[Federal Register Volume 60, Number 63 (Monday, April 3, 1995)]
[Notices]
[Pages 16875-16879]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8218]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
[FRL-5184-4]
Voluntary Environmental Self-Policing and Self-Disclosure Interim
Policy Statement
AGENCY: Environmental Protection Agency (EPA).
ACTION: Interim policy statement and request for comment.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency (EPA) announces and
requests comment on an interim policy to provide incentives for
regulated entities that conduct voluntary compliance evaluations and
also disclose and correct violations. These incentives include
eliminating or substantially reducing the gravity component of civil
penalties and not referring cases for criminal prosecution where
specified conditions are met. The policy also states that EPA will not
request voluntary audit reports to trigger enforcement investigations.
This interim policy was developed in close consultation with EPA's
regional offices and the Department of Justice, and will be applied
uniformly by the Agency's enforcement programs.
DATES: This interim policy statement is effective as interim guidance
15 days after publication, in order to give the Agency time to
coordinate implementation of the policy throughout EPA Headquarters and
the Regions. EPA urges interested parties to comment on this interim
policy in writing. Comments must be received by EPA at the address
below by June 2, 1995.
ADDRESSES: Submit three copies of comments to the U.S. EPA Air Docket,
Mail Code 6102, 401 M Street, SW, Washington, D.C. 20460, attention:
Docket #C-94-01.
FOR FURTHER INFORMATION CONTACT: Additional documentation relating to
the development of this interim policy is contained in the
environmental auditing public docket. Documents from the docket may be
requested by calling (202) 260-7548, requesting an index to docket #C-
94-01, and faxing document requests to (202) 260-4400. Hours of
operation are 8 a.m. to 5:30 p.m., Monday through Friday, except legal
holidays. Additional contacts are Geoff Garver or Brian Riedel, at
(202) 564-4187.
SUPPLEMENTARY INFORMATION:
I. Background
A. Introduction
One of the Environmental Protection Agency's most important
responsibilities is obtaining compliance with federal laws that protect
public health and safeguard the environment. That goal can be achieved
only with the voluntary cooperation of thousands of businesses and
other regulated entities subject to these requirements. Today, EPA is
announcing incentives for those who take responsibility for voluntarily
evaluating, disclosing and correcting violations. These incentives,
developed after nine months of public meetings and empirical analysis,
are set forth in detail below and take effect in 15 days. At the same
time, EPA expects to continue a dialogue with stakeholders and consider
further refinements to this interim policy. The incentives that EPA is
offering fall into three distinct categories.
First, the Agency will completely eliminate gravity-based (or
``punitive'') penalties for companies or public agencies that
voluntarily identify, disclose and correct violations according to the
conditions outlined in this policy. EPA will also reduce punitive
penalties by up to 75% for [[Page 16876]] companies that meet most, but
not all, of these conditions. Second, EPA will not recommend to the
Department of Justice that criminal charges be brought against a
company acting in good faith to identify, disclose, and correct
violations, so long as no serious actual harm has occurred. Finally,
the Agency will not request voluntary environmental audits to trigger
enforcement investigations.
The incentives offered in this policy have been structured above
all to protect human health and the environment. For example, even
where the conditions for mitigated enforcement are met, EPA will
reserve the right to collect full civil penalties for criminal conduct,
violations that present an imminent and substantial endangerment or
result in serious actual harm, or repeat violations. Sources will not
be allowed to gain an economic advantage over their competitors by
delaying their investment in compliance. Nor will EPA hesitate to bring
a criminal action against individuals responsible for criminal conduct.
EPA is considering additional incentives for voluntary compliance
beyond the benefits offered in the policy today. On April 7, 1995, the
Agency will announce 12 Environmental Leadership Program (ELP) pilot
projects with companies and public agencies to test criteria for
auditing and certification of voluntary compliance programs. If
successful, standards developed through Environmental Leadership could
lead to reduced inspections and public recognition for companies or
agencies with state-of-the-art compliance programs. In keeping with the
President's announcement on March 16, 1995, EPA also will shortly be
announcing additional compliance incentives for small businesses.
The Agency is especially interested in comments relating to whether
this interim policy appropriately defines the criteria for determining
whether a self-audit, self-evaluation or disclosure is voluntary;
whether the interim policy adequately preserves the Agency's authority
to assess a gravity penalty component in appropriate cases; and
whether, and according to what criteria, the Agency should consider
giving credit against the economic benefit component of a penalty for
state-of-the-art environmental management systems.
B. Public Process
In May 1994, the Administrator asked the Office of Enforcement and
Compliance Assurance to determine whether additional incentives are
needed to encourage voluntary disclosure and correction of violations
uncovered during environmental audits and self-evaluations.
In developing this interim policy, the Agency held a major two-day
public meeting in July 1994 announced in the Federal Register on June
20, 1994 (59 FR 31914); published a Restatement of Policies Related to
Environmental Auditing in the Federal Register on July 28, 1994 (59 FR
38455); considered over 80 written comments submitted to the
environmental auditing policy docket; held a focus group meeting in San
Francisco on January 19, 1995 with key stakeholders from industry,
trade groups, State environmental commissions, State attorneys general
offices, district attorneys' offices, environmental and public interest
groups, and professional environmental auditing groups; and held a
public comment session in San Francisco on January 20, 1995.
In addition to considering opinion from stakeholders, EPA conducted
its own analysis of relevant facts. For example, the Agency considered
EPA and other Federal policies relating to environmental auditing,
self-disclosure, and correction, as well as incentives suggested by
State and local policies and legislation, and by applications submitted
for the ELP pilot program. The Agency also considered relevant surveys
on auditing practices and incentives.
C. Purpose
This interim policy is intended to promote environmental compliance
by providing greater certainty as to EPA's enforcement response to
voluntary self-evaluations, and voluntary disclosure and prompt
correction of violations. The policy further provides guidance for
States and local authorities in encouraging this behavior among
regulated entities.
Federal laws and regulations set minimum standards for protecting
human health and achieving environmental protection goals such as clean
air and clean water. EPA will continue to uphold these laws through
vigorous enforcement actions that appropriately penalize violators.
Penalties help ensure a level playing field by ensuring that violators
do not obtain an unfair economic advantage over their competitors who
made the necessary investment in compliance. Penalties also promote
protection of the environment and public health by encouraging adoption
of pollution prevention and recycling practices that limit exposure to
liability for pollutant discharges and deterring future violations by
the violator and others.
At the same time, the Agency recognizes that we cannot achieve
maximum compliance without the cooperation of a regulated community
willing to act responsibly by detecting, disclosing, and correcting
violations. Already, regulated entities have many compelling incentives
to implement environmental management/auditing systems, as noted in
EPA's 1986 auditing policy. Indeed, recent surveys show that the vast
majority of large companies engage in environmental auditing and/or
have environmental management systems in place. Nonetheless, EPA has
concluded that the additional incentives in this interim policy will
further promote the regulated community's commitment to adopting
systems for maximizing compliance.
D. Principles for Voluntary Compliance
The interim policy that EPA is announcing today is based on seven
principles:
1. Self-policing by regulated entities can play a crucial role in
finding, fixing and preventing violations.
2. Violations discovered through self-policing should be disclosed
and promptly corrected.
3. Regulated entities that self-police and that voluntarily
disclose and self-correct violations in accordance with this policy
should be assessed penalties that are consistently and predictably
lower than penalties for those who do not.
4. Regulated entities that self-police and voluntarily disclose and
self-correct violations in accordance with this policy should also not
be recommended for criminal prosecution.
5. Providing predictable incentives for voluntary disclosure and
correction of violations identified through self-policing offers a
positive alternative to across-the-board privileges and immunities that
could be used to shield criminal misconduct, drive up litigation costs
and create an atmosphere of distrust between regulators, industry and
local communities.
6. EPA should not seek voluntary environmental audit information to
trigger an investigation of a civil or criminal violation of
environmental laws.
7. To preserve a level playing field, EPA should recover any
economic benefit realized from violations of environmental law.
E. Relationship to Emerging Standards
EPA also recognizes the development of and growing reliance on
international voluntary environmental management standards in the U.S.
and other [[Page 16877]] countries. These standards, if properly
crafted and implemented, can provide a powerful tool for organizations
to improve their overall compliance with environmental requirements and
move beyond compliance through innovative approaches to pollution
prevention. In addition to issuing this interim policy, EPA will
continue to pursue a dialogue with interested parties and to pilot
policy approaches through programs such as the ELP to determine how EPA
can make use of and encourage these standards.
II. Interim Policy
A. Definitions
For purposes of this interim policy, the following definitions
apply:
``Environmental auditing'' has the definition given to it in EPA's
1986 policy on environmental auditing, i.e. ``a systematic, documented,
periodic and objective review by regulated entities of facility
operations and practices related to meeting environmental
requirements.''
``Environmental audit report'' means all documentation of
information relating to an environmental audit, but not including the
factual information underlying or testimonial evidence relating to such
information.
``Regulated entity'' means any entity, including a federal, state,
and municipal facility, regulated under the federal environmental laws
that EPA administers.
``Self-evaluation'' means an assessment, not necessarily meeting
all the criteria of a full environmental audit, by a regulated entity
of its compliance with one or more environmental requirements.
``Voluntary'' means not required by statute, regulation, permit,
order, or agreement.
B. Conditions
The conditions for reducing civil penalties and not making criminal
referrals in accordance with Sections II.C. and II.D. of this interim
policy are as follows:
1. Voluntary self-policing. The regulated entity discovers a
violation through a voluntary environmental audit or voluntary self-
evaluation appropriate to the size and nature of the regulated entity;
and
2. Voluntary disclosure. The regulated entity fully and voluntarily
discloses the violation in writing to all appropriate federal, state
and local agencies as soon as it is discovered (including a reasonable
time to determine that a violation exists), and prior to (1) the
commencement of a federal, state or local agency inspection,
investigation or information request; (2) notice of a citizen suit; (3)
legal complaint by a third party; or (4) the regulated entity's
knowledge that the discovery of the violation by a regulatory agency or
third party was imminent; and
3. Prompt correction. The regulated entity corrects the violation
either within 60 days of discovering the violation or, if more time is
needed, as expeditiously as practicable; and
4. Remediation of imminent and substantial endangerment. The
regulated entity expeditiously remedies any condition that has created
or may create an imminent and substantial endangerment to human health
or the environment; and
5. Remediation of harm and prevention of repeat violations. The
regulated entity implements appropriate measures to remedy any
environmental harm due to the violation and to prevent a recurrence of
the violation; and
6. No lack of appropriate preventive measures. The violation does
not indicate that the regulated entity has failed to take appropriate
steps to avoid repeat or recurring violations; and
7. Cooperation. The regulated entity cooperates as required by EPA
and provides such information as is reasonably necessary and required
by EPA to determine applicability of this policy. Cooperation may
include providing all requested documents and access to employees and
assistance in any further investigations into the violation.
Where appropriate, EPA may require that to satisfy any of these
conditions, a regulated entity must enter into a written agreement,
administrative consent order or judicial consent decree, particularly
where compliance or remedial measures are complex or a lengthy schedule
for attaining and maintaining compliance or remediating harm is
required.
C. Reduce Civil Penalties for Voluntarily Disclosed and Promptly
Corrected Violations
1. Incentive
Regulated entities will be eligible for the following reductions in
civil penalties:
a. EPA will eliminate all of the gravity component of the penalty
for violations by regulated entities that meet conditions 1 through 7
outlined in Section II.B., except for violations involving (i) criminal
conduct by the regulated entity or any of its employees, or (ii) an
imminent and substantial endangerment, or serious actual harm, to human
health or the environment.
b. EPA may mitigate up to 75% of the unadjusted gravity component
of the penalty, taking into account any of conditions 1-7 in Section
II.B. that are met, in the following cases:
(i) cases in which most but not all of the conditions in Section
II.B. are met; or
(ii) cases involving an imminent and substantial endangerment, but
not serious actual harm, in which all the conditions in Section II.B.
are met; or
(iii) cases involving the disclosure of criminal conduct in which
all the conditions in Section II.B. are met.
c. EPA will retain its full discretion to recover any economic
benefit gained as a result of noncompliance to preserve a ``level
playing field'' in which violators do not gain a competitive advantage
through noncompliance. However, EPA may forgive the entire penalty for
violations which meet conditions 1 through 7 outlined in Section II.B.
and, in EPA's discretion, do not merit any penalty due to the
insignificant amount of any economic benefit.
2. Discussion
a. Providing a clear and significant reduction in civil penalties
for companies that assume responsibility for finding, disclosing and
correcting violations will create a strong incentive for regulated
entities to prevent or fix violations before EPA expends enforcement
resources. The policy states clearly the conditions under which EPA
will forgive all or part of the gravity component of a penalty for
voluntary disclosure and correction;
b. The policy appropriately preserves the concept of recovering
economic benefit, except where it is insignificant, as recommended by a
broad spectrum of commenters, including industry commenters;
c. Retaining EPA's discretion to collect the gravity component of
the penalty in appropriate cases, such as where a violation involves
criminal conduct, or imminent and substantial endangerment, will help
to deter the most egregious environmental violations. At the same time,
by preserving flexibility to reduce the gravity element by up to 75%
for good faith efforts to disclose and promptly comply even in those
cases, the policy will retain an appropriate compliance incentive.
D. Limit Criminal Referrals for Voluntary Disclosure and Correction of
Violations
1. Incentive
EPA will not recommend to the Department of Justice that criminal
[[Page 16878]] charges be brought against a regulated entity where EPA
determines that conditions 1-7 in Section II.B. above for reduction of
civil penalties are met, and the violation does not demonstrate or
involve (1) a prevalent corporate management philosophy or practice
that concealed or condoned environmental violations; (2) high-level
corporate officials' or managers' conscious involvement in or willful
blindness to the violation; or (3) serious actual harm to human health
or the environment. This policy does not apply to criminal acts of
individual managers or employees. Where EPA determines pursuant to this
Section that a criminal referral to the Department of Justice is
unwarranted, EPA may nonetheless proceed with civil enforcement in
accordance with Section II.C. of this policy or other applicable
enforcement response and penalty policies.
2. Discussion
The policy will promote candid and thorough self-policing by
providing greater certainty as to how EPA will exercise its criminal
investigative discretion to encourage voluntary disclosure and prompt
correction by regulated entities.
E. Eliminate Routine Requests for Audit Reports in Pre-Enforcement
Proceedings
1. Incentive
EPA will not request a voluntary environmental audit report to
trigger a civil or criminal investigation. For example, EPA will not
request an audit in routine inspections. Once the Agency has reason to
believe a violation has been committed, EPA may seek through an
investigation or enforcement action any information relevant to
identifying violations or determining liability or extent of harm.
2. Discussion
a. This policy makes clear that EPA will not routinely request
audit reports. At the same time, the policy in no way limits the right
of regulated entities to claim common law privileges (e.g., attorney-
client and work product) as appropriate. EPA believes that this
clarification, along with the other incentives in this interim policy,
should greatly reduce any perception that environmental audits may be
used unfairly in environmental enforcement.
b. With respect to federal facilities, although federal facility
environmental audit reports may be accessible to the public under the
Freedom of Information Act (FOIA) in certain circumstances, EPA cannot
utilize FOIA to request information from other federal agencies. Thus,
EPA will apply this policy on requests for audit reports to federal
(and state and municipal) facilities the same as it does for other
regulated entities.
F. Applicability
This interim policy applies to violations under all of the federal
environmental statutes that EPA administers and supersedes (unless
otherwise noted) any conflicting or inconsistent provisions in the
media-specific penalty or enforcement response policies and EPA's 1986
Environmental Auditing Policy Statement. Existing enforcement policies
will continue to apply in conjunction with this interim policy, except
where inconsistent with this policy. In addition, where appropriate,
EPA's Supplemental Environmental Project Policy may at EPA's discretion
be applied in conjunction with this policy.
III. Favor These Incentives Over Broad Privileges and Immunities
This interim policy offers a positive alternative to across-the-
board privileges and immunities that could be used to shield criminal
misconduct, drive up litigation costs and create an atmosphere of
distrust between regulators, industry and local communities.
A. Discussion
1. Penalty immunity provisions for voluntary disclosures of
violations can give lawbreakers an economic advantage over their law-
abiding competitors. It makes sense to give substantial penalty
reductions for those who come forward with their violations and
promptly correct them, but to maintain a level playing field, the
federal and state governments must be able to recoup the economic
benefit of violations.
2. A principal rationale for environmental audit privileges and
penalty immunities for voluntary disclosures is to reduce the exposure
of regulated entities that conduct self-evaluations and act on the
findings by immediately correcting violations. EPA has addressed this
concern with the incentives for disclosure and correction outlined
above.
3. Privilege runs counter to efforts to open up environmental
decisionmaking and encourage public participation in matters that
affect people's homes, workplaces and communities.
4. An environmental audit privilege could be misused to shield bad
actors or to frustrate access to crucial factual information.
5. Environmental audit privileges and penalty immunities could
encourage increased litigation as opposing lawyers battle over what is
privileged or immune from penalties and what is not. Litigation over
the scope of the privileges and immunities could burden our already
taxed judicial system, drain government and private resources, and in
some cases prevent quick action to address environmental emergencies.
6. The Supreme Court has noted, ``privileges are not lightly
created nor expansively construed for they are in derogation of the
search for the truth.'' United States v. Nixon, 418 U.S. 683, 710
(1974). Moreover, the self-evaluation privilege has regularly and
uniformly been rejected by the courts in cases where documents were
sought by a governmental agency.
IV. Consequences for States
EPA recognizes that states are important partners in federal
enforcement, and that it is desirable to create a climate in which
states can be innovative. At the same time, EPA is required to
establish a certain minimum consistency in federal enforcement, so that
the sanctions a business faces for violating federal law do not depend
on where the business is located.
Accordingly, to maintain national consistency:
A. EPA will scrutinize enforcement more closely in states with
audit privilege and/or penalty immunity laws and may find it necessary
to increase federal enforcement where environmental self-evaluation
privileges or penalty immunities prevent a state from obtaining:
1. information needed to establish criminal liability;
2. facts needed to establish the nature and extent of a violation;
3. appropriate penalties for imminent and substantial endangerment
or serious harm to human health or the environment, or from recovering
economic benefit;
4. appropriate sanctions or penalties for criminal conduct and
repeat violations; or
5. prompt correction of violations, and expeditious remediation of
those that involve imminent and substantial endangerment to human
health or the environment.
B. EPA will bring to the state's attention any provisions of state
audit privilege and/or penalty immunity statutes that raise any of the
concerns outlined above, and will work with the state to address those
concerns and ensure that federal requirements are satisfied.
[[Page 16879]]
V. Limitations on Applicability of This Policy
This interim policy sets forth internal guidelines which amend
EPA's penalty policies in situations involving voluntary self-policing,
disclosure and correction. In conjunction with the applicable penalty
policy, these guidelines will aid EPA personnel in proposing
appropriate penalties or negotiating settlements in administrative and
judicial enforcement actions. The interim policy also serves to
structure the Agency's enforcement authority and states the Agency's
view as to the proper allocation of its enforcement resources.
Deviations from these guidelines, where merited, are authorized so long
as the reasons for the deviations are documented.
This interim policy is not final agency action, but is intended
solely as guidance. It is not intended, nor can it be relied upon, to
create any rights enforceable by any party in litigation with the
United States. EPA officials may decide to follow the guidance provided
in this interim policy or to act at variance with the guidance based on
analysis of case-specific facts and circumstances. Application of this
policy to the facts of any individual case is at the sole discretion of
EPA and is not subject to review by any court. In addition, the policy
has no effect on the calculation of any cleanup costs, remedial costs,
natural resources damages or emergency response costs associated with a
violation. EPA reserves the right to change this interim policy at any
time without public notice.
Dated: March 30, 1995.
Steven A. Herman,
Assistant Administrator for Enforcement and Compliance Assurance.
[FR Doc. 95-8218 Filed 3-31-95; 8:45 am]
BILLING CODE 6560-50-P
