On October 7, 2019, the North Dakota Department of Environmental Quality (NDDEQ) and the United States Environmental Protection Agency (EPA) entered into a Memorandum of Agreement (MOA) to establish policies and procedures for North Dakota's self-audit law.  The MOA delegates authority to NDDEQ for most environmental compliance oversight and further encourages regulated companies to voluntarily conduct environmental self-audits and report discovered violations.

Some background
In 2017, North Dakota passed a law allowing companies to conduct self-audits at regulated facilities, such as oil and gas sites, refineries, power plants, and waste facilities, and report compliance-related issues to NDDEQ.  The law prevents regulatory agencies from pursuing civil penalties if a company identifies violations during a voluntary environmental audit.  The law also includes several exceptions where immunity is not provided, such as in circumstances where the violation caused significant human health or environmental harm, is representative of a pattern, or is the result of gross negligence.  To qualify for civil penalty exemptions, companies must also notify regulatory agencies in writing before beginning a self-audit and must complete the audit within 180 days of notice.

What does North Dakota’s new MOA do?
The MOA clarifies how North Dakota's self-audit law will be administered.  The agreement indicates NDDEQ’s program meets EPA’s audit self-disclosure program criteria, establishes how the two agencies will interface, and sets authority boundaries between federal and state.  The agreement explains that EPA will generally delegate authority to NDDEQ, deferring to the state’s decision-making provided it remains consistent with federal law.  The MOA also stipulates that EPA will not selectively target companies seeking immunity under the self-audit law and directs NDDEQ to establish a means to measure increased compliance associated with the self-audit program.

The MOA also highlights a February 5, 2019 North Dakota Attorney General opinion letter regarding the state's self-audit law.  In the letter, the Attorney General addresses a number of legal matters that demonstrate the North Dakota program is consistent with EPA requirements.   

Some things to keep in mind

• Companies purchasing an asset in North Dakota may consider conducting a formal due diligence audit in order to voluntarily identify and address noncompliance issues.  New owners may also consider EPA’s New Owner Audit Policy to address environmental noncompliance.
• If an owner or operator has concerns about an existing compliance program, they may conduct a voluntary audit to determine potential areas of noncompliance. Audit plans should be disclosed to NDDEQ in advance to qualify for incentives and/or immunity. 
• While North Dakota’s self-audit law does not require the use of an attorney, owners and operators may consider consulting legal counsel prior to conducting self-audits.

Contact us to discuss your voluntary environmental disclosures program
Trihydro has experience with environmental self-audit programs for both due diligence and compliance management programs and can assist companies in understanding potential implications of the new MOA.