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EPA May Seek to End Voluntary Self-Disclosure Audit Policy

The question whether to conduct an environmental compliance audit and self-disclose environmental violations to the U.S. Environmental Protection Agency (EPA) may become a little tougher. Citing minimal environmental benefit and the lack of high-priority cases associated with the audit policy, EPA’s Office of Enforcement and Compliance Assurance (OECA) recently announced in a draft guidance document that in FY 2013 it intends to cut back its oversight of the policy so that the agency will have only a “minimum national presence.” The language is tucked away in one paragraph of OECA’s 92-page draft FY 2013 National Program Manager Guidance, dated February 10, 2012. EPA is accepting comments from the EPA Regional Offices, States, and Tribes through today, March 19, 2012. If OECA finalizes the guidance as is, EPA Regional Offices are advised to consult with headquarters before initiating any new work in response to self-disclosures.

EPA’s voluntary self-disclosure audit policy is intended to encourage self-disclosure of environmental violations through administrative and civil penalty mitigation. The audit policy, however, requires disclosing entities to satisfy a series of conditions to qualify for penalty mitigation. Such conditions include, for example, prompt disclosure within 21 days of discovery and independent discovery and disclosure, which at times prove challenging to satisfy under EPA’s interpretation. Further, DOJ is not bound by the policy, particularly when criminal charges may apply. Thus, the program frequently is not available when entities need it the most. As a result, aside from its widespread use for EPCRA violations, those in the regulated community have sometimes viewed the policy with skepticism.

Notwithstanding these drawbacks, industry often cites EPA’s policy as a factor that supports environmental compliance audits. Further, there have been significant penalty reductions associated with the policy. In January 2012, for example, EPA waived $6.7 million of the gravity-based penalty for a self-disclosing entity’s EPCRA reporting violations at 642 different sites across the country. The company’s final penalty was $125,728.

It remains to be seen how EPA will handle voluntary disclosures going forward. On the one hand, this may simply be a temporary triage while EPA tries to satisfy budget cuts. On the other hand, it may suggest that many within EPA want to abandon the policy. Industry, congressional, and other stakeholders may seek to weigh in before the draft becomes final.

If you have questions about EPA’s Audit Policy, how to qualify for it, and the particular circumstances facing your company, please contact Jim Price, Drew Brought, or any member of our Environmental Law Practice Group.