The Environmental Protection Agency announced several updates to its Audit Policy this month that promise to make the system more convenient for users and more forgiving for new owners of regulated facilities. 

       Since 1995, EPA’s Audit Policy has given incentives including reduced civil penalties and a recommendation of no criminal sanctions to companies that self-disclose environmental violations. As of August 7 regulated facilities can now submit disclosures of certain violations through the Agency’s website. EPA’s new “Audit Policy Self-Disclosure System” or “eDisclosure” program lets facilities throughout the country self-report violations of the Emergency Planning and Community Right-to-Know Act online. Companies in EPA Region 6 states, including Louisiana and Texas, benefit from a more expansive pilot program that lets facilities electronically report violations of all federal environmental laws. EPA will monitor the success of the pilot program in Region 6 and determine whether to expand nationwide. Companies wishing to assert a “business confidentiality” privilege still need to submit disclosures the old fashioned way (by mail to their regional EPA headquarters), but for many regulated facilities EPA’s “eDisclosure” system offers a new, more efficient way to take advantage of the Audit Policy’s advantages.     

            EPA also gave a break to companies that acquire facilities with past environmental problems by relaxing its Audit Policy for new owners. Under EPA’s “Interim Approach to Applying the Audit Policy to New Owners,” effective August 1st, companies acquiring new facilities can greatly decrease their exposure to liability by promptly reporting pre-acquisition violations discovered during environmental due-diligence or shortly thereafter. Not all owners buying a facility will qualify as “new.” The Interim Approach excludes companies that operated the facility before the transaction or that had the largest ownership share of the other entity. But qualifying companies that disclose past violations or enter into an audit agreement with EPA during the first nine months after acquiring a facility will have more opportunities to avoid or mitigate civil penalties than long-term owners. In addition to avoiding gravity-based penalties (which is available to all owners under the Audit Policy), qualifying new owners will receive lower economic benefit sanctions as well. If the terms of the Interim Approach are met, economic benefits associated with avoided operation costs and maintenance will only be assessed from the date of acquisition and no delayed capital expenditures or unfair competitive advantage penalties will be levied if the new owner corrects the problem within 60 days of discovery or within a reasonable time agreed upon with EPA.

            Conditions restricting which violations qualify for the Audit Policy have been modified for new owners as well. Many environmental violations ineligible for voluntary self-disclosure by long-term owners can now be submitted by new owners under certain conditions. For example, new owners can now submit violations causing serious actual harm through the Audit Policy as long as the violation began before acquisition and there were no fatalities, evacuations or other catastrophic events; long term owners cannot. Also, long term owners cannot “voluntarily” disclose violations through the Audit Policy where they are otherwise required to disclose by a federally mandated monitoring, sampling or auditing procedure. New owners can still take advantage of the Audit Policy for such violations as long as they promptly disclose and enter into an auditing agreement with EPA before the date a new auditing, monitoring or sampling would be required. 

            EPA hopes the Interim Program will allow new owners to make a “clean start” by giving them incentives to report and remedy violations that began before the facility was bought. For more information about these and other incentives provided by the Interim Approach, as well as info on “eDisclosure” or the Audit Policy generally, visit the Agency’s website at http://www.epa.gov/compliance/incentives/auditing/auditpolicy.html.