Wisconsin Lawyer
Vol. 78, No. 9, September 2005

Achieving Environmental Excellence: Green Tier Legislation

• Interested in Green Tier Participation?
• New Land Use Programs Top the Agenda at Annual Environmental Law Update

by Linda H. Bochert & Mary Woolsey Schlaefer

hat do American Transmission Company, MEGTEC Systems, Veridian Homes, Roundy's, the Wisconsin Builders Association Development Council, Holsum Dairy, and Scrap Metal and Automotive Recyclers have in common? All are pioneers in a new approach to environmental performance called Green Tier.

Green Tier is the name of a Wisconsin law that is designed to promote and reward "superior environmental performance" by businesses, industries, and municipalities.^.1 One of several recent enactments intended to streamline environmental regulation and reform Wisconsin's regulatory climate, Green Tier merges two ideas: 1) moving beyond traditional "command and control" to add an incentive-based, market approach to managing environmental risk, and 2) providing positive public recognition to entities that commit to superior environmental performance and continual improvement.

Implemented by the Wisconsin Department of Natural Resources (DNR), the law applies to the entire range of environmental programs - air, wastewater, stormwater, solid and hazardous waste, wetland, and waterways. Participation is entirely voluntary.

The impetus for Green Tier came in June 2000, when then-DNR Secretary George Meyer charged a diverse group of interested parties to develop a program that encourages businesses and municipalities to exceed environmental requirements but is not based on mandating standards in law. In April 2004 Gov. Jim Doyle signed the resulting legislation, providing a new legal framework designed to create economic value and improve environmental outcomes.

Green Tier builds on lessons learned in the Environmental Cooperation Pilot Program (ECPP), which was enacted in 1997.² ECPP environmental leaders include We Energies, Cook Composites and Polymers, Packaging Corporation of America, Madison Gas & Electric, Northern Engraving Corporation, and 3M. The cooperative agreements these companies signed with the DNR reduced the need to mine more than 1,325 railroad cars of coal by recovering and reburning high-energy ash; reduced hazardous air pollutants 85 percent by using ultraviolet screening and a single DNR permit to cover multiple company facilities; and achieved environmental performance 7.5 times better than the established emissions standard by using innovative, rather than mandated, technologies. ECPP companies report positive experiences, and all continue to participate under five-year agreements.

Linda H. Bochert, U.W. 1972, is a partner in Michael Best & Friedrich LLP, Madison, and a member of the firm's Land and Resources Practice Group. She practices primarily in environmental/regulatory, administrative, and land use law. She was a member of the group that developed the Green Tier legislation.

Mary Woolsey Schlaefer, Minnesota 1989, is the executive assistant in the Department of Natural Resources. She leads the DNR's implementation of Green Tier. The authors thank Mark McDermid for his invaluable assistance with this article.

How Green Tier Works

A Green Tier applicant makes a three-part commitment to 1) systematically exceed the minimum environmental requirements; 2) continually improve environmental performance; and 3) work in a transparent manner by providing the DNR and the public ongoing access to information affirming the commitment to performance.

In return, the DNR provides positive incentives, such as reduced frequency of inspections and reporting; a single point of contact in the DNR; limited exposure to state civil enforcement if environmental violations are identified and remedied; incentives the Tier II participant (explained below) identifies and negotiates with the DNR, so long as incentives are proportional to the environmental performance; and public recognition of these environmental leaders for their commitment to superior environmental performance and improvement.

There are two tiers of Green Tier participation, each with its own eligibility criteria and commitment requirements.

Tier I. The Tier I applicant's environmental compliance record must satisfy the following eligibility criteria: ³

1) no criminal conviction in the prior five years for an environmental law violation that resulted in substantial harm or presented an imminent threat to public health or to the environment;

2) no civil judgment in the prior three years for an environmental law violation that resulted in substantial harm to public health or to the environment;

3) no lawsuit filed by the state or citation issued by the DNR in the prior two years for an environmental law violation.

The eligible Tier I applicant must commit to 1) implement an environmental management system (EMS), such as ISO 14001 or an equivalent, 2) conduct an annual audit of the EMS, and 3) report the results to the DNR. If the EMS audit identifies violations and the Tier I participant timely corrects them, the DNR and the Department of Justice (DOJ) are prohibited from bringing an enforcement action to collect civil forfeitures for the violations.

Tier II. An applicant may start at Tier II; participation in Tier I is not a prerequisite. Tier II eligibility requirements are more demanding:⁴

1) no criminal conviction in the prior 10 years for an environmental law violation that resulted in substantial harm or presented an imminent threat to public health or to the environment;

2) no civil judgment in the prior five years for an environmental law violation that resulted in substantial harm to public health or to the environment;

3) no lawsuit filed by the state or citation issued by the DNR in the prior two years for an environmental law violation.

The eligible Tier II applicant must have an EMS in place and commit to 1) negotiate a contract with the DNR specifying the superior environmental performance it will deliver and the incentives the DNR will provide, 2) conduct an environmental compliance audit, and 3) report the results to the DNR. The Tier II environmental compliance audit is broader than the Tier I audit of the EMS - the Tier II audit looks at the environmental compliance of the facility itself, not just whether there is an EMS in place that is properly used. If the Tier II audit identifies violations and they are timely corrected, the DNR and the DOJ are prohibited from bringing an enforcement action to collect civil forfeitures.

Charters. Unique multi-party agreements called "environmental results charters" can commit similarly situated businesses, industries, or groups to a common set of superior environmental performance actions.⁵

In keeping with the important public policy goal of transparency, Tier I and Tier II applications and proposed charters are subject to public comment prior to DNR approval, and participation includes public access to information and opportunity for public involvement.

Green Tier's Possibilities

Green Tier provides the opportunity for meaningful environmental results and business value. The key question is: will we be able to capitalize on it?

Environmental Results

Green Tier provides incentives not only to go beyond compliance in regulated areas but also to address unregulated areas as well, such as water and energy consumption. This creates the opportunity to manage impacts on air, land, and water in an integrated, holistic way, rather than using the traditional, piecemeal approach of separate regulatory programs for each aspect of the environment. Charters allow groups of companies and municipalities to collaborate on environmental objectives like reduction in stormwater runoff or greenhouse gas emissions and to manage environmental risk across sectors, supply chains, or communities. Green Tier also offers the potential for improved environmental results by encouraging regulated entities to invest where environmental benefits are greatest and by encouraging regulators to focus enforcement on poor performers.

Business Value

Green Tier creates business value by encouraging more effective investment. Green Tier's public recognition and unique incentives can create business value that positively affects the bottom line. Tier II participants can negotiate incentives that add value, reduce costs and time, or help solve operational or technological problems. Examples include: opening a landfill to recover ash as a fuel when the law would otherwise require that the landfill remain closed; creating a corporate emissions cap to allow movement of machines and processes without new permits; eliminating reporting of information not routinely used by the DNR; allowing a company to manage and store material more efficiently by treating a manufacturing by-product as material rather than waste; accepting more effective, less costly control technology in place of one specified in a rule; and accepting self-verification of performance.

Defining 'Transparency'

Depending on one's perspective, public involvement is either an opportunity or a threat. Transparency does not mean a Green Tier participant must give its neighbor a seat on the board of directors. It does mean that program participation is subject to public notice, as well as public meetings, and contract or charter discussions are open to public input. The participant must provide basic performance information to the public in an annual report to the DNR, documenting that the participant did what it said it would. From these basics, each participant can adapt its Green Tier involvement to meet business and community needs.

Madison Gas & Electric plots its performance and shares the results with its community group. The company has distinguished itself in the eyes of many people by listening thoughtfully and acting responsibly. Cook Composites went from a situation in which neighbors threatened to "call the cops" because the company wasn't responding to one in which neighbors worked with the company to solve problems. Cook regularly holds facilitated meetings with neighbors and community leaders to discuss environmental issues and work on common problems such as odor and noise. Cook attests that when managers listen and respond, genuinely trying to solve problems, the relationship shifts from an adversarial one to a collaborative one.

Current Applicants Range from Developers to Dairies

At this writing, the DNR has received seven Tier I applications and one Tier II application and is working on three charters.

American Transmission Company (ATC) constructs, owns, and operates electric transmission lines throughout Wisconsin. ATC's Tier I goal is to maximize environmental performance through leading-edge best-management practices and creation of an environmental stewardship program. "We are optimistic about the success of Green Tier," says Rita Hayen, ATC Environmental Manager. "The relationship-based changes to regulation will benefit business as well as the environment." A decision on ATC's application is imminent.

Holsum Dairies, a 3,600-head dairy farm in eastern Wisconsin, focused its Tier I application on improving nutrient management and storage, and surface and groundwater protection. Holsum plans to build environmental sensitivity, protection, and restoration into its dairy design and operation through its environmental management system. Holsum's application was publicly noticed on April 6, 2005, and a decision on its application is expected in August.

MEGTEC Systems manufactures air flotation dryers and air pollution control equipment used in many industries, including printing, paper making, automotive, and metals coating. MEGTEC's Tier II proposal is to work with its supply chain on environmentally preferable products and practices, encourage those businesses to implement their own environmental management systems, and share environmental improvement results with others. "Green Tier and Wisconsin's environmental excellence programs recognize our efforts to treat the environment with respect. We fundamentally believe these programs help make Wisconsin a good home for our company," says Chris Campbell, MEGTEC's EHS Manager. MEGTEC has completed its participation contract as the first participant in Tier II of the Green Tier program. MEGTEC's application is in the public comment phase.

The proposed Green Tier Charter with the Wisconsin Builders Association Development Council Compliance Corp. Inc.⁶ will commit participating developers and builders to a uniform, high standard of environmental performance on issues such as erosion control and stormwater management. The Development Council's hope is that this commitment to quality will be well-received by municipalities, encouraging expedited and flexible state and local approval processes for developers and builders meeting the charter commitments. In a similar vein, Veridian Homes is working with Dane County and the cities of Madison and Sun Prairie to develop a charter of standards and measures of performance for its developments. That charter is now being shared with the governing bodies of those municipalities before it goes through formal public notice and comment.

Fundamental Questions May Define Green Tier's Success or Failure

Green Tier's newness means a lot of unanswered questions - from broad issues of how to maximize the environmental benefits Green Tier can provide to details of just how the procedures should work. Answers to three fundamental questions will likely determine the success or failure of Green Tier.

First, will the spirit of Green Tier take hold? Collaborative innovation between the DNR and regulated entities is not new, but for Green Tier to work a broad culture of collaboration, trust, and risk-taking shared by the DNR, the regulated community, and the public is needed.

Second, will transaction costs be manageable? One key to this is what form public involvement will take and how effective it will be.

Third, will incentives be meaningful enough? Incentives the DNR can provide will depend, in part, on how flexible the U.S. Environmental Protection Agency (EPA) will be in federally regulated areas. Environmental Cooperation Pilot Program experience is encouraging; available incentives include expedited permitting, reduced reporting frequency, ability to add new equipment without permitting delay, and facility-wide emissions caps. Yet, the most valuable incentive may be one provided by the marketplace - if Green Tier certification becomes a meaningful way for an entity to positively distinguish itself and enhance its competitive position.

The 'Limited Liability' Audit Program

The Green Tier legislation includes a related but separate program - the Environmental Improvement Program - to encourage regulated entities to conduct and act on the results of environmental compliance audits.⁷ Modeled on the EPA's Audit Policy,⁸ this legislation limits civil forfeiture exposure for regulated entities that conduct an environmental compliance audit, report the results to the DNR, and timely remedy identified violations. An entity need not be a Green Tier participant to be eligible for the Environmental Improvement Program; however, the regulated entity must notify the DNR at least 30 days before conducting the audit to qualify for the protections the law provides. Sometimes incorrectly described as "audit immunity," this program provides a limitation on, but not immunity from, civil forfeitures. Rather than enforcement through prosecution by the state DOJ, violations are subject to civil forfeitures through a DNR-issued citation enforceable by the local district attorney. The civil forfeiture amount is limited to no more than $500 per violation, regardless of the number of days of violation.⁹ This is significant because the maximum civil forfeitures under normal circumstances range from $5,000 to $25,000 per day for each violation.¹⁰

Conclusion

In a marketplace that increasingly values corporate responsibility and environmental stewardship, Green Tier provides a framework to improve environmental performance, increase public involvement and trust, and reduce costs. This new approach emphasizes incentives and rewards, rather than regulations and punitive actions. If it works, we should all be winners.

Endnotes

¹Wis. Stat. § 299.83.

²Wis. Stat. § 299.80.

³Wis. Stat. § 299.83(3).

⁴Wis. Stat. § 299.83(5).

⁵Wis. Stat. § 299.83(7e).

⁶Available at dnr.state.wi.us.

⁷Wis. Stat. § 299.85.

⁸See http://www.epa.gov/compliance/incentives/auditing/auditpolicy.html.

⁹Wis. Stat. § 299.85(7)

¹⁰See, e.g., Wis. Stat. §§ 283.91, 285.87, 289.86, 299.97.

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