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Environmental Firms Finding It Harder to Keep Going

Service: Competition, changes in enforcement of regulations among reasons one in four companies have closed in 2-year span.

June 19, 1998|BILL KACZOR | ASSOCIATED PRESS

Companies that clean up pollution and help businesses comply with environmental regulations have fallen on hard times, as one in four closed their doors during a recent two-year period.

Reasons for the decline in the environmental service sector are many, experts say. They include increased competition, cuts in government programs, fewer new environmental regulations and a relaxation in the enforcement of regulations already on the books.

Public opinion is an underlying factor, said Grant Ferrier, publisher of Environmental Business Journal in San Diego.

"There's been a precipitous decline in the demand for environmental improvement," Ferrier said. "Environment is not in the top five public priority issues. From 1970 to about 1990, usually, environmental issues would come in the top three."

Of 3,305 environmental service companies operating across the nation in 1994, a fourth--883--were out of business two years later, according to a survey by Minneapolis-based Environmental Information Ltd., which compiles a directory of such firms.

In addition to cleaning up pollution, such companies do environmental testing, engineering and consulting.

Florida is a good example of what is happening nationally, said Carey Perket, a senior analyst in Environmental Information's San Diego office. Twenty-seven of 98 Florida companies--27.5%--disappeared during the two-year period, only slightly above the national average but tops in the Southeast.

"Lots of people have switched careers," said Duane Truitt, former regional manager in Florida for a Pittsburgh-based environmental service company, International Technology Corp.

"I have one friend who worked for me at IT who actually left the state and he's helping his wife run a family-owned pharmacy," Truitt said.

Truitt, a board member and immediate past president of the Southern Environmental Business Council, left IT last year ago to set up his own company, Truitt Engineering and Construction, in Odessa north of Tampa.

He is turning his focus away from traditional environmental service work to concentrate more on land development and the redevelopment of polluted sites known as brownfields.

"What I'm doing in my company is what a lot of environmental firms either are doing or would like to do," Truitt said. "And that is moving toward a market-driven business as opposed to a regulatory-driven business."

That's because environmental service companies can no longer depend on government regulations to generate business.

Most industries have complied with old environmental standards and government is not increasing them. That means less work for service companies, said Ferrier, who is conducting a competitiveness study of the environmental industry for the U.S. Department of Commerce.

"A lot of big companies have reached a sort of mediocrity of compliance," Ferrier said. But, he added, "We have made progress environmentally from 1970 where smokestacks were billowing stuff out and rivers were catching on fire."

Florida's effort to remove leaking gasoline storage tanks is an example of the kind of changes that are reducing the demand for environmental services.

The program at one point was very expansive, allowing reimbursement for any tank removed. By 1995, however, it was nearly $400 million in the red and Gov. Lawton Chiles ordered a moratorium to prevent the state from going further in debt.

Since then, the Florida Legislature has changed the program to require prior approval for reimbursement, and priority is being given to tanks that most seriously threaten the environment, said Mike Sole, chief of petroleum storage systems for the Florida Department of Environmental Protection.

Bonds are being sold to pay off outstanding reimbursements and money for additional tank removal work has been cut to about $50 million a year, which is half to a third of what once was being spent.

"We've gone from one massive extreme of cleaning up probably a lot of sites we shouldn't even have been looking at, because they were so minimally impacted, to now [where] we've got serious sites that are sitting there," Truitt said.

Most environmental service companies that went out of business from 1994-96 were small but well-established--fewer than 25 employees but older than seven years, said Environmental Information's Perket.

They were created at a time when new regulations still were being adopted. Perket compared their situation to constructing a building.

"You don't need the designer and the construction crew for very much time afterward," he said.

Small companies typically were founded by a handful of people who had expertise and experience in a particular environmental service area. Eventually, larger--and more cost-efficient--companies acquired the same expertise and experience.

"They got themselves in a position where they were competing against much bigger firms for the same projects," Perket said. "It's characteristic of a maturing marketplace."

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