On March 26, 2020, the Office of Enforcement and Compliance Assistance (OECA) published a temporary enforcement discretion policy due to the COVID-19 pandemic. The general conditions of the policy emphasize enforcement discretion and EPA encourages that entities make every effort to comply with their facility environmental compliance obligations. EPA further acknowledged that the policy is general and may not apply to all situations and stated that “the EPA’s self-disclosure program remains available” as an option for companies that are faced with potential non-compliance. So, what is the EPA’s “self-disclosure policy” and how can companies use it?
EPA’s Audit Policy
The EPA’s Self-Disclosed Violation Policies is also called the “Audit Policy” and is formally titled “Incentives for Self- Policing: Discovery, Disclosure, Correction and Prevention of Violations.” The policy was issued in 1995 and revised in 2000. EPA intended the policy to enhance environmental protection by encouraging regulated entities to voluntarily discover, disclose, correct, and prevent violations of federal environmental law with the benefit of reducing civil penalties and criminal prosecution of disclosing entities. In May 2018, EPA announced a renewed emphasis on this program along with enhancement and promotion of the online eDisclosure program.
How to make a voluntary disclosure under EPA’s Audit Policy
A facility has 21 days from the time of discovery to disclose a violation to EPA through the eDisclosure system, in most cases. Discovery is when any officer, director, employee, or agent of the facility has an objectively reasonable basis for believing that a violation has or may have occurred.
New owners in the oil and gas sector may be eligible for penalty mitigation under the Audit Policy for violations at newly acquired facilities irrespective of the disclosing entity's compliance history. Violations discovered at newly acquired facilities as part of the new owner’s reexamination of facility compliance under Title V of the Clean Air Act are considered voluntarily discovered for purposes of the Audit Policy, provided the owner notifies EPA prior to submission of its first annual compliance certification.
Conditions for penalty mitigation
Regulated entities that satisfy the following conditions are eligible for Audit Policy benefits.
- Systematic discovery of the violation through an environmental audit or the implementation of a compliance management system.
- Not detected as a result of a legally required monitoring, sampling or auditing procedure.
- Prompt disclosure in writing to EPA within 21 days of discovery.
- Independent discovery and disclosure before EPA or another regulator would likely have identified the violation through its own investigation or based on information provided by a third- party.
- Correction and remediation within 60 calendar days, in most cases, from the date of discovery.
- Prevent recurrence of the violation.
- Repeat violations are ineligible, i.e., the specific (or closely related) violations have occurred at the same facility within the past 3 years or those that have occurred as part of a pattern at multiple facilities owned or operated by the same entity within the past 5 years.If the facility has been newly acquired, the existence of a violation prior to acquisition does not trigger the repeat violations exclusion.
- Ineligible violations include those that result in serious actual harm, those that may have presented an imminent and substantial endangerment, and those that violate the specific terms of an administrative or judicial order or consent agreement.
- Cooperation by the disclosing entity is required.
Summary of incentives
- Significant penalty reductions. Reduction of 100% of the penalty component that is based on the severity or gravity of the violations provided all nine of the Policy’s conditions listed above are met. EPA retains discretion to collect any economic benefit that may have been realized as a result of noncompliance. Gravity-based penalties can be reduced by as much as 75% where the disclosing entity meets all the Policy’s conditions except detection of the violation through a systematic discovery process.
- No recommendation for criminal prosecution for entities that disclose criminal violations if the applicable conditions under the policy are met. “Systematic discovery” is not a requirement for eligibility for this incentive, although the entity must be acting in good faith and adopt a systematic approach to preventing recurring violations. Refer to the Audit Policy for a complete discussion of issues relating to disclosure of criminal violations.
- No routine requests for audit reports. EPA will not routinely request copies of audit reports to trigger enforcement investigations.
New Owner Clean Air Act Audit Program for oil and natural gas exploration and production facilities
On March 29, 2019, EPA finalized a New Owner Clean Air Act Audit Program tailored for the oil and natural gas sector. This program provides environmentally protective efficiencies and certainty in the oil and natural gas sector based on the Agency’s analysis of the sector’s unique operations. Details of this program can be found here.
Questions? Contact us today.
Rajib Sinha, PE