U.S. EPA's Environmental Audit Policy encourages companies to self-evaluate their compliance with environmental requirements and disclose any violations to EPA. As an incentive to disclose violations to EPA, the Audit Policy provides up to 100% forgiveness of gravity-based civil penalties if certain conditions are met.
U.S. EPA's audit policy contains nine (9) conditions that must be met in order to qualify for the penalty reduction incentive for self-disclosure. Those nine conditions include:
1. Systematic Discovery- There are two ways to qualify under this condition – perform an environmental audit or utilize a compliance management system to review compliance. If a company fails to meet this condition, EPA's policy still may provide a 75% reduction in gravity-based civil penalties if the other eight conditions are satisfied.
2. Voluntary Discovery- The violations disclosed must not have been otherwise legally required to be disclosed. (Example: Title V Air Permits require covered facilities to certify compliance on an annual basis with all requirements in the Title V air permit. Therefore, a Title V facility would not qualify for the incentives under the EPA Audit Policy if it disclosed non-compliance with permitting requirements with its Title V permit. Note: EPA does have a limited exception for new owners of Title V facilities.)
3. Prompt Disclosure- If you decide to disclose violations uncovered to try and secure gravity-based penalty reductions, the company must disclose all violations within 21 days of discovery
4. Independent Discovery and Disclosure- The audit cannot have been performed and/or the violation cannot have been discovered after a federal, state or local investigation, etc.
5. Correction and Remediation- The violations must have been corrected within 60 days.
6. Prevent Recurrence- The company must take steps to prevent recurrence of the violations.
7. No Repeat Violations- The same violations must not have occurred within 3 years at the same facility or within 5 years if EPA determines there is corporate pattern of violations.
8. Certain Violations Excluded- The two types of violations are excluded from any penalty forgiveness– violations that have the potential to cause serious harm or if the company violates an order or agreement with EPA.
9. Cooperation- The company must provide requisite or requested information to EPA.
Why Consider Using EPA's Audit Policy?
If s company can successfully establish all the conditions under EPA's audit policy for forgiveness of gravity-based civil penalties, the company may be able to avoid very large civil penalties that otherwise would have been paid if an EPA inspector detected the violations first.
One common area of environmental compliance that companies audit is Emergency Planning and Community Right to Know Act (EPCRA) reporting requirements. As a prime example of the benefits that may flow from using the U.S. EPA's Audit Policy:
This February U.S. EPA entered into a settlement with a New Cingular Wireless PCS LLC. The company found violations at 642 sites in 35 different states through two separate environmental audits. According to the settlement, the company avoided $6.7 million in projected gravity based civil penalties that EPA otherwise may have pursued if the violations were discovered through EPA inspections versus an audit.
While there are strong incentives to utilize EPA's audit policy, there are many issues to navigate. Some of these issues will be the subject of future blog posts on this topic. Those issues include:
- Confidentiality of the audit;
- Establishing the nine conditions;
- The requirement to report all violations within 21 days
- Gravity-based penalties versus the potential for assessment of economic benefit penalties