When the Biden Administration put forth Executive Order 14008, it created the White House Environmental Justice Interagency Council. Environmental Justice (EJ), as defined by the USEPA, is “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation and enforcement of environmental laws, regulations and policies.”
While the USEPA was previously at the forefront of EJ oversight, Executive Order 14008 expands the mission of EJ to a total of 18 agencies including the departments of Agriculture, Commerce, Labor, Defense, Energy, Transportation, and Housing and Urban Development. With the increased scope of oversight and enforcement expanding beyond just the USEPA, the expectation is EJ principles will be increasingly applied in projects, initiatives, and enforcement actions across all these federal agencies.
Impact on Due Diligence in Private Equity Deals
Acquisitions and mergers will now need to consider a new environmental due diligence concern – environmental justice. Depending on the location of the facility, EJ regulatory requirements have the potential to affect a company’s future operations, including changes in permit and associated compliance requirements, discharge limits, and future construction activities at the facility.
- Increased regulatory permitting scrutiny:
- States are incorporating EJ assessments and EJ screen reports into their permitting process.
- Permit renewals will likely be under more regulatory scrutiny including additional costs, extended schedule for renewals, and potentially lower discharge limits.
- Regulatory authorities may examine discharges to all medias and the surrounding EJ status of receptors.
- Private Equity companies should expect a more complex and expensive permitting process overall for future processes at the acquired facilities.
- Increased regulatory inspections:
- As stated in the latest Progress Report from the EPA – Progress Report on Incorporating Environmental Justice into Enforcement and Compliance Assurance Work (March 1, 2022):
- “Increasing EPA’s presence in overburdened and vulnerable communities is a cornerstone of the Office of Enforcement and Compliance Assurance’s (OECA) Environmental Justice strategy. OECA has set a national goal to conduct 45% of all inspections nationally in fiscal year 2022 (FY 2022) at facilities located in or affecting vulnerable or overburdened communities. This is an estimated increase of almost 20% over our historical average, and the goal will increase to 50% for FY 2023 and FY 2024, and to 55% in FY 2025 and FY 2026.”
- Increased regulatory permitting scrutiny:
The growing focus on EJ will have real-world impacts on due diligence in mergers and acquisitions, as well as remediation and enforcement activities. EHS Support understands the complex regulations and works closely with you to develop comprehensive solutions that ensure the safety of all stakeholders.
What should you do to prepare?
- Understand where the facilities are located in a potential merger and acquisition deal. Use EPA’s EJ Screen Calculator to determine if the facilities are in underserved locations. This tool geographically combines environmental and demographic data, highlighting areas where vulnerable populations may be disproportionately affected by pollution.
- If facilities are located in these areas, the due diligence efforts should increase focus on:
- Ensuring compliance at these facilities.
- Identifying permit renewals that will need to be performed after the merger or acquisition. Be prepared for additional scrutiny and costs on submissions.
Reach out to Jess Myer or Bruce Martin today and explore how the EHS Support Team can help you stay in compliance and achieve your goals.
