Chapter 36

Business
and the
Environment

The Development
of Environmental Protection

36-2

Early federal statutes dealing with environmental issues concerned

themselves primarily with conservation of forests and wildlife.
Manufacturing had not yet reached a stage where there was significant
harm to the environment.

In the 1960s, this view changed.

Citizens of the United States began to insist that strict environmental
laws be enacted to maintain purity of air and water (Earth Day in 1970).
The operations of business firms affected the environment significantly.

Policymakers find it problematic to balance the importance of

allowing businesses to produce at optimal levels while maintaining
a watchful eye over the environment.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Governments Regulation
over Itself

36-3

National Environmental Policy Act (NEPA) of

1970: Congress passed this law that required any
project (a dam, a stadium, a canal, a highway, etc.)
with significant federal involvement to have an
approved environmental impact statement (EIS)
prior to the commencement of any work on the
project.
The Council on Environmental Quality issues guidelines
for EISs.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Governments Regulation
over Itself (cont.)

36-4

To be approved, an EIS must provide responses to

several questions, including:
What is the environmental impact of the proposed project?
What negative environmental effects will result from the
proposed project?
What are the alternatives to the proposed project (including
taking no action)?
What short-term and long-term destruction of environmental
resources will result from the proposed project?
What irreversible and irretrievable commitments of resources will
be consumed by the proposed project?

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Government Regulation
of Business

36-5

In 1970, Congress created the Environmental Protection

Agency (EPA), which has the responsibility of regulating
business activities as these relate to the environment.
The EPA:
Conducts environmental research.
Assists states and municipalities with grants and technical
advice.
Administers the federal pollution laws that cover businesses.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Major Federal Legislation

Protecting the Environment

36-6

Important federal legislation aimed at protecting

the environment includes:
The Clean Air Act
The Clean Water Act
The Comprehensive Environmental Response,
Compensation, and Liability Act (Superfund)

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-7

Clean Air Act

The Clean Air Act: Created with recognition of the fact

that pollution sometimes crosses the boundary lines of
local jurisdictions and extends into two or more states.
This law emphasized that when it comes to protecting
the environment, state regulation is insufficient and
federal law is needed.
All states are required to develop air quality standards
that are at least as rigorous as the federal standards.
Such standards include:
Primary standards: Serve to protect human life and health.
Secondary standards: Serve to protect property, vegetation,
climate, and aesthetic values.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-8

Clean Air Act (cont.)

In addition, the Clean Air Act covers two forms of

pollution:
Stationary pollution: Caused by factories and other
production facilities.
Mobile pollution: Caused by automobiles, trains,
airplanes, etc.

Amendments to the Clean Air Act require that:

Emissions from automobiles contain fewer pollutants.
Gasoline sold in the United States be cleaner
Factories install new technologies to reduce the
discharge of pollutants into the air.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-9

The Clean Water Act

The Clean Water Act of 1972 sets minimum

standards for water purity in a manner similar to the
Clean Air Act.
Included in such standards is Fishable and
swimmable:
An intermediate standard of water quality that allows
the navigable waterways to be used for:

The propagation of fish, shellfish, and wildlife.

Recreational purposes.

The ultimate goal of the Clean Water Act is to

eliminate the discharge of pollutants into the
nation's waters.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-10

Example: The Clean Water Act

Facts:
An offshore oil drilling rig, owned by BP and operating in
the Gulf of Mexico, exploded.
The partially drilled well then began spewing up to an
estimated 60,000 barrels of oil per day.
After several months, BP was successful in its efforts to
permanently cap the well. However, the leak resulted in
a massive oil slick that substantially damaged coastal
areas and marine life.

BP was found to be in violation of the Clean

Water Act and may be subject to civil fines.
2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-11

Superfund

In 1980, Congress passed the Comprehensive Environmental

Response, Compensation, and Liability Act (CERCLA).
More popularly referred to as Superfund.
This law regulates the dumping of waste onto land.
Superfund designates specific sites, placing them on the National
Priorities List, and mandating that these locations be cleaned up by their
owners.

The EPA has authority:

To conduct cleanups when immediate action needs to be taken.

To enforce penalties against potentially responsible parties.
To ensure community involvement.
Involve states.
Ensure long-term protectiveness.

The law also created a Hazardous Substance Trust Fund to help

allay costs in addressing environmentally scarred land.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Example: Federal Legislation

Protecting the Environment

36-12

Facts:
The Hubble Coal Company went bankrupt in 1977.
Hubble owned 10,000 acres of environmentally damaged land
and had numerous creditors who had not been paid.
The land was designated as a Superfund site.
A not-for-profit company called NeoSource received a federal
grant to purchase the land, but was required to engage in a
massive cleanup before reclaiming the land for use as a park
and wildlife preserve.

Therefore, NeoSource was justified in conducting the

cleanup under the authority established by the EPA.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-13

Lawsuits by Private Citizens

In the event a business firm creates pollution or

damages the environment, in addition to being
required to pay a fine, it may be held liable to
private persons as well.
Types of lawsuits by private citizens:
Negligence
Nuisance
Trespass

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Example: Lawsuits
by Private Citizens

36-14

Facts:
Stefan owned a workshop adjacent to a small
manufacturing company owned by Melvin.
Melvins company continually placed numerous bags of
unprotected trash near the property line.
Stefan observed the presence of vermin on his property,
and wrote Melvin a letter requesting the removal of the
trashthat is, abate the private nuisance.

If Melvin refuses to attend to the problem, Stefan

may hire a company to remove the trash and
claim reimbursement from Melvin.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Lawsuits by Private
Citizens (cont.)

36-15

Negligence
A tort that allows a plaintiff to bring a lawsuit against a defendant
under state law for causing personal injury or property damage.
Businesses that create pollution frequently cause injury to
people or damage to their property, and these businesses may
be found liable by a court for the tort of negligence.

Nuisance
Most states have laws prohibiting the creation of a nuisance, a
condition that affects a persons health, causes property
damage, or interferes with a persons well-being.
There are two categories of nuisances:
Public nuisance: Impacts public property.
Private nuisance: Impacts private property.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Lawsuits by Private
Citizens (cont.)

36-16

Trespass
Unauthorized entry onto another persons property.
Businesses that cause pollution are, in effect, sending pollutants
onto another persons land or water.
Most states recognize a cause of action for particle trespass,
accepting the theory that businesses are trespassing on another
persons property with their pollution particles.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-17

Types of Pollution

The most widely discussed forms of pollution

are those that affect air, water, and land.
There are numerous other types of pollution and
environmental issues that are of great concern to
society and are the subject of federal statutes.

Some of them are:

Noise pollution
Pesticide control
Solid waste disposal
Toxic substance disposal
Natural resource conservation and acid rain
2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-18

Types of Pollution (cont.)

Noise Pollution

Pesticide Control

Exposure to loud noise for extended periods of time can affect

an individuals ability to hear, can cause mood swings, and is
even alleged to cause injury to fetuses.
The continued use of a pesticide often causes insects to become
immune to the chemical compounds, and as a result the
pesticide becomes ineffective.
Stronger pesticides must then be created.
In addition, many individuals are not comfortable with having
their food grown in environments wherein pesticides are used.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-19

Types of Pollution (cont.)

Solid Waste Disposal

Toxic Substance Disposal

Many municipalities require that businesses and homeowners

recycle paper, plastic, glass, and metal products.
Many companies are going green; that is, they are making
products and packaging them in environmentally friendly ways.
The quantity of waste materials that can cause great harm to
humans who are exposed to them.
These toxic substances include medical waste and chemicals.
The Resource Conservation and Recovery Act of 1976 (RCRA)
governs the storage and disposal of toxic substances.
Under the RCRA, the EPA has the authority to regulate
facilities that generate, transport, treat, store, or dispose of
hazardous waste.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

36-20

Types of Pollution (cont.)

Natural Resource Conservation

Acid Rain
Sulfur emissions, created primarily by manufacturing
plants located in the central portion of the United
States, cause pollutants to be discharged into the
atmosphere and result in so-called acid rain.
Acid rain creates problems for forests and crops, kills
fish, and destroys the paint finishes on automobiles.

The United States has extraordinary forests and wetlands that

have great aesthetic and economic value.
Often, policymakers struggle with designing laws and regulations
that can protect these resources without disturbing the natural
ecological order.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

A Changing Global
Environment

36-21

The Greenhouse Effect

Scientists believe that the increased burning of fossil
fuels (coal, gas, and oil) has loaded the atmosphere
with heat-trapping carbon dioxide (CO2), creating global
warming, a condition known as the greenhouse effect.
The resulting rising temperatures can melt the polar
icecaps, causing rising sea levels throughout the world.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

A Changing Global
Environment (cont.)

36-22

Destruction of the Rain Forests

There has been a growing recognition that economic
interests are causing the gradual destruction of the
worlds rain forests found in tropical climates.
This deforestation alters the distribution and circulation
of water, which in turn can lead to drought, flooding, soil
erosion, and changes in wind and ocean currents and in
rainfall distribution.
Another serious result of deforestation is that the
absorption of carbon dioxide from the atmosphere is
substantially reduced.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

A Changing Global
Environment (cont.)

36-23

Destruction of the Ozone Layer

The release of chlorofluorocarbons into the air has damaged the
ozone layer in the atmosphere.
A hole in the ozone layer is most manifest over the South Pole
and is causing concern over its potential impact on human
health.
Because the ozone layer protects the environment from the
ultraviolet rays of the sun, damaging this protective shield could
lead to major problems for agricultural products, forests, and
wildlife.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Other Environmental
Issues

Biodiversity

Ocean Pollution

36-24

Of concern to environmentalists is the notion that thousands of

species are becoming extinct at an alarming rate.
It is estimated that since the year 1600, approximately 260
animal species, 370 insect species, and 380 vascular plants
have become extinct.
A developing environmental problem is that of ocean dumping, in
which waste material is illegally deposited into the waters far off
coastal areas.
Currently, ocean dumping is allowed under limited
circumstances.
The EPA is charged with the responsibility of selecting
appropriate sites and types of waste that may be discarded into
the oceans by U.S. organizations.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.

Other Environmental
Issues (cont.)

36-25

Space Pollution
Environmentalists have recently turned their attention
to the increased amount of space junk that is
orbiting the planet.
Satellites no longer in use or in disrepair continue to
orbit the Earth.
It is now estimated that there are 10,000 of these satellites in
orbit.

In 2008, a Navy missile scored a direct hit on the fuel

tank of a dying spy satellite orbiting 130 miles over
the Pacific Ocean, eliminating a toxic threat to people
on Earth.

2013TheMcGrawHillCompanies,Inc.Allrightsreserved.