Environmental Compliance

Pork producers, along with poultry, cattle and dairy operators, are increasingly scrutinized and criticized for their environmental impact.A recent nationwide poll of 1,000 registered voters conducted by Lake, Snell, Perry and Associates indicates that the American public views confined animal-feeding operations (CAFOs) unfavorably. Of those polled, 80% favored the creation of uniform, national standards

Pork producers, along with poultry, cattle and dairy operators, are increasingly scrutinized and criticized for their environmental impact.

A recent nationwide poll of 1,000 registered voters conducted by Lake, Snell, Perry and Associates indicates that the American public views confined animal-feeding operations (CAFOs) unfavorably. Of those polled, 80% favored the creation of uniform, national standards to limit air and water pollution from CAFOs. Sixty-six percent said they would likely vote for political candidates who would enforce regulations on pollution from CAFOs.

New Environmental Regulations The Clinton administration and Congress, always mindful of political winds, whims and polls, are at work on regulations that will impact hog producers and other CAFO owners. For example, on Feb. 19, 1998, at Baltimore's Inner Harbor, President Bill Clinton and Vice President Al Gore announced the administration's Clean Water Action Plan to finish cleaning up America's rivers, lakes and coastal waters. A key element of the plan is the control of water pollution from animal feeding operations.

In response to the action plan, the U.S. Environmental Protection Agency (EPA) announced its strategy: * Setting new national standards for allowable levels of pollution in runoff from poultry and swine facilities by December 2001 and from cattle and dairy operations by 2002.

* Issuing permits to limit pollution from runoff for the largest CAFOs by 2002 and from all other large feeding operations and priority facilities in impaired watersheds by 2005.

* Focusing enforcement and permitting efforts on those watersheds most vulnerable to pollution from animal feeding operations.

* Expanding the scope of permitting, through administrative actions in the near term and through regulatory changes by 2001, to include for the first time, national efforts to manage pollution associated with the land application of manure.

* Preparing a unified national strategy under EPA and USDA leadership to control pollution from feedlot operations.

State governments have been just as aggressive in controlling CAFOs and that has been especially true with hog facilities.

Arkansas, Kentucky, Maine, Missouri, North Carolina, Virginia and Wisconsin have all enacted or considered moratoriums on granting new permits for swine facility construction. Arkansas, Illinois, Iowa, Kansas and Wyoming are examples of states that require hog producers to prepare detailed manure management plans that address waste disposal, odor control and water quality.

Increasing Litigation The EPA has also increased its enforcement actions, especially regarding criminal prosecutions. In 1997, EPA officials pursued 2,000 leads as to environmental crimes. The agency opened 551 criminal cases and referred 278 to the Department of Justice for prosecution. The result was a record $169 million in criminal fines (compared to $99 million in civil fines) and a total of 195 years of jail time assessed to defendants. The increased rate of criminal charges for environmental violations continues unabated.

Civil citizen suits, as always, remain a constant threat to agricultural operations. Major dairy producers in Washington were recently found in violation of the Clean Water Act in a civil citizen's suit sponsored by a number of environmental organizations.

Finally, there is always the possibility of a pork producer being sued by his or her neighbors for nuisance or a tort action for bodily injury or property damage from environmental pollution. A major hog producer recently lost a $5.2 million nuisance suit.

Environmental Compliance Programs Ensuring compliance with environmental laws is critical to pork producers' survival. Like any other business operation, a hog producer must have an environmental compliance program tailored to the needs of his or her operation. Operations which are not particularly vulnerable to environmental actions may need a relatively simple compliance program. At a minimum, the following guidelines must be followed:

* Articulate an environmental policy and communicate it. There must be a written farm policy as to environmental issues and it must be communicated to all employees. The policy must be supported by management.

* Resource allocation and training. A hog producer must allocate money and personnel to environmental compliance. For example, personnel responsible for environmental compliance must be trained. While this may entail considerable expense, the severe consequences associated with environmental claims leave no alternative but to make a major business commitment in this area.

* Discipline. An effective environmental compliance program includes discipline. Employees who will not follow the program cannot be put into positions where they have responsibility for environmental compliance. In many cases, it is best to terminate an employee who does not appreciate the importance of environmental compliance.

* Design and implement audit or assessment programs. An audit program should measure environmental compliance systematically and provide assurance to farm management that relevant regulatory requirements are being met.

Auditors will typically perform the following duties:

1. Ascertain the maintenance of schedules and records as to all operations with environmental compliance requirements;

2. Inspect facilities and equipment, as well as evaluate personnel performance to assure adherence to institutional standards; and

3. Make written reports to management explaining any deviations from the farm's environmental policy and make recommendations for corrective action.

The integrity of an internal audit requires that those conducting the audit be adequately trained for the purpose, be properly staffed and be supported by top management. Audits should be conducted at least once a year, but preferably every six months, or even quarterly, depending on the operation and its vulnerability to environmental claims.

* Timely follow-up. Follow-up is critical to a good compliance program. Prompt, immediate action must be taken as to difficulties and environmental violations revealed by the audit.

* Documentation. Some documentation is a necessity in an environmental program. Documentation should include a statement of the swine operation's environmental policies and procedures, a description of the training program and persons trained, dates and results of audits and corrective action taken, complaints of third parties and responses to those complaints.

The primary benefit of a corporate compliance program is preventive in character. By instituting an effective compliance program, many environmental mistakes can be avoided, as well as the accompanying legal liability associated with such mistakes. But there are other practical benefits to be derived from a compliance program. Environmental compliance programs can:

1. Improve internal management practices;

2. Improve production processes and efficiency;

3. Train employees in environmental compliance and more efficient production processes;

4. Improve risk management practices;

5. Minimize waste;

6. Provide data regarding cost of regulatory compliance useful for promoting regulatory reform at the local, state and federal level;

7. Improve company public relations and market perceptions; and

8. Mitigate civil or criminal penalties for noncompliance.

EPA's Compliance Incentives The EPA is actively encouraging the development and implementation of compliance programs. On Jan. 12, 1994, the EPA's Office of Criminal Enforcement published a guidance document about the EPA's exercise of investigative discretion. (Memorandum from Earl E. Devaney, Director, EPA Office of Criminal Enforcement, Jan. 12, 1994.)

According to the memo, violations which are discovered and remedied as a result of a company's compliance program will not ordinarily result in a criminal prosecution. Conversely, a criminal prosecution is appropriate if a company fails to implement remedial recommendations made in an audit.

On June 10, 1996, the EPA's Policy on Compliance Incentives for Small Businesses became effective. The policy promotes environmental compliance by small businesses - defined as any person, corporation, partnership or other entity that employs 100 or fewer individuals.

In accordance with the policy, the EPA will refrain from enforcement action seeking civil penalties, or will mitigate civil penalties, if a small business makes a good faith effort to comply with environmental requirements by receiving on-site compliance assistance or promptly disclosing the findings of a voluntarily conducted environmental audit.

A pork producer can meet the compliance assistance requirement through assistance provided by the EPA, a state or other government agency, or government supported entity. The EPA policy broadly defines compliance assistance. A pork producer can meet compliance levels by obtaining basic information on legal requirements or specialized advice on the technology best suited to achieve compliance at a particular swine facility.

Assistance can be delivered to the producer through a variety of ways, such as the Federal Register or other publications, conferences and computer bulletin boards or on-site assistance in response to a specific request for help.

The policy's special penalty mitigation provisions, however, apply only to civil violations identified as part of an on-site compliance assistance visit to a swine facility. In addition, the producer must correct all violations identified during an on-site visit within 90 days. Or, if the violations cannot be corrected within 90 days, the producer must agree to a schedule for remedying the violations as issued by the agency.

Because the EPA, states and other government agencies lack the resources to provide on-site assistance to all small business requesting compliance assistance, voluntary environmental audit programs must be utilized by most pork producers to take advantage of the policy's penalty mitigation provision.

The policy defines an environmental audit as "a systematic, documented, periodic and objective review by regulated entities of facility operations and practices related to meeting environmental requirements." If an audit results in the discovery of a violation, the producer must fully disclose the violation within 10 days (or such shorter period as provided by law) in writing to the EPA or appropriate state or local governmental agency.

To qualify for the policy's penalty mitigation provisions, the pork producer must also meet the following requirements:

* The violation did not cause serious harm to public health, safety or the environment;

* The violation does not present imminent and substantial endangerment to public health or the environment; and

* The violation does not involve criminal conduct.

Financial Assistance Implementing an effective environmental compliance program can be costly. Fortunately, some financial assistance is available. The 1996 Farm Bill created the Environmental Quality Incentives Program (EQIP) to provide technical, financial and educational assistance to address livestock related environmental concerns, especially CAFOs.

Under EQIP, qualifying pork producers can receive federal financial assistance for up to 75% of the cost of certain conservation practices. EQIP currently limits financial assistance to $10,000/person/year and $50,000 over the length of a contract. Pork producers seeking EQIP funds should contact their local or state Natural Resources Conservation Service.

The Clean Water State Revolving Fund (CWSRF) program widely provides financing for water quality improvement projects. The CWSRF was initially used to finance municipal wastewater treatment projects. The EPA, however, has encouraged the use of the CWSRF to implement a broad range of watershed-based activities, including controlling nonpoint water pollution sources.

The CWSRF awards capitalization grants to the states, many of which contribute matching funds. The funds are used to make loans at below market interest rate s for up to 20 years for agricultural, rural and urban runoff control; estuary improvement; wet weather flow control; and alternative treatment technologies.

The loans can be made to individuals, pork producers for example, as well as to public agencies. The loans are administrated by an appropriate state agency, such as a state's department of agriculture or natural resources department.

In recent years, a number of states have used CWSRF money to assist CAFOs.

For example, Minnesota's Department of Agriculture has made loans to rural landowners and agribusiness to implement water quality improvement practices that mitigate or prevent nonpoint source pollution, including loans for animal waste control systems. Missouri's Department of Natural Resources has used CWSRF money to assist farmers in constructing animal waste facilities or to purchase waste-handling equipment. And, Washington's Department of Ecology has distributed funds to prevent, reduce or correct pollution runoff from agricultural sources by implementing Best Management Practices (BMP).

Information about the CWSRF program can be obtained from EPA regional offices. EPA Regional CWSRF coordinators can explain the general status of expanded CWSRF uses in his or her state and provide the name and phone number of the state's CWSRF contact person.

Technical Assistance Numerous resources are available to pork producers in designing and implementing environmental compliance programs. An excellent source of information is the National Farm *A*Syst/Home*A*Syst Office at B142 Steenbock Library, 550 Babcock Drive, Madison, WI 53706-1293; (608) 262-0024. The Farm *A*Syst/Home*A*Syst Program is funded nationally by the USDA Cooperative State Research Education and Extension Service, USDA Natural Resource Conservation Service and the EPA.

Land grant colleges, universities, farm organizations and environmental agricultural waste professionals can also be extremely helpful in constructing compliance programs.

John Copeland is Executive Vice President, Ethics, Food Safety and Environmental Compliance of Tyson Foods Inc.