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Environmetal Auditing Since EPA's 1986 Audit Policy

by Karry A. Johnson and Bertram C. Frey

Bertram C. Frey, B.A. Haverford College (1969), J.D. Washington University School of Law (1974). Mr. Frey is Deputy Regional Counsel for EPA Region 5, Chicago. Karry A. Johnson, B.S. Black Hills State University (1997), J.D. candidate University of South Dakota School of Law. Ms. Johnson served as a summer extern with EPA Region 5. Any opinions expressed in this article are those of the authors and do not represent an endorsement of any point of view by the Environmental Protection Agency or the Environmental Law Institute. By citing World Wide Web site links, the authors make no representation or endorsement, express or implied, concerning an individual link or the content within it

This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the copyright owners. The views expressed in this article are those of the authors and are not necessarily those of U.S. EPA.

Copyright © 2000. All rights reserved by the copyright owners.

Table of Contents
 1. Introduction
2. EPA’s 1986 Audit Policy
3. Audits Under the Department of Justice’s Policy Regarding Criminal Prosecutions
4. Audit Provisions as Conditions of Enforcement Settlements, Criminal Sanctions, or "Delisting"
5. Common Law Privileges and Environmental Audit Privilege and/or Immunity Statutes that Protect Audit Information
6. EPA’s 1995 Self-Policing Policy
7. Preliminary Results of the 1995 Policy
8. Conclusion
 9. Footnotes
 10. Supporting Tables (433 kb)

Introduction

Environmental auditing has become an important tool for achieving and maintaining compliance with pollution control standards. Generally defined as a systematic, documented, periodic and objective review by regulated entities of facility operations and practices related to meeting environmental requirements,1 an environmental audit may have various purposes: it may verify compliance with environmental requirements, evaluate the effectiveness of environmental management systems (EMS) already in place, or assess risks from regulated and unregulated materials and practices.2

A primary purpose of auditing is to help improve the effectiveness of basic environmental management by verifying that management practices are functioning and adequate. Environmental audits evaluate direct compliance activities such as obtaining permits, installing controls, monitoring compliance, reporting violations, and keeping records. It is important to note that auditing does not in any way serve as a substitute for compliance activities, nor does it replace regulatory agency inspections.

Audits can be conducted by independent internal or third party auditors. Larger organizations generally have greater resources to devote to an internal auditing team, while smaller entities are more likely to use outside auditors. The federal environmental laws do not require a regulated facility to have an auditing program. Ultimate responsibility for environmental compliance, however, lies with the top management, who has a strong incentive to use means such as auditing to secure reliable information on a facility’s compliance history and status. Environmental auditing has developed for sound business reasons, particularly to help regulated entities manage pollution control affirmatively over time instead of reacting to crises. Auditing can result in improved environmental performance. Auditing can also help communicate effective solutions to common environmental problems, bring attention to upcoming regulatory requirements, and generate protocols and checklists which help facilities better manage themselves.

This article reviews how the United States Environmental Protection Agency (EPA) has defined, treated, encouraged and provided incentives for environmental auditing in its policies and practices. The article also briefly addresses how the Department of Justice (DOJ) gives consideration to auditing in criminal prosecutions. In addition, the article reviews how audits have been negotiated or required as conditions of enforcement settlements, criminal sanctions and "delisting" determinations. Next, the article discusses: 1) how state laws have treated environmental auditing under the common law and under recently enacted environmental audit privilege and/or immunity statutes, 2) how EPA has responded to the new laws, and 3) how the new laws have impacted, or not, the level of audit activity. Finally, the article addresses the incentives offered by EPA’s 1995 Self-Policing Policy,3 sets forth the conditions that must be met in order to qualify for the incentives offered, reviews how the 1995 Policy is being implemented, and covers recently announced, proposed revisions to the 1995 Policy. The article basically proceeds chronologically, beginning with the 1986 Policy and ending with the proposed revisions to the 1995 Self-Policing Policy.

 

EPA’s 1986 Audit Policy

It is EPA policy to encourage the use of environmental auditing by regulated entities to help achieve and maintain compliance with environmental laws and regulations, as well as to help identify and correct unregulated environmental hazards. Recognizing that voluntary auditing programs can result in better identification, resolution, or avoidance of environmental problems, EPA first issued an audit policy in July 1986. This policy statement specifically: 1) encourages regulated entities to develop, implement and upgrade environmental auditing programs; 2) discusses when the Agency may or may not request audit reports; 3) explains how EPA’s inspections and enforcement activities may respond to regulated entities’ efforts to assure compliance through auditing; 4) endorses environmental auditing at federal facilities; 5) encourages state and local environmental auditing initiatives; and 6) outlines elements of effective auditing programs.4

EPA has broad statutory authority to request relevant information on the environmental compliance status of regulated entities.5 Nevertheless, EPA believes routine Agency requests for audit reports could inhibit auditing in the long run, decreasing both the quantity and the quality of audits conducted.6 EPA therefore does not routinely request environmental audit reports.7 But EPA and state and local environmental protection agencies may seek audit reports during investigations that precede an enforcement action. Private groups, including citizens environmental groups, may also seek disclosure during discovery in citizen suits and toxic tort litigation.

EPA will not promise to forgo inspections, reduce enforcement responses, or offer other incentives in exchange for implementation of environmental auditing or other sound environmental management practices. Although environmental audits may complement inspections by providing self-assessment to assure compliance, they are in no way a substitute for regulatory oversight. In addition, certain EPA programs like the Resource Conservation and Recovery Act (RCRA) require minimum facility inspection frequencies, to which not only EPA and the states but also owners and operators of regulated facilities must adhere.8

While EPA inspections of self-audited facilities will continue, to the extent that compliance performance is considered in setting inspection priorities, facilities with a good compliance history may be subject to fewer inspections. Moreover, in fashioning enforcement responses to violations, it is EPA policy to take into account, on a case by case basis, the honest and genuine efforts of regulated entities to avoid and promptly correct violations and underlying environmental problems.9 When regulated entities take reasonable precautions to avoid noncompliance, expeditiously correct underlying environmental problems discovered through audits or other means, and implement measures to prevent their recurrence, EPA may exercise its discretion to consider those actions as honest and genuine efforts to assure compliance.10 Such consideration applies particularly when a regulated entity promptly reports violations or compliance data which otherwise were not required to be recorded or reported to EPA.11

Nonetheless, it is fair to observe that EPA and DOJ have protected prosecutorial discretion first, leaving the fate of audit reports with individual enforcement and prosecution teams or circumstances. The 1986 Policy (as well as the 1995 Policy) expressly reserves EPA’s right to request audit summaries or reports on a case-by-case basis whenever: 1) audits are conducted under consent decrees or other settlement agreements requiring them, 2) a company has asserted its environmental management practices in mitigation or as a defense, or 3) state-of-mind or intent is a relevant element of inquiry, such as during a criminal investigation or as to the gravity of a civil penalty.12

While the 1986 Policy remains in effect, some provisions have been superceded by the 1995 Policy.13 The provisions of the 1995 Policy and the proposed revisions to it will be discussed in detail later.

 

Audits Under the Department of Justice’s Policy Regarding Criminal Prosecutions

DOJ’s July 1, 1991 policy entitled, "Factors in Decisions on Criminal Prosecutions For Environmental Violations in the Context of Significant Voluntary Compliance or Disclosure Efforts By the Violator," accords limited consideration to environmental audits. It states that in determining whether to prosecute, DOJ attorneys should consider if the target has made "voluntary, timely and complete disclosure." The policy offers a range of examples of such cooperation, most of which have the effect of throwing the target on the mercy of the prosecutor in order to protect it from prosecution. This strategy has worked in a number of instances to prevent a criminal prosecution, but the quid pro quo has almost always been a comprehensive and expensive civil settlement. Indeed, many of EPA’s most far-reaching, multi-facility, company-wide, judicial consent decrees have had elements of this settlement dynamic.

 

Audit Provisions as Conditions of Enforcement Settlements, Criminal Sanctions, or "Delisting"

EPA’s February 1991 "Policy on the Use of Supplemental Environmental Projects in EPA Settlements" (most recently updated effective May 1, 1998)14 clearly recognizes that certain types of environmental auditing projects will qualify to reduce the gravity amount of a civil penalty in settlement with the agency. Audits that could be required as injunctive relief, however, are not acceptable. Nevertheless, an audit project may be considered by EPA if the defendant/respondent undertakes qualifying pollution prevention assessments, environmental quality assessments or compliance audits. The company must agree to provide EPA with a copy of the audit report. Usually, the company must also agree that after conducting the audit, it will correct the problems, both with respect to management and environmental practices, uncovered by the audit. In general, compliance audits are acceptable as SEPs only when the defendant/respondent is a small business or community.15

To date, the DOJ and EPA have negotiated over 150 federal court consent decrees requiring environmental auditing. The consent decrees vary from a mere mention of auditing16 to setting out the procedures to be taken in exacting detail.17 The auditing provisions from a number of federal court consent decrees, as well as some EPA administrative orders, are summarized in the tables that accompany this article. The tables categorize the types of provisions contained in the settlement documents for easy reference and comparison. The decrees and orders delineate the type of audit to be performed (e.g., field audit, lab audit, facility audit, and/or compliance audit) and whether or not the entity must file reports as part of the audit. Some consent decrees require an audit of a company’s environmental management system. Almost all decrees require reporting to governmental agencies of audit results. Superfund orders and decrees comprise about half of the items in the tables. Almost all of the Superfund orders or decrees require audits of laboratories that analyze samples of hazardous substances and field audits of sampling procedures and techniques at Superfund sites. Orders and decrees under EPA’s other programs in the tables generally require compliance audits at specific facilities. A few settlements require that the company pay stipulated penalties for redress of violations uncovered in an audit.18 The frequency of the audit(s) is sometimes specified, but often left to the entity’s discretion. The tables also analyze whether the order or decree requires an entity to implement an environmental management system and, if so, whether auditing was required as a component of that system. In addition, approximately 15 consent decrees require audits of an existing environmental management system. Finally, the tables list whether an audit is to be performed as part of a Supplemental Environmental Project (SEP).19

Generally, neither the EPA general civil penalty policy20 nor the various program-specific civil penalty policies21 directly address the issue of environmental auditing. One exception is the TSCA program, which, in its penalty policies,22 has considered self-confession and environmental auditing in mitigating penalties. Nevertheless, prior to the 1995 Policy where consideration of environmental auditing in mitigating penalties has occurred under a program-specific penalty policy, it has almost always been on a case by case basis using the SEP policy as justification.23

EPA’s July 24, 1992 guidance entitled, "Procedures To Implement the Guidelines of the U. S. Sentencing Commission for Organization Defendants,"24 addresses the use of environmental auditing in sentencing. Auditing can be imposed as a condition of probation. The Sentencing Guidelines themselves, which expand the use of remedial orders as conditions of probation, contain explicit provisions for the imposition of measures that can be characterized as auditing at Section 8D1.4(c).25 Also, a sentencing court can take into consideration the existence of an effectively functioning environmental auditing program in imposing a sentence.26

In addition, EPA’s October 31, 1991 policy regarding the role of corporate attitude, polices, practices, and procedures in determining whether to remove a facility from the EPA list of violating facilities following a criminal conviction27 offers further guidance on the use of environmental audits. As a practical matter, the policy requires a corporation that desires to be removed from the list of violating facilities ("delisted") to create and implement an effective compliance and auditing program, including a program to take expeditious steps to correct violations, once identified.28

 

Common Law Privileges and Environmental Audit Privilege and/or Immunity Statutes that Protect Audit Information

A number of commentators on environmental auditing have written of the balance that must be struck between the public interest in uncovering environmental violations and the competing interest of fostering an environment in which business and industry are encouraged to monitor and correct environmental problems.29 The oldest of the privileges protecting confidential communications is the attorney-client privilege. That privilege has been narrowly construed by the courts and does not protect facts about a company’s environmental management practices and compliance status uncovered by an environmental audit.30 Similarly, neither the attorney work-product privilege nor the "self-evaluative" privilege will protect factual material disclosed in an audit report.31

In July of 1993, however, Oregon enacted the first statute in the nation that codifies a self-evaluative privilege for environmental audits. The new privilege bears some similarity to provisions in the Federal Rules of Evidence and many state evidence codes that prohibit the use of evidence of subsequent remedial measures to establish a party’s negligence.

As of August 1999, 24 states have adopted some form of environmental audit privilege and/or penalty immunity law.32 Audit privilege laws generally protect environmental information related to an audit from disclosure to the public or regulatory agencies and prohibit the use of the information in judicial or administrative proceedings, including enforcement settlements.33 Audit immunity laws typically provide immunity from penalties for violations discovered during an audit and reported to a regulatory agency.34 Proponents of audit privilege and/or immunity laws suggest that the laws are needed to encourage companies that do not currently audit to begin to do so; to encourage more auditing by companies that already audit; and for immunity laws, to encourage disclosure and prompt correction of environmental violations.35

EPA has consistently opposed such laws because of their effect on public access to information and on the states’ ability to enforce regulations to protect human health and the environment.36

Completed in 1998, a National Conference of State Legislatures (NCSL) study concluded that the existence of an audit privilege and/or immunity law does not appear to influence the disclosure of violations by a facility.37 NCSL also found that the existence of such laws does not appear to influence the level of audit activity.38 Of the facilities surveyed, 88% reported that they were conducting audits and between one-fourth and one-third said they had disclosed a violation. There was no difference in responses based on whether the state in which the facility operated had an audit law, an audit policy, or no audit law or policy.39 The NCSL study concludes that the advocated benefits of audit privilege/immunity laws may not exist.

 

EPA’s 1995 Self-Policing Policy

On December 18, 1995, EPA issued its revised audit policy which became effective on January 22, 1996. More of a self-policing policy than an audit policy, it was designed to "enhance the protection of human health and the environment" and encourage greater compliance with environmental laws and regulations.40 Incentives are available to those who voluntarily discover and disclose violations, when specified conditions are met. These incentives are discussed below.

First, gravity-based penalties (i.e., non-economic benefit) are eliminated or reduced for voluntary disclosures that meet the terms of the 1995 Policy. Gravity-based penalties are eliminated when violations are found through either an environmental audit or a compliance monitoring program, either of which must meet EPA’s requirements, and are voluntarily and promptly disclosed and corrected. The environmental audit must be systematic, objective and periodic, as defined under the 1986 Audit Policy. The compliance monitoring system must also meet certain requirements. These include standards and procedures that outline how employees are to meet compliance, a method for overseeing compliance, mechanisms to assure compliance (including monitoring and audits to detect and correct violations), efforts to communicate standards to employees and agents, incentives to managers and employees to comply with policies, procedures for prompt and appropriate correction of any violations, and measures to prevent future violations. Gravity-based penalties are reduced by 75% when a violation is voluntarily discovered, promptly disclosed and expeditiously corrected, even if it was not found through an environmental audit or a compliance management system.

As additional incentives, EPA will not recommend a regulated entity for criminal prosecution and will refrain from routine requests for audits if the conditions of the 1995 Policy are met. If the Agency has independent evidence of a violation, it may seek additional information.

In order to receive full benefits under the policy, a violator must meet several conditions. The entity must discover the violation through an environmental audit or compliance monitoring system ("due diligence"). The violation must be discovered voluntarily, not through legally mandated monitoring or sampling requirements prescribed by statute, regulation, permit, judicial or administrative order, or consent agreement. The disclosure must be prompt (within 10 days after discovery41) and must be in writing to EPA. The violation must be discovered and disclosed prior to any government investigation, citizen suit, filing of a third party complaint, report of violation by an employee not in authority, or imminent discovery by a regulatory agency. The entity must correct the violation, within 60 days, and remedy any harm that has occurred as a result of the violation. If it will take longer than 60 days to correct, the entity must notify EPA in writing. The regulated entity also must prevent recurrences of violations. This may require improvements to environmental auditing or "due diligence." The specific violation can not have occurred within the past three years at the same facility, or be part of a pattern of violations by the facility’s parent organization in the past five years. The entity must cooperate fully with EPA to determine the applicability of the policy. There are no penalty reductions available for violations that "resulted in serious actual harm or which may have presented an imminent and substantial endangerment to public health or the environment." Corporations remain criminally liable for violations that exhibit an ongoing management philosophy or practice that conceals and/or condones violations, or high-level management’s participation in (or willful blindness to) the violation.

In 1995 EPA established the Audit Policy Quick Response Team (QRT) to ensure consistent application of the self-policing policy across the country. The QRT is made up of senior representatives from EPA Headquarters, Regions and the Department of Justice. In January 1997, the QRT developed Audit Policy Interpretive Guidance.42 The Interpretive Guidance presents a discussion of questions and answers that is intended to aid in the implementation of the policy. The guidance addresses many of the most significant issues raised to the QRT’s attention. The document also sets forth guidance for EPA’s use in exercising its enforcement discretion. EPA also publishes a periodic newsletter on EPA audit policy issues.43

In October 1997, EPA established a separate Voluntary Disclosure Board (VDB) to act as a central body for reviewing all possible criminal violations that are disclosed under the policy. Like the QRT, the purpose of the VDB is to ensure consistent application of the policy nationwide.

In May 1998, EPA published a survey44 as part of its public commitment in the 1995 Policy to conduct a "study of effectiveness of the policy." The survey solicited responses relating to the general "effectiveness" of the 1995 Policy in "encouraging voluntary discovery, disclosure, correction and prevention of violations."45 The survey sought information on how the policy and its application could be improved. Participation in the survey was voluntary and a respondent could choose to remain anonymous.

On May 17, 1999,46 EPA announced the preliminary results of its evaluation of the effectiveness of the 1995 Policy, proposed revisions,47 and requested public comment in several areas. EPA used four criteria to analyze its preliminary findings, as follows: 1) whether environmental or human health improvements result from the policy; 2) whether the policy encourages prompt disclosure and correction of violations; 3) whether the policy encourages improvements in corporate compliance programs; and 4) whether the policy engenders greater awareness of new environmental issues.

 

Preliminary Results of the 1995 Policy

Using the criteria set out above, EPA, as a preliminary matter, found that:

These findings will aid EPA in making appropriate revisions to the 1995 Policy.

 

Conclusion

Environmental auditing will continue to be an important tool for measuring and maintaining compliance with environmental standards. Regulated entities continue to voluntarily disclose and correct violations under EPA’s 1995 Self-Policing Policy. EPA is fine-tuning the policy to offer the policy’s incentives to a broader number of regulated entities and to expedite procedures for resolving disclosures under the policy. EPA also continues to negotiate audits as conditions of settlement in appropriate enforcement cases. Although many states have enacted audit privilege/immunity laws, the laws appear to have little or no effect either on the conduct or frequency of environmental auditing or on the reporting and disclosure of violations by regulated entities. As the NCSL study concludes, entities have audited and disclosed without regard to whether they are located in states that have such laws or in states that do not.

Go To Supporting Tables 

Footnotes

1. Environmental Auditing Policy Statement, 51 Fed. Reg. 25,003, 25,006 (1986), [hereinafter 1986 Policy]. The Internal Organization for Standarization (ISO) has in effect adopted EPA’s definition of environmental auditing (Compare 1986 Policy at 25,004, 25,006-07 with ISO 14010). The ISO 14000 series establishes internationally-accepted standards for environmental management. While laws, regulations, and compliance requirements vary from country to country, the ISO 14000 series of standards provide, inter alia, common standards for environmental auditing and management systems. For more information on ISO and the ISO 14000 series of standards, see <http://www.iso.ch/>.

2. 1986 Policy at 25,006.

3.  Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations, 60 Fed. Reg. 66,705 (1995) [hereinafter 1995 Policy]. Also available at <http://www.epa.gov/region5/orc/audits.htm>. The 1995 Policy applies to the assessment of penalties for any violations under all of the federal environmental statutes that EPA administers, and supercedes any inconsistent provisions in media-specific penalty or enforcement policies and EPA’s 1986 Environmental Auditing Policy Statement. To the extent that existing EPA enforcement policies are not inconsistent, they will continue to apply in conjunction with this policy. 1995 Policy at 66,712.

4.  1986 Policy at 25,004.

5.  E.g., Clean Water Act Section 308, 33 U.S.C. §1318; Clean Air Act Section 114, 42 U.S.C. §7414; Resource Conservation and Recovery Act Section 3007, 42 U.S.C. § 6927.

6. 1986 Policy at 25,007.

7.  Id.

8.  Compare 42 U.S.C. § 6927(e) with 42 U.S.C. § 6924(a)(2) and 40 C.F.R.§ 264.15.

9. 1986 Policy at 25,007.

10.  Id.

11.  Id.

12.  Id. at 25,007-08; 1995 Policy at 66,708-09, 66,711-12.

13.  1995 Policy at 66,712; see supra note 3.

14.  Memo from James M. Strock, Assistant Administrator, to Regional Administrators, Deputy Regional Administrators, Regional Counsels, Regional Program Division Directors, Assistant Administrators, General Counsels, Program Compliance Directors and Associate Enforcement Counsels, February 12, 1991. The SEP policy was most recently updated effective May 1, 1998. <http://www.epa.gov/oeca/sep/sepfinal.html>.

15.  Id., May 1, 1998 update, at D.5.

16.  More than 50 federal consent decrees make references to environmental auditing, but in not enough detail to be summarized in the tables accompanying this article. Several state court orders and two Canadian provincial court orders also require auditing. In addition, there has recently been a plea agreement in a United States v. B.P. Exploration (Alaska), Inc., District Court of Alaska, dated September 23, 1999, which requires audits of their environmental management systems. See infra endnote 1.

17.  See tables at the end of this article. In addition to the cases in the tables, EPA has entered into informal agreements where the requirements to do audits are not contained within judicial or administrative orders, but nonetheless the companies have agreed to perform audits and disclose results. E.g., Arizona Chemical Company, December 1998.

18.  E.g., U.S. v. Darling International, Inc., C.V. No. 97-1611 (D. Minn., order entered September 12, 1997); U.S. v. Rhone-Poulenc Ag. Co., and Union Carbide Chemical and Plastics Co., Inc., C.V. No. 2:90-0929 (S.D. W.Va., order entered December 19, 1991); U.S. and Natural Resources Defense Council v. Wheeling-Pittsburgh Steel Corp. (Allenport Facility), C.V. No. 89-237 S (W.D. Pa., order entered November 4, 1992). Other consent decrees require the payment of stipulated penalties for the violation of auditing provisions or of the audit work plan, but not for the violations themselves discovered under such provisions or work plan. E.g., U.S. v. E.I. Dupont de Nemours & Co. (Chamber Works), C.V. No. 91-768 (D. N.J., order entered May 21, 1991); U.S. v. Grumman St. Augustine Corp., C.V. No. 91-141-CIV-J-16 (M.D. Fla., order entered July 20, 1993); U.S. v. New Haven Foundry, Inc., C.V. No. 97-71842 (E.D. Mich., order entered June 23, 1997).

19.  See tables at end of this article.

20.  "New Civil Penalty Policy," Memo from Courtney M. Price, Assistant Administrator for Enforcement and Compliance Monitoring to Associate Administrators, Assistant Administrators, General Counsels, Inspector General, Regional Administrators and Staff Office Directors, February 16, 1984.

21.  E.g., "A Framework for Statute-Specific Approaches to Penalty Assessments: Implementing EPA’s Policy on Civil Penalties," February 16, 1984.

22.  TSCA Civil Penalty Policy, 45 Fed. Reg. 59,770 (1980); "Polychlorinated Bephenyls (PCB) Penalty Policy," April 9, 1990.

23.  See supra note 3.

24.  Memo from Herbert H. Tate, Jr., Assistant Administrator for Enforcement, to Regional Administrators, Deputy Regional Administrators, and Regional Counsels, July 24, 1992.

25.  United States Sentencing Commission Guidelines, §8D1.4(c). The guidelines are at <http://www.ussc.gov/>.

26.  Memo from Herbert H. Tate, Jr., supra note 24, at 5 (referring to 52 [sic] Fed. Reg. 64,785).

27.  EPA Policies Regarding the Role of Corporate Attitude, Policies, Practices, and Procedures, in Determining Whether to Remove a Facility from EPA List of Violating Facilities, 56 Fed. Reg. 64,785 (1991).

28.  Id. at 64,789.

29.  Compare McLeod, Douglas P. and Kirk R. Marty, Can You Afford to Perform an Environmental Audit?, 5th Update (1998), with Rosemarin, Carey S. and Gary W. Ballesteros, Audits Good Even Though State Law and Federal Policy Differ, Chicago Lawyer, June 1995. Both articles, as well as a number of others, can be found at <http://www.epa.gov/region5/orc/articles.htm>.

30.  National Labor Relations Board v. Harvey, 349 F. 2d. 900, 906 (1965); see U.S. v. Nixon, 418 U.S. 683, 709-10 (1974); Upjohn Co. v. United States, 449 U.S. 383, 389 (1981); see also McLeod, Douglas P. and Kirk R. Marty, supra note 29, at 1-2.

31.  Stout v. Illinois Farmers Ins. Co., 852 F. Supp. 704 (1994); Solarex Corp. v. Arco Solar, Inc., 121 F.R.D. 163 (1988); but see Reichhold Chemicals, Inc. v. Textron, Inc., 157 F.R.D. 522, 524 (Florida 1994).

32.  Privilege and Immunity: Colorado (Colo. Rev. Stat.,13-25-126.5, 25-1-114.5 (1994)), Kentucky (Ky. Rev. Stat. Ann., 224.01-040 (1994)), Minnesota (Minn. Stat. Ann., 114C.20 et seq. (1995)), Wyoming (Wyo. Stat. 35-11-1105 et seq. (1995)), Utah (Utah Code Ann., 19-7-101 et seq. (1995)), Texas (Texas Civ. Stat., 4447cc (1995)), Kansas (Kan. Stat. Ann., 60-3332 et seq. (1995)), Virginia (Va. Code, 10.1-1198 et seq. (1995)), Michigan (Mich. Comp. Laws Ann., 324.14801 et seq. (1996)), South Carolina (S.C. Code Ann., 48-57-10 et seq. (1996)), New Hampshire (N.H. Rev. Stat. Ann., 147-E:1 et seq. (1996)), Ohio (Ohio Rev. Code Ann., 3745.70 et seq. (1996)), Montana (Mont. Code Ann., 75-1-1202 et seq., 80-1-301 et seq. (1997)), Alaska (Alaska Stat., 9.25.450 et seq. (1997)), Nevada (Nev. Rev. Stat., 445C.010 et seq. (1997)), Nebraska (Neb. Rev. Stat., 25-21, 254 et seq. (1998)), Iowa (1998 Chapter 1109 (1998)), South Dakota (S.D. Codified Laws Ann.,1-40-33 et seq. (1996)); Privilege Only: Oregon (Ore. Rev. Stat., 468.963 (1993)), Indiana (Ind. Code, 13-28-4-1 et seq. (1994)), Illinois (Ill. Comp. Stat. Ann., 415-5/52.2 (1995)), Arkansas (Ark. Stat. Ann., 8-1-301 et seq. (1995)), Mississippi (Miss. Code Ann., 49-2-71 (1995)); Immunity Only: Rhode Island (R.I. Gen. Laws, 42-17.8-1 et seq. (1997)). Idaho also enacted an audit privilege/immunity law in 1995, but it sunset on December 31, 1997 (Idaho Code, 9-801 et seq. (1995)).

33.  Nancy K. Stoner and Wendy J. Miller, National Conference of State Legislatures Study Finds That State Environmental Audit Laws Have No Impact on Company Self-Auditing and Disclosure of Violations, 29 E.L.R. 10,265 (May 1999).

34.  Id.

35.  Stoner, et al., supra note 33, at 10,266; e.g., Roger Walker, Environmental Audit Laws and Small Business (1997); E. Lynn Grayson and Christina M. Landgraf, EPA’s Audit Policy and State Audit-Privilege Laws: Moving Beyond Command and Control?, 27 E.L.R. 10,243 (May 1997).

36.  "Effect of Audit Immunity/Privilege Laws on States’ Ability to Enforce Title V Requirements," Memo from Steven Herman, Assistant Administrator, OECA and Mary Nichols, Assistant Administrator, OAR to Jackson Fox, Regional Counsel Region 10, April 5, 1996, at 2.

37.  Larry Morandi, National Conference of State Legislatures, State Environmental Audit Laws and Policies: An Evaluation (1998). The study is available at <http://www.ncls.org/programs/esnr/audits.htm>.

38.  Id. at 1.

39.  Id. Fourteen states have adopted self disclosure policies: California (July 8, 1996, revised December 1998), Connecticut (October 23, 1996), Delaware (April 11, 1997), Florida (April 1, 1996), Maryland (June 24, 1997), Massachusetts (April 26, 1997), Minnesota (January 24, 1995), New Mexico (February 5, 1999), New York (August 12, 1999), North Carolina (September 1, 1995), Pennsylvania (September 25, 1996), Tennessee (November 27, 1996), Vermont (December 14, 1996), and Washington (December 20, 1994). Oklahoma has adopted a rule, effective June 1, 1997. The rule replaced an audit policy. Oklahoma’s rule allows for waiving and mitigating civil and administrative penalties under certain circumstances.

40.  Similar policies were issued for small businesses (Policy on Compliance Incentives for Small Businesses, 61 Fed. Reg. 27,984 (1996)) and small communities ("Policy on Flexible State Enforcement Response to Small Community Violations," Memo from Steven A. Herman, Assistant Administrator, to Assistant Administrators, General Counsels, Regional Administrators, Deputy Regional Administrators, Regional Counsel and Regional Enforcement Coordinators (November 22, 1995)).

41.  EPA is considering changing this requirement to 21 days. 64 Fed. Reg. 26,745 (1999). See infra note 47.

42.  Memo from Steven Herman, Assistant Administrator, to Regional Administrators and Assistant Attorney General, Environment and Natural Resources Division, January 15, 1997. Publicly available at <http://www.epa.gov/region5/orc/audits.htm>.

43.  "Audit Policy Update" is available on the Internet at <http://www.epa.gov/oeca/apolguid.html>.

44.  Agency Information Collection Activities: Proposed Collection; Comment Request; Audit Policy Customer Satisfaction Survey, 63 Fed. Reg. 25,855 (1998).

45.  Id. at 25,856.

46.  Evaluation of "Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations" Policy Statement, Proposed Revisions and Request for Public Comment, 64 Fed. Reg. 26,745 (1999).

47.  EPA has proposed various revisions to the 1995 Policy. The Agency based these changes on the comments received to the survey and the preliminary findings of the effectiveness evaluation. Comments relating to the proposed revision were due July 19, 1999. The revisions would:

1. Broaden the period for "prompt disclosure" from 10 to 21 days and clarify the time of discovery.
2. State that the impending investigation or request for information must "involve the same facility" to fail under the "independent discovery" provision.
3. State that the "no recommendation for criminal prosecution" clause is available for entities that meet all of the conditions except for "Systematic Discovery."
4. Clarify what is meant by "cooperation" required for disclosures made under the 1995 Policy.
5. Clarify that penalty relief may be available for "good faith" under other enforcement policies for violation disclosures even if the entity does not meet the Audit Policy criteria.
6. Clarify the imminent and substantial endangerment exclusion.
7. Change "due diligence" to "compliance management system".
8. Describe EPA processes for handling civil and criminal disclosures.
9. Clarify that case information will be released by EPA upon settlement unless a claim of confidential business information is made, another Freedom of Information Act exemption applies, or any other law would preclude its release.
10. Clarify that violations found through the use of an audit or compliance management system performed as a requirement of participation in an Agency Partnership Program can be considered to have been voluntarily discovered.
11. Note the availability of Interpretive Guidance on issues concerning the availability and application of the Policy.
12. Clarify that if a facility discloses a violation of a state approved program or one that the State is authorized to administer or enforce, EPA will consult with the State in responding to the disclosure.

48.  As of December 1, 1999, approximately 500 entities have disclosed violations at over 2700 facilities.

49.  Programs other than ones that states are authorized, delegated or approved to administer and enforce.

 

 



 

Enforcement in Region 5
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