Ecology and Environment, Inc.

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Ecology and Environment, Inc.

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(NASDAQ:EEI)
Contact Information
Ecology and Environment, Inc.
Buffalo Corporate Center, 368 Pleasant View Dr.
Lancaster, NY 14086-1397
NY Tel. 716-684-8060
Fax 716-684-0844

Type: Public
On the web: http://www.ene.com
Employees: 1,130
Employee growth: (3.8%)

Every day is Earth Day at environmental consulting and testing company Ecology and Environment (E & E). The company, which has completed more than 50,000 projects in some 120 countries, provides engineering, permitting, and environmental support for all types of energy development, including offshore energy, power plants, pipelines, and renewables. Services include environmental impact assessments, air pollution control, wastewater analyses, and site-planning. It also consults on natural resource restoration programs, green initiatives, emergency planning, and hazardous waste projects. E & E, which generates most of its sales in the US, targets government, industrial, and engineering clients.

Key numbers for fiscal year ending July, 2013:
Sales: $134.9M
One year growth: (13.2%)
Net income: ($2.1)M

Officers:
Chairman: Gerhard J. Neumaier
VP, CFO, and Treasurer: Engineering Services

Competitors:
ATC Associates
GZA GeoEnvironmental

Gale Directory of Company Histories:

Ecology and Environment, Inc.

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Incorporated:1970
NAIC: 541330 Engineering Services
SIC: 8711 Engineering Services

One of the earliest companies dedicated to the problem of environmental conservation and enhancement, Ecology and Environment, Inc. (E & E) is based in Lancaster, New York, with regional offices throughout the United States and active subsidiaries in Costa Rica, Venezuela, Brazil, Chile, Germany, Russia, Kazakhstan, and China. The company also has representation in 20 other countries. Focusing on the engineering and scientific consulting side of the industry, rather than direct waste clean up or disposal, E & E is also involved in with the entire range of macro-environmental problems, including acid rain, ozone depletion, global warming, biodiversity, and mass deforestation. E & E creates teams of specialists from more than 70 disciplines, depending on client requirements, to provide environmental impact assessments; industrial hygiene and occupational health studies; infrastructure planning; solid, hazardous, and mixed waste management, as well as analytical laboratory and field monitoring services. Since its creation in 1970, E & E has been highly dependent on federal contracts, awarded mostly by the U.S. Environmental Protection Agency (EPA) and Department of Defense (DoD). In recent years E & E has made an concerted effort to diversify its business

A case can be made that the rise of the modern environmental movement can be traced to Rachel Carson's 1962 book, Silent Spring, which brought to public attention the dangers of the indiscriminate use of synthetic chemicals, especially pesticides employed in agriculture. In fact, Carson infused the everyday word 'environment' with new meaning when she wrote, 'The most alarming of all man's assaults upon the environment is the contamination of air, earth, rivers and sea with dangerous chemicals, from the moment of conception until death.' The public outcry to the charges in Silent Spring was so intense that even before the book was officially published, President Kennedy promised an investigation. Congress established 13 committees to address environmental problems. The first Clean Air Act was passed in 1963, the first Clean Water Act in 1965. The environmental movement gained even broader support in 1969 when an oil platform off the coast of Santa Barbara, California, blew out and spilled 235,000 gallons of black crude oil over 30 miles of beaches in an affluent community.

On April 22, 1970 the first Earth Day was celebrated by some 20 million Americans. Although greeted with skepticism from both the political left and right, Earth Day at the very least established a loose, nationwide coalition of committees that could provide organization to the environmental movement. The coordinating organization, Environmental Action, grew into a Washington, D.C., presence, with offices and a full-time staff of lobbyists. Perhaps the most important event of 1970, however, came in December, when President Nixon signed into law the creation of the Environmental Protection Agency, the first time that a single, independently budgeted entity would be responsible for monitoring and enforcing the nation's environmental protection laws.

One week before Earth Day 1970, four men trained in engineering, physics, and biophysics formed Ecology and Environment, Inc. to work in the environmental consulting business. Gerhard Neumaier, a mechanical engineer and physicist; Frank Silvestro, a biophysicist a; Ronald Frank, a mechanical engineer and biophysicist; and Gerald Strobel, a licensed professional civil/sanitary engineer, had worked together on environmental issues at the Cornell Aeronautical Laboratory (later Calspan) in Buffalo, New York. When Congress in 1969 passed the National Environmental Policy Act (NEPA), they anticipated a demand for consulting firms that could provide specialists in a combination of fields, all related to environmental science and engineering, who would conduct the impact assessments that government would now require. Because the emphasis at Calspan was on defense work and automobile crash testing, the four men decided to form their own company to pioneer the new environmental industry. Initially they operated out of an office above a carpet store.

Most of E & E's early business was done locally in the Buffalo area and involved waste-water and water-pollution control. Soon after, the company became involved in the energy industry, opening an office in Houston, Texas, to work with natural gas exploration and pipeline transmission firms. It landed its first major contract in 1974 with the Department of Interior to act as its environmental monitors during the design and construction of the $8 billion, 800-mile Trans-Alaskan pipeline, the largest private construction project ever undertaken. In the same year, E & E became the environmental consultant for the consortium building the Northern Border Pipe Line that would deliver natural gas from Alberta, Canada, to the midwestern United States.

National concern about the environment continued to grow in the 1970s. A 1977 study estimated that 95 percent of the country's river basins were polluted. A little-known Niagara Falls, New York, neighborhood nicknamed Love Canal gained notoriety because of the unusually high rate of birth defects, miscarriages, cancer, epilepsy, and other diseases that plagued the community. A controversy turned into a scandal when it was learned that city officials had concealed the fact that the community had been built on land that had served as a chemical waste dump for the area's largest industry, Hooker Chemical Company. As a result, the environmental movement took on a new face, that of the 'angry mom,' a force that politicians ignored at their own peril. Only weeks before leaving office, President Carter in 1980 signed the Comprehensive Environmental Response, Compensation, and Liability Act, which would become commonly known as the 'Superfund.' The $1.6-billion appropriation, funded in part by taxes on petroleum and other chemicals, was intended for the cleanup of toxic-waste sites and oil spills.

In the late 1970s E & E received an EPA contract to establish Technical Assistance Teams (TATs) to support the agency's Oil and Hazardous Substances Spill Emergency Response program. The company was required to open offices in Washington D.C., as well as the nine other cities where EPA had regional offices. E & E's multidisciplinary teams of engineers, scientists, and technical specialists responded to spill emergencies whenever there was federal intervention. E & E received another major EPA contract to provide Field Investigation Teams (FITs) to assist it with Superfund activities involving uncontrolled and abandoned hazardous waste sites,. Although the company profited from its EPA contracts, E & E found it increasingly difficult, despite its sound reputation, to generate business within the chemical industry because of its close ties to EPA's regulatory function. The result would be an over-dependence on federal contracts, making the company susceptible to government budgetary constraints. In 1982 the company was forced to lay off employees whom it would later rehire as these specialties again became needed.

As early as the mid-1970s, E & E made attempts to break into foreign markets. Although an effort in Japan failed, the company was able to land consulting assignments on industrial park development in Bolivia and water supplies in Caracas, Venezuela. In 1979 E & E became the environmental consultant to the Saudi Arabian Royal Commissioner for Jubail and Yanbu. It would open subsidiaries, as well as establish affiliations with foreign specialists, until E & E had a presence in almost 30 countries around the world.

The environmental movement and industry suffered a general setback during the early years of the Reagan administration, as EPA went a year without a new administrator. According to Hal K. Rothman in his book, Saving the Planet: 'The Reagan administration also worked to curtail EPA's reach. ... Enforcement standards were set so that the $1.6 billion Superfund would not be spent. This meant that the agency generally did not pursue law enforcement, instead resorting to sometimes fruitless negotiation with polluters. ... Later, in 1986, Reagan signed Executive Order 12580, which gave the Department of Justice the right to disapprove any EPA enforcement action against a federal facility. The Justice Department held that the executive branch entities could not sue each other, effectively ending EPA's ability to enforce its mandate on federal lands.'

An outraged Congress held hearings that revealed that the Pentagon itself recognized 4,611 contaminated sites at 761 military bases, many of which posed grave threats to local communities. In October 1986 Congress re-authorized the Superfund cleanup program, allocating $9 billion for the next five years. E & E received major contracts from the Department of Defense in connection with the clean up of hazardous wastes cause by munitions and fuels, as well as environmental impact studies on base closings that would result from the termination of the Cold War. Established players like E & E were now challenged by hundreds of start-ups companies, and soon investors recognized the potential for growth in the industry.

In June 1987 E & E filed an initial public offering of one million Class A common shares of stock with the Securities and Exchange Commission and began trading on the American Stock Exchange. With some of the $15 million raised in the offering, E & E purchased 85 acres of an abandoned golf course in Lancaster, New York, and built an environmentally friendly headquarters. More than 90 percent of the property would serve as a game preserve.

For the next few years E & E showed steady growth in revenues and profits. It signed another major four-year contract with the EPA in August 1990 that was worth $111.3 million. In July 1991 it signed a $15 million contract with the Army Corps of Engineers to assist in the clean up of civil works and military facilities in California, Arizona, Colorado, Nevada, and Wyoming. However, also in 1991, E & E suffered a setback when its FIT contract with the EPA expired.

In 1992 the price of E & E's stock tumbled, as the industry in general suffered from a sluggish economy. With the election of President Bill Clinton and Vice-President Al Gore, who was well known for his support of environmental concerns, it was generally assumed that the environmental services industry would enjoy renewed growth. E & E in particular felt good about the news that Carol Browner would head the EPA. When she served as Florida's top environmental official, E & E was the state's largest contractor involved in waste problems caused by underground storage tanks. E & E anticipated that its work on military sites would also increase and was optimistic about the potential of its overseas' work, especially in China, where the company already had two projects.

E & E's profits grew during the first two years of the Clinton Administration, but the 1994 Republican takeover of the Congress soon had a chilling effect on the environmental services industry. Congress proposed deep cuts in the budget of the EPA and its Superfund projects. Because of uncertainty about Congressional intent to reauthorize environmental legislation, there was concern that both federal and state agencies and private sector firms might postpone, or cancel altogether, the cleanup programs that would have normally gone forward. The military, because of interventions in Somalia, Kuwait, and Haiti, opted to shift money away from environmental projects. By August 1995, after three rounds of layoffs, E & E had trimmed its staff by 17 percent. The price of its stock was down 43 percent from a high in 1994. Its laboratory business found itself in an increasingly competitive market, as 1,400 firms began to go through a period of consolidation. Even when E & E received five contracts from the EPA, potentially worth more than $200 million, the company found itself a collateral victim of the prolonged budget fight between the president and Congress that precipitated the notorious 'government shutdown.' Heavily reliant on federal contracts, E & E would continue to suffer even after the impasse was resolved. It would report declining results in eleven out of twelve quarters, finally reaching bottom in 1997.

E & E began to seriously look at diversifying its business. As early as 1995 it investigated the possibility of getting involved in shrimp farming, hoping to use its expertise to increase yield and bring to market an environmentally friendly product that could command a premium price. Negotiations, unfortunately, failed on two separate deals. E & E also engaged in talks with a California real estate manager to create a venture that would clean up properties with minor environmental problems that depressed values, in order to resell at a profit.

As the economy picked up, E & E began to recover as well. Companies made plans to expand, requiring site preparation and clean-up work. With more cash on hand, businesses were also more willing to address environmental problems. Furthermore, E & E's efforts to diversify began to show progress. In January 1998 the company became involved in reviving the shellfish industry in the Narragansett Bay in Rhode Island that had both pollution and over-harvesting had damaged. Under the $400,000 contract, E & E would raise up to 50 million clams in a nursery, then transplant them in the bay. The company also formed a finance group to arrange financing for development projects such as the cogeneration plants it had developed in China.

The company finally purchased a shrimp farm in 1999, paying $1.89 million for a 90 percent stake in a Costa Rican operation. E & E also became involved in providing support for companies installing fiber optic systems that require environmental permits. In addition the company began to sell expertise to corporations and law firms engaged in risk-based decisions, as well as litigation that involved health-related and economic/property devaluation claims. It sought to diversify further via selective acquisitions of consulting firms. In 1999 E & E acquired a controlling interest in an environmental consulting company in Chile, as well as a Colorado firm, Walsh Environmental Scientists and Engineers.

E & E's traditional government work also picked up at the end of the 1990s. The company signed a three-year contract with the U.S. Army Corps of Engineers to work on hazardous waste and related clean-up projects; a new deal with the EPA to support cleanups of oil, petroleum, and hazardous waste in western Pennsylvania and West Virginia; and three new Superfund contracts. E & E won a contract with the Illinois Department of Transportation to do site assessment work. It entered into an agreement with Urbitran Corporation to work with the New York City Department of Sanitation in anticipation of the 2002 closing of existing landfills. E & E also received a contract from the U.S. Minerals Management Service to assess the environmental effects on the Gulf of Mexico from floating production, storage, and offloading vessels (FPSOs) that transfer oil to smaller shuttle tankers for delivery to port.

Internationally, investments in the environment looked especially promising in eastern Europe, where many countries were becoming concerned after decades of unchecked pollution. With a 30-year reputation as a leader in its field, and still operated by its four founders, E & E looked to position itself as a true global concern with a broad range of related businesses that would no longer be overly dependent on the patronage of one federal agency.

Principal Subsidiaries

Ecology and Environment Engineering, Inc.; E & E Drilling and Testing Co. Inc.; Ecology and Environment, Limited.

Principal Competitors

American Ecology Corporation; The IT Group Inc.; Waste Management, Inc.

Further Reading

Archer, Jules, To Save the Earth, New York: Penguin, 1998.

Dowie, Mark, Losing Ground, Cambridge, Mass.: MIT Press, 1995.

'E & E Celebrates Silver Anniversary,' The Bear Facts: The Newsletter for the Employees of Ecology and Environment, Inc., Summer 1995, pp. 1-3.

Robinson, David, 'E & E Exploring New Ventures,' Buffalo News, January 19, 1996, p. B6.

Rothman, Hal K., Saving the Planet, Chicago: Ivan R. Dee, 2000.

Rubin Debra K., 'Countries and Companies Make Cleanup a Priority,' Engineering News Record, July 3, 2000, pp. 50-1.

— Ed Dinger


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