Now, with the appearance that a Republican Executive Administration for the next term may be in question, the MDEQ is stepping up enforcement prerogatives across the board, including criminal prosecutions. Whether you are regulated by stormwater discharges, particulate output from batching equipment, waste management issues or pollution prevention plans related to admixtures, you should be prepared for increased environmental scrutiny by administrative agencies.

This newsletter is published twice annually by the Michigan Concrete Association in an effort to make you aware of environmental changes and how they may affect your business. Only you can decide to be proactive or to be one of the poster children for the next MDEQ enforcement initiative.

Do You Own Underground Storage Tanks Or Pollution Control Equipment? You May Be Eligible For Tax Relief
Well, the news is not all bad. Despite the lengthy warnings and the time available for implementation, some owners and/or operators of underground storage tanks are claiming they were caught unaware of the December 22, 1998 deadline for upgrading their tanks.

Specifically, significant amendments to state and federal laws provided a ten year sunset to allow underground storage tank (UST) owners and operators to upgrade their tank systems to meet new federal and state corrosion and leak protection standards. At this time, the Michigan Department of Environmental Quality Storage Tank Division is gearing up its enforcement posture to insure that individuals with tanks not in compliance are prevented from operating those tanks. Specifically, it can be a criminal act to dispense product from a tank not in compliance with the new standards.

Those facilities that have undertaken the expense of upgrading their systems to meet the new standards will receive some good news from the Internal Revenue Service this year regarding the ability to expense or deduct the substantial cost involved in these endeavors. Thus, the IRS has concluded that most costs associated with the removal and disposing of old USTs, as well as the cost of the disposal of any contaminated soil may be deductible as business expenses when the taxpayer incurring these expenses is the owner/operator of the UST system.

Costs associated with the replacement UST, as well as the cost of any monitoring wells or other equipment associated with remediation of groundwater may be capitalized to the applicable basis of the equipment. Fortunately, some relief may be found in that such upgrades may not require longer depreciation schedules as substantial improvements to the real estate itself.

However, the IRS has provided a capful of vinegar to go along with the spoonful of sugar. This analogy can be found in a provision that does not allow the deduction of costs expended to remove the UST if the property is being adapted to a new or different use. Accordingly, those individuals who wish to acquire real estate which was the site of a former gas station will not be able to enjoy this same deduction if they intend to adapt the station to a new or different use.

Similar provisions apply to pollution control equipment. If you have recently installed pollution control equipment for your facility, you may be able to recapture and/or deduct any sales or use taxes or other state taxes associated with a purchase and/or operation of these pieces of equipment. If you need additional information regarding how you may pursue potential recovery of these amounts, please contact the MCA general counsel, Joseph Quandt for details.

New DEQ Rules May Profoundly Affect How You Operate Your Facility
On February 23, 1999, new Administrative Rules affecting Baseline Environmental Assessments and Due Care obligations were filed with the Secretary of State. This means that the new Administrative Rules took effect on March 11, 1999. These rules have the potential to affect any purchase or sale of real estate, as well as the operation of any piece of real estate impacted with environmental contamination.

As you are more than likely aware, substantial revisions to Michigan's Environmental Clean Up Program in 1995 provided for the transferability of contaminated property to a new owner without liability to the new owner so long as a Baseline Environmental Assessment (BEA) is conducted on the property. A BEA, simply put, is an assessment of the property sufficient to distinguish previously existing contamination from new releases of contamination. Accordingly, the new owner would only be responsible for new releases of contamination and not the previously existing contamination.

Along with the changes affecting BEAs, the law also required that any owner or operator of real estate which was a source area of contamination exercise "Due Care" so that their ownership or operation of the property did not result in an unacceptable exposure of contamination to third parties. Unfortunately, there has been very little legally enforceable guidance which dictated how BEAs were to be conducted and exactly what could constitute an unacceptable exposure.

According to the new rules, persons who previously conducted BEAs and determined that groundwater contamination was present will now be required to notify the DEQ of the migrating contamination. The new and/or current owner or operator may also need to develop a plan to submit to the Department of Environmental Quality as to how the owner or operator intends to deal with the migrating contamination so as to prevent such unacceptable exposures. Although the promulgation of the new rules is not shocking, some of the new provisions will more than likely provide an unsuspecting trap for the unwary. If you have conducted a BEA in the past in order to purchase your current facility and discovered groundwater contamination, you will probably need to revisit your BEA to determine if a Due Care plan or migration disclosure is necessary. If you are unsure as to how you should respond to old or new BEA information, you should contact your MCA Environmental Counsel for free guidance on determining your compliance status.

Environmental Agencies Increase Number Of Criminal Prosecutions Of Corporate Officers
In the last eighteen months, the number of criminal prosecutions against corporate officers for environmental crimes has dramatically increased.

Specifically, the EPA and the DEQ have stepped up enforcement seeking fines, penalties, and prison sentences against corporate officers and senior management personnel when environmental laws are violated. The current trend is alarming because criminal enforcement was previously viewed as applicable only when there were severe or egregious violations which directly affected the health or safety of others. Further, these types of prosecutions were reserved primarily where corporate officials or senior management knew or had reason to know of an egregious violation.

The 9th Circuit Court of Appeals recently upheld a prison sentence as well as a $75,000 fine against the president and chairman of a Washington State corporation which had unlawful discharges of alkaline compounds into a sewer. Even though the president and chairman did not have specific decision making control over the activity which was in violation, the court held that he had authority to exercise control over the corporation's activities which caused the discharges. Environmental agencies have accordingly stepped up their numbers of criminal enforcement cases viewing this as a "soft tissue" area which can achieve more expedient compliance goals.

This apparently new policy should provide some reason for caution for the senior management of regulated businesses that "what you don't know may hurt you". If you have questions regarding your environmental compliance status or potential exposure to this type of enforcement activity, contact experienced environmental counsel.

Help Is Available
To assist MCA members in evaluating their environmental compliance status, the MCA has negotiated several contracts and group benefit associations with environmental consultant firms to assist in the management of various environmental issues. The benefit to MCA members is that the MCA and its legal counsel have already negotiated specific terms and conditions to the contracts to help safeguard general membership interests. Additionally, with a bargaining strength of about 200 member companies, the MCA was able to negotiate lower service costs and flat rates for most services to be provided under these contracts. For more information on these companies and their services, please contact the MCA or its legal counsel, Joseph E. Quandt at Menmuir, Zimmerman, Kuhn, Taylor and Quandt, PLC.

Free Regulatory Guidance Available
The MCA's general counsel, Zimmerman, Kuhn, Darling, Boyd, Taylor & Quandt, PLC has specific regulatory expertise in environmental matters and is happy to provide any regulatory guidance which may be needed by Michigan Concrete Association Members. As an Association benefit, Mr. Quandt will answer any environmental regulatory question or any other questions of a general legal nature which may confront Michigan Concrete Association Members. These initial consultations (one per month per member) are of no cost to individual members, so feel free to utilize this benefit. Please direct your questions to Mr. Joseph Quandt at Zimmerman, Kuhn, Darling, Boyd, Taylor & Quandt, PLC (231) 947-7900.