Financial History Issue 130 (Summer 2019) | Page 31

Drumming Up Business In 2020, the EPA turns 50 and Superfund turns 40. Their effects on business have been almost as big as their effects on the environment. By Gregory DL Morris Even though there are some calls to roll back environmental regulation in the name of profitability, a growing consensus within industry and finance believes that cleaner is better in the long run. Insti- tutional investors from private equity to sovereign wealth and pension funds now scrutinize stewardship and sustainability just as thoroughly as they do balance sheets and growth plans. From a basic economic standpoint, envi- ronmental degradation is the same “trag- edy of the commons” well documented from grazing lands in Medieval England to post-war oilfields in Texas. Still, it took flagrant dangers to public health and safety coming to a head in the 1970s to drive Congressional action, most notably a toxic waste dump in western New York with the ironic name of Love Canal. Environmental Protection Agency (EPA) workers at a designated Superfund site near the Houston, Texas area. In response, Congress established the Comprehensive Environmental Response, Compensation, and Liability Act (CER- CLA), commonly known as Superfund, on December 11, 1980. It created a tax on the chemical and petroleum industries and provided broad federal authority to respond directly to releases or threatened releases of hazardous substances that may endanger public health or the environ- ment. Over just the first five years, $1.6 billion was collected, and the tax went to a trust fund for cleaning abandoned or uncontrolled hazardous waste sites. Superfund authorizes and funds the US Environmental Protection Agency­—itself only created under the Nixon administra- tion in 1970—to remediate contaminated sites. At the very least, that means stabi- lizing and securing them; if possible, the ideal is to return them to some beneficial use. Importantly, Superfund also forces the parties responsible for the contam- ination to either perform cleanups or reimburse the government for EPA-led work. When there is no viable responsible party, Superfund gives EPA the funds and authority to clean up contaminated sites. The initial mandates to EPA are well understood: protect human health and the environment by remediating contami- nated sites, and make responsible parties pay for the work. It is less commonly known that CERCLA also mandates that communities be involved in the Super- fund process, and that sites are to be returned to “productive use.” Joint and several liability is a major legal lever in forcing responsible parties to pay for remediation. In for a penny, in for a pound. Ironically, that provision quickly became an equally major impediment to the last mandate, return to productive use. Superfund sites became literal, figurative and legal tar pits. Developers would not go near them even in prime locations for fear of being on the hook for all the work. One recent example is just a few miles from Wall Street on the other side of the East River. The Gowanus Canal in Brook- lyn was notoriously noxious for decades. EPA proposed Superfund listing in 2009 www.MoAF.org  |  Summer 2019  |  FINANCIAL HISTORY  29