West Virginia and the Flaws of Self-Reporting

In mid-January, strange and troubling news began to leak out of West Virginia. After residents complained of a licorice-like scent and strange odor in their water, officials did some sleuthing and uncovered an active chemical spill pouring into a local river. They issued a stop drinking order, forcing West Virginians to use bottled water for drinking, bathing, cleaning, laundry, and effectively everything but flushing the toilet. The water crisis stretched on for days, with no clear end in sight: West Virginia’s water had been contaminated with crude MHCM.

As the news began to sort itself out, more information emerged: the spill had likely been leaching not just crude MHCM but other chemicals into the water, probably for days before water authorities acted, and the chemicals might well linger in the water system even after people were assured it was safe to drink. More damningly, the company involved, Freedom Industries, had clearly known about the leak long before anyone else did, and they didn’t report it, cooperate with officials, request assistance, or offer information about the chemicals that might be involved when water authorities were seeking information so they could make a decision about the safety of the water.

The situation riveted much of the country as an example of terrible corporate abuses, a cavalier attitude towards community safety, and a case where the health of an entire community was put at risk by a company that knew about a dangerous situation and chose not to act. Many stories and criticisms focused on Freedom Industries, but this case also illustrated a larger problem and a serious issue that needs to be confronted in politics, especially environmental politics: that of the perils of relying on companies to self-report.

In an era when the government seems to be seriously considering self-inspection and reporting (as seen for example with proposals to let slaughterhouses do their own meat inspection), this case shows exactly, in real time, why these plans are monumentally bad ideas. No company is going to willingly report potential environmental hazards if officers think they can get away with it, and once exposed, the company certainly isn’t going to take steps to cooperate.

It wasn’t in the interest of Freedom Industries to admit that several of its tanks were leaking, that they had spilled chemicals into a catchment, and that the catchment had failed to contain the leak, thereby, er, failing as a failsafe. The company definitely didn’t want to admit that chemicals were leaking into the Elk River, nor did it want to provide information about what, exactly, was in the spill, as this could have created liability problems for the firm. By being cagy about information, Freedom Industries clearly wanted to create a liability shield–if there’s no information, there’s nothing to catch them out on, as it were. (Conversely, had the firm said the leak contained crude MHCM and testing later revealed other compounds, Freedom Industries would have been on the hook for not disclosing the other contaminants.)

Much has been made of the fact that the facility hadn’t been inspected in over a decade, and that the firm’s mandatory self-reports were not very complete, but not of much is being made of the fact that Freedom Industries was self-reporting in the first place. And of the fact that the inspectors being blamed for not catching the problem earlier are few and far between, stretched across a huge territory and across a huge number of companies, making it functionally impossible for them to inspect every facility in a timely fashion, let alone enforce recommended or required interventions.

Effectively, the system the government has in place for managing potential polluters like this is one of response, not proactive movement, and herein lies the problem. Freedom Industries, and thousands of other companies like it, know that they can rely on the thin number of regulators on the ground to go for years, and sometimes multiple decades, without inspections. In some cases, agencies have already given up, and they’re simply requesting that companies file self-reports: as seen with the EPA and fracking in Southern California, where new fracking operations are supposed to politely file quarterly notices telling the EPA about which pollutants they’ve released into the water supply. (No, really.)

Self-reporting is not an effective method for protecting public health and safety, no matter what the industry, because firms have a clear and active incentive to avoid reporting any damaging information. Why should a company admit that it’s polluting? Why would a company want to disclose the fact that its aging equipment needs to be replaced? Why would a company indicate that part of its infrastructure is failing, or that its practices are out of date and it needs to retrain certain employees on key tasks? All of these things cost money.

To some extent, firms may have an incentive to not pollute and to not sell contaminated products, in the form of the exposure to financial risks in the form of civil suits and government action. This incentive, however, is far outweighed by the incentive to just say nothing and hope you don’t get caught. This is, in essence, how self-reporting works for many companies, because their obligation is not to the public, or to the government agencies that theoretically oversee them, or even to greater ethical values. Their obligation is to their shareholders, and this is something that must never, ever, be forgotten. No firm being requested to self-report is going to put any interests other than those of shareholders first.

This is the way capitalism is structured, and it is the result of living in a system where income is put at a premium over other concerns. Having made this choice, we now need to live with the outcome: namely, that we cannot rely on huge corporations to do the right thing simply because we’ve asked them to. West Virginia learned that the hard way.