[Federal Register Volume 64, Number 94 (Monday, May 17, 1999)]
[Notices]
[Pages 26745-26756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12369]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
[FRL-6343-4]
Evaluation of ``Incentives for Self-Policing: Discovery,
Disclosure, Correction and Prevention of Violations'' Policy Statement,
Proposed Revisions and Request for Public Comment
AGENCY: Environmental Protection Agency (EPA).
ACTION: Policy statement and request for public comment on proposed
revisions.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency (EPA) announces the
preliminary results of its evaluation of the effectiveness of EPA's
``Incentives for Self-Policing: Discovery, Disclosure, Correction and
Prevention of Violations'' (Audit Policy) and solicits public comment
on proposed revisions to the Audit Policy that are based on the
evaluation. The proposed revisions include broadening the period for
prompt disclosure from 10 to 21 days, clarifying the availability of
Policy relief in multi-facility contexts, and providing that entities
meeting all of the Policy conditions except for ``systematic
discovery'' will not be recommended for criminal prosecution. EPA
developed the Audit Policy to enhance protection of human health and
the environment by encouraging entities to voluntarily discover, and
disclose and correct violations of environmental requirements. EPA
published the Audit Policy in the Federal Register at 60 FR 66705 on
December 22, 1995.
DATES: EPA requests interested parties to comment on this notice in
writing. Comments must be received by July 16, 1999.
ADDRESSES: Submit three copies of comments to the EPA Audit Policy
Docket, 401 M Street SW, Mail Code 2201A, Room 4033, Washington, DC
20460.
FOR FURTHER INFORMATION CONTACT: Additional documentation relating to
the development and evaluation of this Policy are contained in the EPA
Audit Policy Docket. Documents from the docket may be requested by
calling (202) 564-2614, requesting an index to docket #C-94-01, and
faxing document requests to (202) 501-1011. Hours of operation are 8
a.m. to 4 p.m., e.s.t., Monday through Friday, except legal holidays.
Additional contact is Catherine Malinin Dunn, at (202) 564-2629.
SUPPLEMENTARY INFORMATION:
I. Explanation of Notice
A. Executive Summary
EPA initiated the Audit Policy Evaluation as part of EPA's
commitment set forth in the Policy at 60 FR at 66712. The major
preliminary findings of the Audit Policy Evaluation, and the major
proposed revisions to the Policy and its implementation, are as
follows:
Discovery and correction of violations under the policy
have removed pollutants from the air and water, reduced health and
environmental risks and improved public information on potential
environmental hazards.
EPA has consistently applied the policy.
[[Page 26746]]
Use of the policy has made EPA aware of new environmental
issues.
Use of the policy has been widespread (as of March 1,
1999, 455 entities have disclosed violations at approximately 1850
facilities), including significant multi-facility disclosures (16
parent companies disclosed the same types of violations at over 900
facilities).
Users of the policy report a very high satisfaction rate
with 88% of the respondents stating that they would use the Policy
again and 84% stating that they would recommend the Policy to clients/
counterparts.
Most disclosures involve monitoring and reporting
violations in federally-run programs (i.e., not in programs that states
are authorized or approved to administer and enforce).
The policy encourages specific improvements in auditing
programs and environmental management systems.
The most frequently suggested change to the policy is
expansion of 10-day disclosure period.
The most frequently suggested change to policy
implementation is shortening the time to process cases.
Based on these major findings and others, EPA proposes specific
improvements to the Policy. One significant proposed revision is to
broaden the prompt disclosure period from 10 to 21 days. EPA also
proposes to clarify that a facility in many circumstances may satisfy
the ``independent discovery'' condition even where inspections or
investigations have commenced at, or information requests have been
issued to, other facilities owned by the same parent. Another proposed
change is to provide that entities that meet all of the Policy
conditions except for ``systematic discovery'' would not be recommended
for criminal prosecution.
Proposed changes to implementation of the Policy include a
commitment to reduce the time to process Audit Policy cases by, for
example, encouraging disclosers to use disclosure checklists, so that
EPA receives all of the information it needs to determine policy
applicability and resolve cases in a timely fashion. The Agency also
plans particularly to encourage disclosures at multi-facilities because
such disclosures effectively leverage resources of the Agency, allow
regulated entities to review their operations holistically, and benefit
the environment. For the same reasons, sector-based initiatives
involving the Audit Policy also figure prominently in the future of
EPA's enforcement and compliance program.
B. Audit Policy, Audit Policy Evaluation and Criteria for Effectiveness
1. Audit Policy
On December 22, 1995, EPA published the ``Incentives for Self-
Policing: Discovery, Disclosure, Correction and Prevention of
Violations' (Audit Policy) in the Federal Register at 60 FR 66705.
Today's Notice solicits public comment on the preliminary results of
the Audit Policy Evaluation and the specific proposed revisions to the
Audit Policy and its implementation.
Under the Audit Policy, where violations are found through
voluntary environmental audits or efforts that reflect a regulated
entity's due diligence, are promptly disclosed and expeditiously
corrected and meet certain other conditions designed to protect public
health and the environment, EPA will not seek gravity-based (i.e., non-
economic benefit) penalties and will recommend against criminal
prosecution against the regulated entity. EPA will reduce gravity-based
penalties by 75% for violations that are voluntarily discovered, and
are promptly disclosed and corrected in accordance with the conditions
of the Policy, even if not found through a formal audit or due
diligence. Finally, the Policy restates EPA's long-held policy and
practice to refrain from routine requests for environmental audit
reports.
The Policy includes important safeguards to deter irresponsible
behavior and protect the public and environment. For example, in
addition to prompt disclosure and expeditious correction, the Policy
requires companies to act to prevent recurrence of the violation and to
remedy any environmental harm which may have occurred. Repeated
violations or those which result in actual harm or may present an
imminent and substantial endangerment are not eligible for relief under
this Policy, and companies will not be allowed to reap a significant
economic benefit by delaying their investment in compliance.
Corporations remain criminally liable for violations that demonstrate
or involve a prevalent management philosophy that concealed or condoned
violations, or high-level corporate officials' or managers' conscious
involvement in, or willful blindness to, the violation. Individuals
remain liable for their criminal misconduct. The Audit Policy is on the
High Priority List of the President's Reinventing Environmental
Regulations program. The final Audit Policy became effective on January
22, 1996.
When EPA published the Audit Policy as a Federal Register Notice in
December of 1995, the Agency stated in the Notice that the Policy was
intended as guidance and did not represent final agency action. At the
time of publication, some in the regulated community had argued that
the Policy be converted into a regulation to ``ensure consistency and
predictability.'' EPA promised in the Notice that it would revisit that
request ``if it determines that a rulemaking is appropriate.'' EPA
believes there is ample evidence, much of it summarized in this Federal
Register Notice, that the Policy has worked well as guidance and that a
rulemaking is therefore unnecessary. Nothing in today's document is
intended to change the status of the policy as guidance, as described
in paragraph II.G(3) of the 1995 Audit Policy. 60 FR at 66712.
U.S. EPA also issued a policy on Compliance Incentives for Small
Businesses in 1996 (Small Business Policy). Under the Policy, the
Agency will eliminate the entire civil penalty for certain violations
if a small business--defined as an entity employing 100 or fewer
individuals--satisfies the policy's conditions. These conditions
include a good-faith effort to comply by either receiving on-site
compliance assistance or conducting an environmental audit and by
disclosing violations promptly, and correcting them within six months
of discovery. Violations excluded from the policy's coverage include
repeat violations, those involving imminent and substantial
endangerment or actual harm, and criminal conduct.1
---------------------------------------------------------------------------
\1\ For federal facilities, EPA has an Incidental Violations
Response Policy (IVRP), which allows federal facilities to obtain
penalty mitigation for violations disclosed and corrected during an
Environmental Management Review pursuant to the IVRP. The IVRP can
be found (within the Environmental Management Review Policy) on
EPA's World Wide Web site at http://www.epa.gov/oeca/fedfac/policy/
policy.html.
---------------------------------------------------------------------------
EPA is currently evaluating the effectiveness of the Small Business
Policy. The Agency will be publishing a Federal Register Notice in
approximately 6 weeks asking for comments on the Small Business Policy.
As part of the Agency's evaluations of the two policies, EPA asks for
comments in this Notice on the advisability of combining the Audit
Policy with the Small Business Policy. In particular, the Agency is
interested in whether small businesses would be more likely to audit
and self-disclose violations (or seek on-site compliance assistance) if
the two policies were merged. EPA is particularly interested in hearing
the
[[Page 26747]]
comments of small businesses on this point. If the Agency ultimately
decides not to merge the two policies, it will insert a reference to
the Small Business Policy in the text of the revised Audit Policy.
Comments concerning small business issues received in response to
today's Notice will be considered when EPA reviews comments to the
Small Business Policy Notice.
2. Audit Policy Use and General Results
Use of the Audit Policy has been widespread. As of March 1, 1999,
455 organizations had disclosed potential violations at approximately
1850 facilities. A large proportion of the facilities (at least 900)
were the subject of multi-facility disclosures by 16 parent
organizations. The rate of disclosure has increased every year the
Policy has been in place.
The Audit Policy User's Survey indicates a very high satisfaction
rate among the users of the Policy, with 88% of the respondents stating
that they would use the Policy again and 84% stating that they would
recommend the Policy to clients/counterparts. None stated that they
would not use the Policy again or not recommend its use to others.
Among the user comments are the following:
``Companies can avoid penalties for doing the right thing.
And everyone wins.''
``It enhances compliance, environmental performance and
de-polarization of regulators and the regulated community.''
``Very good experience. It allowed the facility to
proactively respond to address a compliance issue quickly without
delays related to traditional command-and-control enforcement.''
``In general, it is a solid program.''
``Created a partnership of trust between regulator and
reporting regulated entity.''
``Ability to find, report, and correct issues in a
cooperative or partnering role with EPA.''
Before the effective date of the final Audit Policy (and the April
3, 1995 interim Audit Policy that preceded it), EPA had differing
approaches to penalty mitigation for auditing, disclosure and
correction of violations, depending upon the specific enforcement
policy involved. The EPA Audit Policy provides a common penalty
mitigation approach towards systematic discovery, prompt disclosure and
expeditious correction of environmental violations across all
environmental statutes and media. The Audit Policy states that it
``supersedes any inconsistent provisions in media-specific penalty or
enforcement policies * * *.'' II.G.(1).
With respect to consistent application of the Audit Policy to civil
violations, EPA established the Audit Policy Quick Response Team (QRT)
in June 1995 to ensure that determinations for eligibility under the
Audit Policy are consistent, expeditious and fair nationally. In
January 1997, the Audit Policy QRT developed the Audit Policy
Interpretive Guidance, providing useful guidance to regulated entities,
the EPA Regions and Headquarters and other interested parties. The
Audit Policy QRT is comprised of senior representatives from EPA
Headquarters, Regions and the Department of Justice.
To address criminal violations that are self-disclosed under the
Audit Policy, EPA established the Voluntary Disclosure Board (VDB) in
October 1997. The VDB serves as a central body for consideration of all
voluntary disclosures potentially criminal in nature; its purpose is to
ensure consistent application of the Policy nationwide in the
nationally-managed criminal enforcement program. The VDB is comprised
of members associated with the criminal enforcement program at EPA, and
a member from the Department of Justice, Environmental Crimes Section.
EPA has made the Audit Policy and related documents, including
Agency guidance interpreting the Policy and general interest
newsletters, available on the World Wide Web at www.epa.gov/oeca/
polguid/polguid1.html. EPA's guidance for implementing the Audit Policy
in the context of criminal violations can be found at http://
es.epa.gov/oeca/oceft/audpol2.html.
3. Audit Policy Evaluation and Criteria for Effectiveness
Under the Public Accountability section of the Audit Policy (Part
II.H.), EPA pledged to conduct a ``study of the effectiveness'' of the
Audit Policy by January 1999. Pursuant to this pledge, EPA initiated
the Audit Policy Evaluation in spring 1998 to review the effectiveness
of the Audit Policy and to recommend any appropriate revisions to the
Assistant Administrator for Enforcement and Compliance Assurance.
EPA is using the following criteria to evaluate the effectiveness
of the Policy:
Environmental or Human Health Improvements Resulting from
the Policy.
Prompt Disclosure and Correction of Violations.
Improvements in Corporate Compliance Programs.
Awareness of New Environmental Issues.2
---------------------------------------------------------------------------
\2\ The Policy sets forth the following evaluation criteria:
``H. Public Accountability
(1) Within 3 years of the effective date of this policy, EPA
will complete a study of the effectiveness of the policy in
encouraging:
(a) changes in compliance behavior within the regulated
community, including improved compliance rates;
(b) prompt disclosure and correction of violations, including
timely and accurate compliance with reporting requirements;
(c) corporate compliance programs that are successful in
preventing violations, improving environmental performance and
promoting public disclosure;
(d) consistency among state programs that provide incentives for
voluntary compliance.
EPA will make the study available to the public.'' 60 FR at
66712.
The Audit Policy Evaluation utilizes criteria (b) and (c) but
will not focus on criteria (a) and (d). An effort to measure
compliance behavior and compliance rates (criterion (a)) is underway
through the National Performance Measures Strategy (Measures
Strategy). As performance measures, the Measures Strategy has
identified an ``outcome'' of ``self-policing efforts by using
compliance incentive policies'' (Set 5), and an ``output'' of the
``number of self-policing settlements concluded'' (Set 9). More
information regarding the Measures Strategy may be found at the
following website: es.epa.gov/oeca/perfmeas.
Consistency among state compliance incentive approaches
(criterion (d)) is not an EPA goal per se. Rather, EPA encourages
balanced, open and innovative approaches for encouraging protection
of human health and the environment. Approximately eleven states
have developed audit policies that are designed to encourage self-
policing without undermining enforcement or the public's right to
access environmental information. Other states have enacted audit
privilege and/or immunity laws. EPA believes that such laws are not
as protective of human health and the environment as policies
because they invite secrecy, complicate investigations and criminal
prosecutions, shield evidence of wrongdoing, impede enforcement
discretion, breed litigation over the scope of the privilege, and
frustrate public access to information about sources of pollution.
However, such laws can be narrowly crafted such that they do not
conflict with minimum federal requirements.
---------------------------------------------------------------------------
Using an empirical, fact-based approach, EPA developed and utilized
the Audit Policy Internal Survey (Internal Survey) and the Audit Policy
User's Survey (User's Survey), and will rely upon other information and
public comments. Under the Internal Survey, EPA collected information
from approximately fifteen Regional and Headquarters offices that
process enforcement cases under the Audit Policy. The results of the
Internal Survey include information about environmental or health
improvements, new environmental issues about which EPA became aware,
numbers and types of Audit Policy cases, time-frame for resolving
cases, reasons why entities did not qualify for Policy relief, and
suggestions for improvements to the Policy and its implementation.
EPA, through its contractor, sent copies of the User's Survey to
252
[[Page 26748]]
regulated entities that had disclosed violations under the Policy. The
results of the User's Survey are based on responses from 50 respondents
whose identities are not known to EPA. The results include information
about user satisfaction, the extent to which the Policy encourages
improvements in corporate compliance programs, motivations for using
the Policy, and suggestions for improvements to the Policy and its
implementation. (Copies of the User's Survey results will be available
in the Audit Policy Docket, hereinafter, ``Docket''.)
EPA also held several informal meetings and conference calls with
industry, environmental groups and State representatives to obtain
input on the evaluation. On January 26, 1999, and February 3, 1999,
EPA's Office of Enforcement and Compliance Assurance (OECA) and the
Vice President's National Partnership for Reinventing Government (NPR)
hosted two conferences entitled ``Protecting Public Health and the
Environment through Innovative Approaches to Compliance.'' The first
was held in Washington D.C., followed by a similar conference in San
Francisco, California. Both conferences were held to evaluate the
success of EPA's enforcement and compliance assurance programs at
protecting public health and the environment since OECA was reorganized
five years ago. The purpose of the conferences was to discuss the
actions the Agency has taken over the past five years and to solicit
ideas from a variety of different stakeholders on how EPA can further
improve public health and the environment through compliance efforts.
Participants included environmental and community groups, trade
associations, small and large business representatives, academics, and
state, local and tribal representatives. These stakeholders
participated in small group discussions addressing the topics of
compliance assistance, compliance incentives, information and
accountability, and innovative approaches to enforcement. OECA also
published a Federal Register Notice soliciting comments on how EPA can
further protect and improve public health and the environment through
new compliance and enforcement approaches (64 FR 10,144, March 2,
1999). Conference summaries and a copy of the Federal Register Notice
are available at OECA's website at http://www.epa.gov/oeca/polguid/
oeca5sum.html.
C. Audit Policy Evaluation
Discussed below are the preliminary results under each of the
evaluation criteria, based upon data current through the fall of 1998,
followed by analyses and recommendations regarding proposed revisions
to the Policy and its implementation.
1. Environmental or Human Health Improvements Resulting From the Policy
Use of the Audit Policy has resulted in overall benefits to human
health and the environment. When companies voluntarily detect and
correct violations in order to take advantage of the Policy, they
remove harmful pollutants from our air, ground and waterways, reduce
the likelihood of chemical spills and accidental releases, improve
public information regarding potential environmental hazards, and
ensure safe management of hazardous chemicals and wastes. In the three
years the Policy has been in effect, 73 of the violations disclosed
involved the unauthorized release of pollutants, storage or disposal of
wastes, failure to remediate or unpermitted activities. Examples of
benefits to human health and the environment that have been achieved as
a result of these disclosures include:
A property management company removed doors that were
painted with lead-based paint from a Maryland apartment complex
(elevated blood lead levels in children have been linked to learning
disabilities, growth impairment, permanent visual and hearing
impairment and other neurological damage);
A Minnesota company corrected violations involving the
improper storage of polychlorinated biphenyls (PCBs) and subsequently
properly disposed of over 195 pounds of PCBs (PCBs cause birth defects,
have been linked to hormonal disruptions and are possible carcinogens);
A manufacturing facility in New York corrected Clean Air
Act violations by installing pollution control equipment on two
methanol storage tanks (methanol fumes are a hazardous air pollutant,
contribute to smog and can cause serious health problems); and
A natural gas production company installed pollution
control equipment at facilities located on an American Indian
Reservation in Colorado that will reduce carbon monoxide emissions by
3,700 tons, or 80%, a year (high CO levels pose a health threat,
particularly to young children, the elderly, and those with heart or
respiratory ailments).
Hundreds of violations have been disclosed and have been or are
being corrected involving deficiencies in monitoring/sampling,
reporting, labeling, manifesting, recordkeeping, testing, training, and
production requirements. Benefits that result from the detection and
correction of these types of violations accrue in the form of risk
reduction. For example, the development of spill response plans will
help prevent spills and minimize risk of associated harm, improved
recordkeeping will provide firefighters and other response personnel
with more accurate information in the event of an emergency, and
improved public reporting of Toxic Release Inventory (TRI) data may
encourage companies to reduce pollution at the source. Examples of
benefits that have been achieved as a result of disclosures in these
areas include:
An oil company resolved Resource Conservation and Recovery
Act violations involving the shipment of benzene-contaminated waste
without a transportation manifest and to an unauthorized facility;
A Michigan manufacturer that had previously failed to file
TRI reports corrected its violation and subsequently substituted an
environmentally preferable water-based process for the use of 2500
pounds of chemical solvents;
A manufacturing company provided public notice that it is
storing more than 25,000 pounds each of four heavy metals at a
Pennsylvania facility;
A Montana company corrected its failure to file reports
under the Toxic Substances Control Act's Inventory Update Rule, which
requires manufacturers to report current data on production volume,
plant site, and site-limited status for listed chemicals;
A telecommunication company alerted state agencies and
local fire departments to the presence of batteries containing sulfuric
acid at hundreds of sites nationwide, and the company developed spill
prevention measures required by the Clean Water Act;
Eleven Texas companies that operate facilities in the
Maquiladora (U.S. border) region in Mexico corrected violations
involving transportation of hazardous waste; and
The owners of an Oklahoma facility reported two previously
unreported spills of hazardous substances and promptly remediated the
spill area.
EPA plans to maintain the ineligibility under the Policy for
disclosures of violations that resulted in actual harm or may have
presented an imminent and substantial endangerment to human health or
the environment.3 Such violations are ineligible because
[[Page 26749]]
they should be prevented by the types of auditing and management
systems that the Policy is designed to encourage. As the above examples
illustrate, this condition does not bar a company from qualifying for
relief under the Audit Policy solely because the violation involves
release of a pollutant to the environment. Similarly, EPA plans to
retain the no-repeat-violation exclusion, because, among other things,
the entity should prevent recurrence of noncompliance for which the
entity has had clear notice and an opportunity to correct. EPA is
interested in comments on possible ways to increase the environmental
and public health benefits resulting from the Policy, including greater
use of Supplemental Environmental Projects (SEPs).
---------------------------------------------------------------------------
\3\ See Section II.5, infra, for discussion of the availability
of enforcement response policies in those instances where the
criteria of the Audit Policy are not met.
---------------------------------------------------------------------------
2. Prompt Disclosure and Correction of Violations
The results to date under the Audit Policy indicate widespread use.
As of March 1, 1999, 455 regulated entities had identified and
disclosed violations at approximately 1850 facilities. The rates of
disclosing entities and disclosed violations have increased every year
since the effective date of the Policy. In 1995, the first year of the
final Policy, 46 entities disclosed violations at 49 facilities. In
1996, 72 entities disclosed violations at 105 facilities. In 1997, 90
entities disclosed violations at 568 facilities. In 1998, 96 entities
disclosed violations at 927 facilities.
BILLING CODE 6560-50-U
[[Page 26750]]
[GRAPHIC] [TIFF OMITTED] TN17MY99.005
BILLING CODE 6560-50-C
[[Page 26751]]
The Audit Policy's substantial benefits to human health and the
environment can be increased significantly through detection and
correction of violations on a multi-facility basis. To date, 16 parent
organizations have disclosed the same type of violations at over 900
facilities. For example, under the Policy, a gas company conducted a
corporate-wide audit and disclosed and subsequently corrected
violations discovered at 13 of its facilities. Often multi-facility
settlements are preceded by negotiations in which EPA and the company
arrive at a mutual understanding of how the Audit Policy is to be
applied (for example, the 10-day timely-disclosure condition is
adjusted to a reasonable period to allow for completion of a corporate-
wide audit). EPA plans to continue to encourage comprehensive
detection, disclosure and correction of violations in multiple
facilities owned by a common entity.
Many of the multi-facility disclosures that are being made occur
after one company acquires another. Typically, the acquiring company
discovers the potential violations through an audit of the company to
be acquired and discloses them to the EPA. The Agency is interested in
receiving comments on how to encourage more companies to disclose and
correct violations discovered in the acquisition context.
As of April 30, 1999, EPA had granted penalty relief under the
Policy to 166 entities involving approximately 936 facilities,
including 131 instances in which no monetary penalty was assessed and
19 instances in which gravity-based penalties were mitigated by 75%.
There were 8 instances in which the company's economic benefit was
recouped, including 6 instances in which only the economic benefit was
paid, with 100% mitigation of the gravity-based penalty.
Most of the disclosures under the Audit Policy involve reporting
and monitoring types of violations of federally-run programs. Eighty-
four percent of the violations disclosed are reporting, monitoring/
sampling, labeling/manifesting, recordkeeping, testing, training and
production violations. Sixteen percent of violations disclosed are
unauthorized releases and violations of storage/disposal/container
management, permit application, and remediation requirements. These
percentages appear to reflect the high percentage of regulations for
reporting, monitoring and recordkeeping. Ninety-one percent of
violations disclosed were violations of programs administered by EPA
and not by the states.
To date, there have been 14 disclosures to EPA's criminal
enforcement program. Of the 14 disclosures received by the Agency's
criminal program, three were denied consideration under the Policy
because they were submitted subsequent to a criminal investigation
having been opened by EPA's Criminal Investigations Division. Seven
remain in open investigation status. In four of the 11 eligible
disclosures, the government (either EPA alone or in conjunction with
the Department of Justice) determined either that the conduct disclosed
was not criminal in nature, and referred the matter to EPA's civil
enforcement arm, or closed the matter in consultation with civil
enforcement. Violations disclosed involve RCRA, CAA, CWA, TSCA and
CERCLA. Due to the relatively small number of cases, however, and the
fact that the majority of cases are open investigations, specific
violations cannot be discussed.
The User's Survey indicates that while many would have disclosed
even in the absence of the Audit Policy, it was a motivator for some.
Responses received include the following:
``It was only a reporting violation; without the policy we
may not have reported it.''
``The Audit Policy was a clear motivator to report.''
``We probably would have disclosed under the voluntary
disclosure policies.''
``Violations would always be disclosed, but EPA Audit
Policy creates an incentive for comprehensive self-auditing.''
Less directly applicable, the National Conference of State
Legislatures (NCSL) recently released a study concluding that there is
no statistically significant relationship between the existence of a
state environmental Audit Policy or law and the level of environmental
disclosures over time.4 The study also reveals that
facilities are not necessarily aware of the existence in their state of
an audit policy or privilege/immunity law. Between 40% and 50% of the
facilities interviewed did not know whether their state had an audit
policy or law.
---------------------------------------------------------------------------
\4\ ``State Environmental Audit Laws and Policies: An
Evaluation,'' National Conference of State Legislatures (October,
1998).
---------------------------------------------------------------------------
3. Improvements in Corporate Compliance Programs
Seventy percent of respondents to the User's Survey reported having
in place a formal environmental compliance auditing program and 52%
reported having either a formal environmental management system (EMS)
or a compliance management (``due diligence'') system. Of these,
approximately half reported that the Audit Policy encouraged specific
improvements in their compliance auditing program (54%) or EMS/
compliance management program (50%). Reported improvements include
introducing EMSs and auditing to some companies, and motivating others
to audit more pervasively throughout the organization. Responses
include the following:
``Ensured inclusion of internal auditing system into
EMS.''
``Broadened scope of regulatory efforts at compliance--
Increased awareness of various regulatory responsibilities.''
``It confirmed the desirability of rigorous effectuation
of an EMS.''
``Take more diligence on audits and report violations in a
timely manner''
``Improved audit follow-up of any findings.''
``Internal audit system being developed on corporate level
for all facilities in division.''
``Introducing EMS and audits to company.''
``Gave us discipline and focus for auditing.''
``Encouraged more complete documentation of the EMS.''
When asked what compliance or environmental improvements were
induced at least in part by the incentives offered by the Policy,
forty-four percent of respondents offered examples, including increased
awareness of compliance issues, enhanced training and review of staff
performance, and improved reporting. Responses include the following:
``We've embarked on a broad program to update and improve
procedures to more plainly address compliance.''
``Supports open reporting internally within entity.''
``To be more aware of potential problems.''
``Stored waste disposed of properly.''
``Enhancement of procedures and training.''
``Greater awareness on the part of management that
compliance activities must become part of business processes.''
``Internal audit system being developed on corporate level
for all facilities in division.''
``Motivator in general to do more frequent audits.''
``The facility established a better system to monitor
reporting requirements.''
[[Page 26752]]
``Improved reporting.''
``Enhanced process sampling--operator personnel protective
equipment, operator training.''
``EPA demonstrated the benefit of maintaining compliance
and auditing programs through their willingness to reduce penalty
amounts on self-reported violations.''
``Completed TRI reports that were not done previously so
reporting was brought up to date.''
An additional 22% of respondents indicated that it was too early to
tell whether the Policy had induced compliance or environmental
benefits, 14% didn't know, and 4% indicated no improvements.
The Internal Survey revealed that entities adopted the following
known efforts to prevent recurrence of the violation: 24% of the
entities implemented employee training covering compliance
requirements, 43% of the entities implemented a management system
addressing compliance requirements, and 33% of the entities took other
efforts such as developing or formalizing procedures or increasing
oversight or review.
As part of several enforcement initiatives involving the Audit
Policy, EPA is encouraging environmental auditing by distributing
copies of auditing protocols. For example, as part of an initiative to
encourage auditing and self-policing, the EPA is developing and plans
to distribute 13 audit protocols that will include summaries of the
applicable statutes and regulatory requirements, and checklists to help
direct environmental auditors through the auditing process.
The Audit Policy has spurred improvements in environmental auditing
and compliance management systems. EPA's experience suggests that
companies are much more likely to take advantage of incentives to
disclose and correct violations when such incentives are offered in the
framework of integrated enforcement and compliance assistance
strategies, which can include such elements as outreach, identification
of compliance assistance tools such as audit protocols, and increased
compliance monitoring and enforcement activities. Participation may be
further enhanced when the terms for disclosure and correction are
standardized, e.g., through pre-established deadlines and penalty
amounts. This is consistent with a 1995 Price Waterhouse survey, ``The
Voluntary Environmental Audit Survey of U.S. Business,'' which found
that inspections and enforcement play a critical role in motivating
corporate audit programs. By providing ``early warning,'' EPA can
provide industries with an opportunity to come into compliance without
facing the risk or expense of an enforcement action. EPA proposes no
specific revisions to the Audit Policy in this regard. The Agency plans
to focus more carefully on reviewing efforts to prevent recurrence and
plans to continue the development and dissemination of auditing
protocols and other tools to assist companies in systematically
discovering and correcting violations.
4. Awareness of New Environmental Issues
The Internal Survey revealed that in 27 instances EPA became aware
of new environmental issues related to compliance as a result of
disclosures made under the Audit Policy. In addition to the discovery
of specific issues, use of the Policy has heightened awareness by both
EPA and the regulated community of otherwise undetected environmental
problems prevalent among specific industry sectors. Some disclosures to
EPA have assisted the agency in identifying newly emerging
environmental problem areas.
For example, a national telecommunications company discovered and
disclosed over 600 violations of the Clean Water Act (CWA) and the
Emergency Planning and Community Right to Know Act (EPCRA) at over 300
of its facilities. In undertaking the audit that led to this
disclosure, the company identified the existence of a previously
undetected environmental risk. Through its disclosure under the Audit
Policy, the company alerted the EPA to this risk, prompting the Agency
in turn to contact other members of the telecommunications industry to
call attention to potential problems at their sites. EPA might have
remained unaware of the risk were it not for the first company's
disclosure and correction of the problem.
Another example of heightened awareness of sector-related
environmental issues is disclosures made to EPA by six member companies
of the Oilseed Processors Association. Through use of the Audit Policy,
EPA became aware of significant violations among food processors who
produce products that do not qualify as foods or food additives for
purposes of the Federal Food, Drug and Cosmetic Act and, therefore, are
subject to regulation as chemical substances under the Toxic Substances
Control Act (TSCA). TSCA's Inventory Update Rule requires certain
parties to report to EPA chemical information for use in EPA's database
of national organic chemical production volume information. Disclosures
of violations in nine states brought to EPA's attention prevalent
violations of the reporting requirement among this industry sector.
Finally, the 11 eligible disclosures received by EPA's criminal
enforcement program so far and accepted for consideration under the
Policy involve violations that may well not have been discovered absent
the voluntary disclosure.
II. Proposed Revisions and Solicitation for Public Comment
A. Discussion of Specific Proposed Revisions to Policy Text
In the following set of proposed revisions to the Audit Policy,
proposed additional text is indicated in italics, and proposed deleted
text is indicated in [brackets].
1. Broaden Period for ``Prompt Disclosure'' From 10 days to 21 Calendar
Days, and Clarify the Time of Discovery
Proposed Revision: II.D.3., Prompt Disclosure, ``The regulated
entity fully discloses a specific violation within 21 [10] calendar
days, [(]or such shorter period provided by law[)], after it has
discovered that the violation has occurred, or may have occurred, in
writing to EPA;''
Proposed Revision: Explanatory Text, I.E.2 (third column, third
full paragraph), delete: ``[Where reporting within ten days is not
practical because the violation is complex and compliance cannot be
determined within that period, the Agency may accept later disclosures
if the circumstances do not present a serious threat and the regulated
entity meets its burden of showing that the additional time was needed
to determine compliance status.]'' Replace it with: ``EPA may extend
the disclosure period to allow reasonable time for completion and
review of multi-facility audits where: (a) EPA and the entity agree on
the timing and scope of the audit prior to its commencement; and (b)
the facilities to be audited are identified in advance.''
Proposed Revision: Explanatory Text, I.E.2 (66708-66709), ``This
condition recognizes that it is critical for EPA to get timely
reporting of violations in order that it might have clear notice of the
violations and the opportunity to respond if necessary, as well as an
accurate picture of a given facility's compliance record. Prompt
disclosure is also evidence of the regulated entity's good faith in
wanting to achieve or
[[Page 26753]]
return to compliance as soon as possible.
``In the final Policy, the Agency has added the words, ``or may
have occurred,'' to the sentence, ``The regulated entity fully
discloses [that] within 21 days * * *'' after it has discovered that
the violation has occurred, [a specific violation has occurred,] or may
have occurred * * *.'' This change, which was made in response to
comments received, clarifies that where an entity has some doubt about
the existence of a violation, the recommended course is for it to
disclose and allow the regulatory authorities to make a definitive
determination. The time at which a violation may have occurred begins
when any officer, director, employee or agent of the facility has an
objectively reasonable basis to conclude that a violation may have
occurred.
Rationale: While EPA proposes to broaden the disclosure period from
10 to 21 days, EPA also proposes to clarify when a violation ``may have
occurred,'' or when the disclosure period begins to run. Based on
results of the User's Survey and other sources, the 10-day disclosure
period may be a significant impediment to increased use of the Audit
Policy. Expanding the disclosure period is the most frequent suggestion
by users, and disclosure beyond the 10-day time-frame is a common
reason for ineligibility under the Policy. For these reasons, EPA
proposes to broaden the prompt disclosure period from 10 days to 21
days.
The broadening of the disclosure period is in response to EPA's
analysis and experience as well as to input from representatives from
regulated entities that 10 days is not sufficient time to analyze and
decide whether to disclose potential violations, especially for larger
corporations with several layers of management. Results of the Internal
Survey indicate that approximately 23 of 53 late disclosers reported by
survey respondents had disclosed within the 11-21 day time-frame after
they ``discovered'' the violation had occurred or may have occurred.
The choice of 21 days, a multiple of seven, will make it very likely
that the disclosure deadline falls on a business day if ``discovery''
was made on a business day. Finally, the designation of ``calendar''
day as opposed to ``business'' day will clarify EPA's expectations. In
practice EPA has used calendar days in applying this condition. Note
that entities would still be required to disclose within any legally
mandated time frame, e.g., the immediate reporting requirement for
unpermitted releases in 42 U.S.C. 9603.
Under the prompt disclosure provision, for purposes of pinpointing
the date of discovery and calculating the disclosure period, the time
at which a violation may have occurred begins when any officer,
director or employee of the facility has an objectively reasonable
basis to conclude that a violation has occurred. The existence of this
objectively reasonable basis will begin the running of the 21-day clock
for disclosure. Where there are differing legal interpretations that
raise the issue of whether a violation has occurred as a matter of law,
an entity should disclose the violation as soon as possible but in no
case more than 21 days after the awareness of facts that constitute a
possible violation. EPA will make a definitive determination concerning
whether such facts actually present a violation of law.
For the sake of clarity, the explanatory text language implying
that disclosures may be made after the disclosure period has run is
proposed for deletion.
2. State That the Impending Inspection/Investigation or Information
Request Must ``Involve The Same Facility'' in Order to Fail Under the
``Independent Discovery'' Condition
Proposed Revision: II.D.4, Discovery and Disclosure Independent of
Government or Third Party Plaintiff, ``The violation must also be
identified and disclosed by the regulated entity prior to:
(a) the commencement of a federal, state or local agency inspection
or investigation, or the issuance by such agency of an information
request [to the regulated entity] involving the same facility of that
entity; or the commencement of a broad investigation to address multi-
facility compliance problems at the regulated entity. Where, as a
result of violations uncovered during an inspection, investigation, or
information request at a facility, EPA is planning to inspect,
investigate, or send an information request to other facilities of the
same regulated entity, such facilities will not qualify for audit
policy credit because any violations disclosed thereafter would not be
``independent'' of government action.''
Add to the Explanatory Text (at end of current text in section E(3)):
``Where the regulated entity owns and/or operates more than one
facility, the fact that an investigation (e.g., information request or
inspection) has begun with respect to one facility does not per se
disqualify another facility owned or operated by the entity from
receiving audit policy credit. The audit policy does encourage multi-
facility auditing and disclosure of violations. However, the audit
policy is designed to encourage entities to disclose violations before
an entity is the subject of any investigation, not after EPA uncovers
violations at one facility. EPA cautions that once an inspection or
response to an information request has revealed violations at one
facility, the regulated entity is more likely to be the subject of
increased scrutiny. Where EPA plans an investigation of other
facilities owned or operated by an entity, those other facilities will
not be entitled to audit policy credit.
Rationale: The primary purpose of this condition, as stated in the
current preamble to the Policy, is to ensure that regulated entities
seeking relief under the Policy have taken the initiative to find
violations and promptly report them, rather than reacting to knowledge
of a pending enforcement action, investigation, or third-party
complaint. This proposed change harmonizes the language of the Policy
with EPA practice. Thus, Policy relief for a facility is not
necessarily precluded by an inspection, investigation or information
request at another facility owned by the same parent organization.
3. State That ``No Recommendation for Criminal Prosecution'' Is
Available for Entities That Meet All of the Conditions Except for
``Systematic Discovery''
Proposed Revision: II.C.3, No Criminal Recommendations, ``(a) EPA
will not recommend to the Department of Justice or any other
prosecuting authority that criminal charges be brought against a
regulated entity where EPA determines that all of the conditions of
Section D(2) through D(9) below [in Section D] are satisfied, so long
as the violation does not demonstrate or involve: * * *.''
Rationale: EPA proposes that ``no recommendation for criminal
prosecution'' is available for entities that meet all of the conditions
except for ``systematic discovery.'' In the application of this Policy
to criminal matters, there is no ability to grant a reduction in
gravity benefit to a disclosing entity. Even if a violation is not
discovered systematically, its circumstances may not present the kind
of culpability that rises to the level of criminal conduct. Because EPA
wants to encourage disclosures of potential criminal violations, Policy
benefits will be extended to a disclosing entity in the criminal
context regardless of how discovery is made.
[[Page 26754]]
4. Clarify the Meaning of ``Cooperation'' Required for Disclosures Made
Under the Policy
Proposed Revision: II.D.9. Cooperation, add a new sentence at the
end of the paragraph: ``EPA does not intend to request an audit report
to determine the applicability of this Policy for purposes of civil
penalty mitigation unless EPA determines that information contained in
an audit report is necessary to such determination and is not readily
available otherwise.''
Proposed Revision: Explanatory Text, I.E.8., Cooperation, add to
end of paragraph, ``Cooperation in a criminal investigation shall
include, at a minimum, access by EPA to all information relevant to the
violation(s) disclosed, including that portion of the environmental
audit or documentation from the compliance management system that
revealed the violation(s), access to the individuals who conducted the
audit or review, access to all employees of the disclosing entity, and
access to all requested documents. Such cooperation may be effected
directly by the company or through counsel. Full cooperation does not
necessarily require that the entity waive all legal privileges
available to it, but does require that the disclosing entity provide
EPA with all information relevant to the violation(s) disclosed,
whether or not such information might otherwise be protected by legal
privilege.''
Rationale: Part II.C.4. of the Policy states EPA's general policy
and practice regarding requests for and use of environmental audits,
but does not indicate under what circumstances EPA will request audit
reports from entities that have disclosed violations under the Audit
Policy, i.e., what is required under the Policy's ``cooperation''
condition. This language clarifies the EPA's approach to
``cooperation'' for disclosures of civil and criminal violations.
These proposed changes are consistent with EPA practice. EPA has
not requested submission of audit reports to satisfy the cooperation
condition unless it is necessary to apply the Policy and the
information contained in the audit report is not available otherwise.
The second set of proposed revisions provides additional guidance
with respect to requests for audit reports from entities that have
disclosed criminal violations.
5. Clarify That Penalty Relief Is Available Under Other Enforcement
Policies for ``Good Faith'' Disclosures of Violations Even for Those
That Do Not Meet the Audit Policy criteria
Proposed Revision: G. Applicability, add to end of paragraph (2),
``Where an entity has failed to meet any of the conditions of Section
II.D.2 through 9 and therefore is not eligible for penalty relief under
this Policy, an entity may still be eligible for penalty relief under
other EPA media-specific enforcement policies in recognition of good
faith efforts, even where, for example, the violation may have
presented an imminent and substantial endangerment or resulted in
serious actual harm.''
Rationale: This additional language responds to industry
contentions that regulated entities may not be aware that penalty
relief for self-disclosures is available under other enforcement
policies for entities that did not qualify for relief under the Audit
Policy, even if they failed under the exclusion for ``imminent and
substantial endangerment/serious actual harm.'' A review of the major
media-specific enforcement policies indicates that ``good faith''
efforts may result in up to 50% gravity mitigation with respect to
violations that may have failed under the ``imminent and substantial
endangerment/serious actual harm'' exclusion of the Audit Policy,
depending upon the enforcement policy involved and the precise facts.
6. Clarify EPA's Intent Concerning the Imminent and Substantial
Endangerment Exclusion
In response to concerns that the imminent and substantial
endangerment exclusion from the Policy is unclear and/or too harsh,
today EPA is clarifying its intent regarding this standard. This
condition does not bar a company from qualifying for relief under the
Audit Policy solely because the violation involves release of a
pollutant to the environment; rather, it is intended to exclude those
violations that present a serious risk of harm since good audit
programs should prevent such occurrences. Releases of emissions do not
necessarily result in an imminent and substantial endangerment.\5\ To
date, EPA has not invoked the imminent and substantial endangerment
exclusion to deny Audit Policy credit for any disclosure.
---------------------------------------------------------------------------
\5\ See Guidance on the Use of Section 7003 of RCRA (October
1997).
---------------------------------------------------------------------------
7. Change Nomenclature of ``Due Diligence'' to ``Compliance Management
System''
Proposed revision: D.1.Systematic Discovery, ``The violation was
discovered through:
(a) an environmental audit; or
(b) a compliance management system [an objective documented,
systematic procedure or practice] reflecting the regulated entity's due
diligence in preventing, detecting, and correcting violations. The
regulated entity must provide accurate and complete documentation to
the Agency as to how its compliance management system meets [it
exercises due diligence to prevent, detect and correct violations
according to] the criteria in Section B and how the regulated entity
discovered the violation through its compliance management system. EPA
may require as a condition of penalty mitigation that a description of
the regulated entity's compliance management system [due diligence
efforts] be made publicly available.
Proposed revision: II.B., Definitions * * * ``Compliance Management
System'' [``Due Diligence''] encompasses the regulated entity's
documented systematic efforts, appropriate to the size and nature of
its business, to prevent, detect and correction violations through all
of the following: * * *.''
Proposed revision: D.6. Prevent Recurrence, ``The regulated entity
agrees in writing to take steps to prevent a recurrence of the
violation, which may include improvements to its environmental auditing
program or compliance management system [due diligence efforts];''
Rationale: Under this proposed revision, ``compliance management
system'' would replace the term ``due diligence'' without changing the
listed criteria for a systematic compliance management program. The
term ``compliance management system'' is much more commonly used by
industry and EPA to refer to a systematic management plan or efforts to
attain compliance than the term, ``due diligence efforts.'' The term
``due diligence'' arose solely from the 1991 Sentencing Guidelines as
part of the definition of an ``effective program to prevent and detect
violations of law,'' which is a mitigating factor in determining the
criminal fine for convicted organizations. This proposed revision will
avoid confusing ``due diligence'' under this Policy with ``due
diligence'' inquiries in the mergers and acquisitions context. The
proposed revision also states that, like the ``environmental audit''
method of
[[Page 26755]]
systematic discovery, the ``compliance management system'' must be
documented. The explanatory text will state that the compliance
management system method of systematic discovery is intended to cover
violations discovered through the day-to-day operation of the system,
such as detection of violations by an employee trained pursuant to the
compliance management system, as well as detection through
environmental audits that are part of the compliance management system.
8. Describe the EPA Processes for Handling Civil and Criminal
Disclosures
Proposed revisions: add new Section I at the end of the explanatory
text:
``I. Implementation of Policy
``Disclosures of civil environmental violations under the Audit
Policy should be made to the EPA Regions or, where the violations to be
disclosed involve more than one EPA Region, to an appropriate
Headquarters office. The Regional or Headquarters offices decide in the
first instance whether application of the Audit Policy in a specific
case is appropriate. As in other non-disclosure cases, the Regional and
Headquarters offices coordinate with the criminal program offices and
the Department of Justice where there may be evidence of criminal
violations. Conversely, disclosures made to the criminal enforcement
program that reveal violations that may be civil in nature will be
coordinated with the appropriate Regional or Headquarters civil
enforcement office. The Audit Policy Quick Response Team (QRT),
established in June 1995, addresses issues of national significance and
ensures consistent and fair application of the Policy across EPA
Regions and programs. The Audit Policy QRT is comprised of senior
representatives from EPA Headquarters, Regions and the Department of
Justice.
``Requests for relief under the Audit Policy for cases giving rise
to potential criminal violations will be considered by the Voluntary
Disclosure Board (VDB or Board) in the Office of Criminal Enforcement,
Forensics and Training (OCEFT), located at EPA Headquarters. The Board
will receive, monitor and consider all requests for consideration under
the Policy, and make recommendations to the Director of OCEFT who will
serve as the Deciding Official in all cases where disclosure indicates
potential criminal violations.
``Disclosure and request for relief under the Policy in potential
criminal cases should be made to the Board directly. Disclosures
identifying potential criminal violations made through the Special
Agent-in-Charge (SAC) or EPA regional enforcement personnel will be
forwarded to the Board for initial evaluation and monitoring purposes.
``Following a disclosure of potential criminal violation(s), a
criminal investigation will be initiated. During the course of the
investigation, the Board will routinely monitor the progress of the
investigation as necessary to ensure that sufficient facts have been
established to support (or oppose) a recommendation that relief under
the Policy be granted. At the conclusion of the criminal investigation,
the Board will make a recommendation to the Deciding Official.
``Upon receiving the Board's recommendation, the Deciding Official
will make his final recommendation to the appropriate United States
Attorney's Office and/or the Department of Justice. The recommendation
of the Deciding Official, however, is only that--a recommendation. A
United States Attorney's Office and/or the Department of Justice retain
full authority to exercise prosecutorial discretion.
``The Voluntary Disclosure Board was established in October 1997 to
serve as a central body for consideration of all voluntary disclosures
potentially criminal in nature. The VDB is comprised of members
associated with the criminal enforcement program at EPA, including a
member from the Department of Justice, Environmental Crimes Section.
The Board operates to ensure consistent application of the Policy
nationwide in this nationally managed criminal enforcement program.''
9. Clarify That EPA Will Release Case Information Upon Case Settlement
Unless a Claim of Confidential Business Information Is Made, Another
Freedom of Information Act Exemption Applies, or Any Other Law Would
Preclude Such Release
Proposed Revision: Explanatory Text, I.E.2., Voluntary Discovery
and Prompt Disclosure, 66709, column 1: ``[In general, the Freedom of
Information Act (FOIA) will govern the Agency's release of disclosures
made pursuant to this policy.] Upon formal settlement of a case
involving disclosure under this Policy, EPA will [, independently of
FOIA,] make publicly available any self-disclosures and related
documents, unless the disclosing entity claims them as Confidential
Business Information (and that claim is validated by U.S. EPA), unless
another exemption under the Freedom of Information Act is asserted and/
or applies, or the Privacy Act or any other law would preclude such
release. Presumptively releasable documents include compliance
agreements reached under the Policy (see Section H of the Policy)[,]
and [as well as, including] descriptions of compliance management
systems [due diligence programs] submitted under Section D.1 of the
Policy. Any material claimed to be Confidential Business Information
will be treated in accordance with EPA regulation at 40 CFR Part 2.''
Rationale: This change is intended to harmonize the explanatory
text with EPA practice regarding the public availability of Audit
Policy case information following the formal conclusion of the case.
10. Clarify That Violations Discovered Pursuant to an Environmental
Audit or Use of a CMS Performed as a Requirement of Participation in an
Agency Partnership Program Can Be Considered To Have Been Discovered
Voluntarily
Proposed Revision: Add a new subsection (5) to the
``Applicability'' Section of the Audit Policy (II.G), as follows:
(5) For purposes of this Policy, violations discovered pursuant to
an environmental audit or CMS can be considered to be voluntary even if
it is conducted in conjunction with a ``partnership'' program that
requires an environmental audit or CMS. EPA will consider application
of the Audit Policy to such partnership program projects on a project-
by-project basis.
Rationale: In partnership programs, EPA has found the Audit Policy
to be useful as applied to companies sponsoring regulatory flexibility
pilot projects (e.g., Project XL). This change will ensure that
facilities or regulated entities participating in one of the
``partnership'' programs that EPA is conducting are not foreclosed from
receiving penalty mitigation for violations discovered during an
environmental compliance audit or use of a CMS performed as a condition
of participation in such program.
11. Note the Availability of Interpretative Guidance on Many Issues
Concerning the Availability and the Application of the Policy
Proposed Revision: II.G, add a new subsection to the
``Applicability'' section of the Policy:
``(6) EPA has issued interpretative guidance addressing several
applicability issues pertaining to the Audit Policy. Those considering
whether to take advantage of the Policy should review that guidance to
see if it
[[Page 26756]]
addresses any relevant questions. The guidance can be found on the
Agency's World Wide Web page at www.epa.gov/oeca/apolguid.html.''
12. Clarify That if a Facility Discloses to EPA a Violation of a
Program That a State is Approved or Authorized to Administer and
Enforce, EPA Will Consult With the Applicable State in Responding to
the Disclosure
Proposed Revision: I.G, add a new sentence at the end of the
current text in the ``Effect on States'' section of the explanatory
text:
``Facilities wishing to disclose violations under the Audit Policy
should disclose to the appropriate EPA Regional or Headquarters
contact. When a facility discloses to EPA a violation of a state-
authorized or -approved program, the Agency will inform the relevant
state agency and consult with it as to an appropriate response.''
B. Discussion of Specific Proposed Revisions to Policy Implementation
The most frequently suggested change from users regarding Policy
implementation is expediting the EPA time to acknowledge or respond to
the disclosures and/or time to settle the case. EPA internal data also
point toward needed improvements in this area as EPA took more than 15
days to acknowledge the disclosure in at least 35% of the cases and
more than 90 days to settle the case in at least 66% of the cases. In
many cases, EPA has experienced long delays in obtaining requested
information from entities. In many other cases, however, EPA should
have been able to process disclosures on a more expeditious basis. EPA
intends to encourage the use of disclosure checklists that would have
the effect of increasing the efficiency of collecting information
needed to apply the Audit Policy, and the Agency is exploring other
steps to speed the processing of disclosures.
The data reveal that entities disclosed violations at approximately
1850 facilities and that at least 900 of these facilities involved
multiple disclosures by the same parent organization. The Agency
proposes to encourage multi-facility disclosures in particular because
such disclosures effectively leverage resources of the Agency, allow
regulated entities to review their operations holistically, and benefit
the environment.
For the same reasons, sector-based enforcement initiatives
involving the Audit Policy also figure prominently in the future of
EPA's enforcement and compliance program. These types of initiatives
are also supported by direct evidence that an inspection presence
provides a direct incentive for auditing for and correction of
environmental violations.\6\
---------------------------------------------------------------------------
\6\ Results of the following surveys and studies support this
proposition:
1995 Price Waterhouse survey, ``The Voluntary
Environmental Audit Survey of U.S. Business,'' question 25, (As a
reason for auditing, 96% indicated ``Problems can be identified
internally and corrected before they are discovered by an agency
inspection.'');
1998 National Conference of State Legislatures, finding
5 (90% of respondents rank as being very important reasons for
auditing, ``Measuring compliance with environmental requirements,
and identifying problems internally and correcting them before they
are discovery during an inspection by a regulatory agency.'')
1998 Audit Policy User's Survey, question 17 (As second
most frequently cited reason for disclosing violations under the
Audit Policy, ``To take proactive measures to find and address
compliance problems before EPA discovered them.'')
---------------------------------------------------------------------------
The Audit Policy has successfully provided a common approach toward
encouraging self-policing that is consistently applied across all
environmental media and EPA Regions and offices. EPA does not recommend
any revisions to Policy implementation in this regard. To the extent
that data indicate that awareness of the Audit Policy is low, EPA will
continue to emphasize Audit Policy awareness-building activities.
Dated: May 11, 1999.
Steven A. Herman,
Assistant Administrator for Enforcement and Compliance Assurance.
[FR Doc. 99-12369 Filed 5-14-99; 8:45 am]
BILLING CODE 6560-50-U
