News

EPA Plans To Cut Back Self-Disclosure Program; AGC Solicits Member Input

The U.S. Environmental Protection Agency (EPA) may soon end its program that allows regulated companies to self-disclose environmental violations.  EPA’s so called “Audit Policy” has been around since 1995 and it has incentivized thousands of companies to voluntarily disclose and correct environmental violations in exchange for reduced (and sometimes waived) fines and penalties.  However, the Agency has plans to cut back its Audit Policy program to “a minimal national presence.”  AGC is currently evaluating whether or not to push EPA to maintain this existing program and seeks member input on the value of having the self-disclosure option – particularly when managing mergers and acquisitions. In dealing with anticipated budget cuts, the EPA Office of Enforcement and Compliance Assurance (OECA) has recently issued a draft “Program Manager Guidance” directed to the Agency’s regional offices that, if finalized, would instruct EPA’s regional offices to spend no resources processing self-disclosures under the Audit Policy effective October 1, 2012, the start of the agency’s 2013 fiscal year (FY).  The guidance states –

The EPA Regions should consult with Headquarters before initiating any new work in response to self-disclosures. For FY 2013, the Audit Policy (self-disclosure) program is one of the areas where OECA will reduce its program work to a minimal national presence. OECA is working with the Regions to develop a plan for reducing work in this area to a level of minimal national coverage.

See draft “Program Manager Guidance” at page 14.
AGC Needs YOUR Input! Outside legal experts predict that EPA will proceed to de-fund its audit program if the regulated community does not stand up for the policy and its value.  If this program is used widely by the membership, AGC will draft a comment letter to EPA laying out the construction industry’s views of why this change in direction is a serious mistake.  If your company finds value in having the option of audit disclosure, please email your comments or concerns to Leah Pilconis at pilconisl@agc.org as soon as possible. Although EPA is not formally taking comment from the regulated community on draft “Program Manager Guidance,” AGC understands that the Agency has been receiving some comments and that those comments are being reviewed internally.
‘Significant Number’ of Disclosures Have Resulted in ‘Small Pollution Cuts" EPA acknowledges that it receives “a significant number” of disclosures each year.  In FY 2011 alone, EPA received disclosures from 458 companies covering 855 facilities.  But the Agency estimates the environmental benefits from those disclosures to be significantly less than from traditional enforcement. In addition, the disclosures generally have not focused on reducing pollution that poses the greatest threats to public health and the environment, according to draft national Program Manager Guidance for FY 2013. The FY 2013 draft guidance is available online.  More information on EPA’s FY 2013 planning and budget is online at http://www.epa.gov/planandbudget/annualplan/fy2013.html.  EPA’s Audit Policy Web page is at http://www.epa.gov/compliance/incentives/auditing/auditpolicy.html. Summary of How EPA’s Audit Policy Works EPA’s initial policy of self-audits and disclosures was published in the Federal Register on December 22, 1995. On April 11, 2000, EPA published an amended policy, entitled "Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations,” (Audit Policy) which is currently in effect. 65 Fed. Reg. 19,618 (Apr. 11, 2000). EPA’s Audit Policy provides incentives for company owners to self-report environmental violations, resolving violations at nearly 10,000 facilities since 1995, according to EPA. Fines and penalties may be reduced or waived if a company voluntarily reports a violation.  Penalties are not waived for repeat offenders or violations that caused actual harm. Specifically, under EPA’s Audit Policy gravity-based penalties for violations of EPA-administered statutes are reduced or completely eliminated if the violations are voluntarily discovered, promptly disclosed to EPA, and meet a number of other specified conditions. The nine specific requirements of the policy are:
  1. The violation must be systematically discovered, either through: (a) an environmental audit; or (b) a compliance management system reflecting the company’s due diligence in preventing, detecting, and correcting violations.
  2. The violation must be discovered voluntarily (i.e., not through a legally mandated monitoring or sampling requirement prescribed by statute, regulation, permit, judicial or administrative order, or consent agreement).
  3. The company must fully disclose the specific violation in writing to EPA within 21 days (or within such shorter time as may be required by law) after the entity discovered that the violation has, or may have, occurred.
  4. The company must discover and disclose the potential violation to EPA prior to: (a) the commencement of a federal, state or local agency inspection or investigation, or the issuance by such agency of an information request to the company; (b) notice of a citizen suit; (c) the filing of a complaint by a third party; (d) the reporting of the violation to EPA (or other government agency) by a "whistleblower" employee; or (e) imminent discovery of the violation by a regulatory agency.
  5. The company must correct the violation within 60 calendar days from the date of discovery, certify as such in writing, and take appropriate measures as determined by EPA to remedy any environmental or human harm due to the violation.
  6. The company must agree in writing to take steps to prevent a recurrence of the violation.
  7. The specific violation (or a closely related violation) cannot have occurred previously within the past three years at the same facility, or within the past five years as part of a pattern at multiple facilities owned or operated by the same entity.
  8. The violation cannot be one that (a) resulted in serious actual harm, or may have presented an imminent and substantial endangerment, to human health or the environment, or (b) violates the specific terms of any judicial or administrative order, or consent agreement.
  9. The company must cooperate with EPA and provide such information as is necessary and requested by EPA to determine applicability of the Policy.
If a company can establish that it satisfies all of the conditions of the policy, EPA will not seek gravity-based penalties for the disclosed violations. If a company can establish that it satisfies all of the conditions of the policy except for the "systematic discovery" requirement, EPA will reduce gravity-based penalties by 75 percent and generally will not pursue criminal enforcement. Under the policy, EPA will neither request nor use an environmental audit report to initiate a civil or criminal investigation of an entity, nor will it request an environmental audit report in a routine inspection. For more information, or to provide AGC with input on value your company finds having the option of audit disclosure, please email Leah Pilconis at pilconisl@agc.org.