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Justice & Regulation

Mises Daily: Sunday, December 06, 1998 by

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The EPA has recently begun flexing its muscle and further interfering with the market economy. Under the auspices of a still-developing policy on environmental justice, the EPA has assumed power to determine what industrial plants and waste sites can be built where, and even the number of workers at a plant.

The EPA maintains that a disproportionate share of industrial plants and waste sites are located in poor and minority neighborhoods. So, in the spirit of all socialists past, the EPA has decided that the EPA will be the new authority locating these facilities.

The embryonic policy recently had its first test case in a heavily industrialized rural area in Louisiana. Shintech Corporation wanted to build a plant there. It was to be a $700 million polyvinyl chloride chemical plant, with a workforce of approximately 255 people. The company had a site picked out between Baton Rouge and New Orleans, along the mighty Mississippi River. The plant would have been in a predominantly minority and low-income area.

As with any new construction, there was strong support and opposition. A poll conducted by the local NAACP chapter concluded that 73% of the people in the communities near the proposed plant favored it. All the town's councilmen voted for the plant. Shintech had the approval of state environmental regulators. The company, in an attempt to win public support for the plant, pledged $500,000 to train local residents for jobs at the new plant. Most people felt the new plant would have a positive effect on the local economy.

The opposition stemmed mainly from environmental groups, who complained about the potential for leaks, pollutants and the high-energy requirements of the new plant. Losing the public debate, the opposition decided to use the police force of the U.S. Government and filed a complaint with EPA, alleging that the state's environmental regulators violated the 1964 Civil Rights Act by approving the plant.

The present-day policy evolved from Title VI in the 1964 Act and subsequent efforts to expand its role in federal funding projects. Title VI prohibits discrimination under any program receiving federal financial assistance. The specific implications of Title VI have lain dormant for years. This is a law that has been on the books for over three decades. The concept really gained momentum with President Clinton's edict in 1994 that all agencies apply Title VI to their programs. To enforce Title VI, the EPA has been looking to place new burdens on state agencies to ensure that the poor and minorities do not bear a disproportionate share of environmental risks as a result of permits issued for industrial plants and waste. Since then,there have been more than 50 complaints from all over the country alleging discrimination.

The EPA has not ruled on the complaint, but the company has decided to abandon its plans. It will now relocate the plant and build a smaller $250 million plant, employing 75. The specific reasons for the abandonment were not disclosed, but you can be sure the nightmare of dealing with the EPA and the months of delays and the dollars it would have cost to fight the petition entered into Shintech's equation.

Environmental justice? Companies already deal with local zoning requirements and a host of other regulations. Now, they also have to satisfy the EPA. Industrial plants and waste sites wind up in poor areas because land is cheap, labor is cheap and the cost of doing business is low. Or more properly, lower than the alternatives. It must be so, otherwise they would build elsewhere. Further, the EPA's new policy also counteracts existing "enterprise zone" and other similar legislation.

So, it follows that by forcefully relocating these plants, you are forcing what would seem to be a sub-optimal site. That is, one that is more costly than the alternative. Can you draw the similarities of this policy with tariff protection, rent control, minimum wage laws, and a host of other social engineering machinations? By forcing a more costly option, the government has impoverished everyone, there is less wealth than before. More money is expended for a given good than otherwise need be. Our standard of living is lowered.

Beyond the purely monetary or economic concerns, there is the moral dilemma of the EPA usurping the rights of individual cities and local people to decide what's best for their community. After all, the state's environmental legislators approved the Shintech plant and the town's elected representatives unanimously supported the plant.

Helping the poor is a noble goal. Forcefully taking from others is not. The government has once again moved well beyond its rights.

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Mr. Mayer is an MBA student at the University of Maryland.