EPA to Revamp Electronic Voluntary Disclosure Program
On May 20th, the Environmental Protection Agency (EPA) announced that it will be holding webinars on June 10 and 15, 2015, to discuss eDisclosure, which EPA described as its “plan to modernize the implementation of its Audit Policy and Small Business Compliance Policy.”1 The announcement provides few details, but it describes eDisclosure as a “new, centralized web-based system for more efficiently receiving and processing violations disclosed to EPA under these policies.”2 The benefit of the eDisclosure system, according to EPA, is that it “streamline[s] how disclosures are submitted and processed to save transaction costs, increase efficiency, and provide quicker responses.”3 As such, the system appears to comport with the Agency’s new “Next Generation Compliance” program, which has one of its main goals the increase of electronic reporting and monitoring of all kinds.4
EPA previously released a pilot web-based compliance disclosure program, also called eDisclosure, in 2008. Under that earlier program, which terminated in 2013, EPA accepted disclosures of violations under the Emergency Planning and Community Right-to-Know Act (EPCRA) using fillable forms that allowed companies to submit information in a single submission rather than be required to spend more resources on multiple submissions to ensure that the Agency had all of the information it needed to determine an appropriate enforcement response. Hopefully, the new eDisclosure program will do the same.
The Audit Policy has the potential to provide significant relief from so-called “gravity-based” penalties to companies and others who self-disclose violations to EPA prior to independent discovery and enforcement by the Agency. Gravity-based penalties are assessed against alleged violators depending on the gravity or the seriousness of the harm that such violations may cause. Such penalties are usually calculated in accordance with other compliance policies that are specific to the environmental statute that is violation. For example, the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Enforcement Response Policy assigns four “gravity levels” in determining gravity-based penalties that consider “the actual or potential harm to human health and the environment and the importance of the requirement to achieving the goals of the statute.” Similarly, the Clean Air Act Mobile Source Civil Penalty Policy calculates gravity-based penalties by applying a base-per-engine penalty amount and then multiplying the amount depending on whether the “egregiousness” of the penalty is “major,” “moderate,” or “minor.”6
Depending on EPA’s interpretation of the seriousness of the harm posed by an alleged violation, gravity-based penalties can be significantly increased and constitute a major portion of the overall penalties imposed. The Audit Policy provides parties with the opportunity for a reduction of up to 100 percent of gravity-based penalties if they meet all nine conditions of the policy and 75 percent if they meet eight of the conditions but do not discover the violation through systematic discovery process (described below).7 Regulated entities therefore often may have a strong incentive to meet these conditions and disclose violations as soon as they are discovered. Note, however, that the Audit Policy has no bearing on EPA’s authority to impose penalties that reflect any economic benefit a regulated entity may have enjoyed as a result of the violation, nor does it have any bearing on whether EPA brings criminal penalties. The nine conditions for gravity-based penalty mitigation are as follows:
- Systematic discovery – the violation was discovered through an environmental audit or a compliance management system.
- Voluntary discovery – the violation was discovered voluntarily and not through a legally mandated monitoring or sampling requirement.
- Prompt disclosure – the violation was promptly disclosed to EPA, generally within 21 days after discovery of the violation.
- Independent discovery – discovery of the violation independent of government enforcement or filing by a third-party plaintiff in a citizen suit or complaint.
- Correction and remediation – correcting the violation within 60 days, or within a longer time period if EPA is notified in writing before 60 days has elapsed.
- Prevent recurrence – agreement to take steps to prevent a recurrence of the violation.
- No repeat violation – the violation (or a closely related violation) has not occurred within the past three years at the same facility and not within the past five years as part of a pattern at multiple facilities owned or operated by the same entity.
- Other violations excluded – the violation does not result in serious actual harm or imminent and substantial endangerment to human health or the environment, or does not violate any order or consent agreement.
- Cooperation – the regulated entity cooperates as requested by EPA and provides requested information.8
As can be seen from the list above, the determination of whether an entity meets one condition may be more difficult than whether it meets others. We will have to wait until June 10th and later to see if EPA’s revamped eDisclosure program will provide not only a more convenient means for disclosing violations electronically, but also provide disclosing entities with a clearer sense of what EPA is looking for when determining whether to apply the Audit Policy and, therefore, a better means for ensuring transparency in EPA’s use of the Audit Policy in resolving enforcement actions. Such transparency would go a long way to reduce regulated entities’ transaction costs and give them more comfort that disclosure is a better strategy overall – for human health, the environment, and their bottom line.
1 See EPA’s Audit Policy website, available at http://www2.epa.gov/compliance/epas-audit-policy.
4 See EPA, Next Generation Compliance: Strategic Plan 2014-2017, available at http://www2.epa.gov/sites/production/files/2014-09/documents/next-gen-compliance-strategic-plan-2014-2017.pdf.
5 FIFRA Enforcement Response Policy (December 2009), available at http://www2.epa.gov/sites/production/files/documents/fifra-erp1209.pdf.
6 Clean Air Act Mobile Source Civil Penalty Policy (January 2009), available at http://www2.epa.gov/sites/production/files/documents/vehicleengine-penalty-policy_0.pdf.
7 EPA Final Rule: Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations “Audit Policy”), 70 Fed. Reg. 19,618 (April 11, 2000), available at http://www.gpo.gov/fdsys/pkg/FR-2000-04-11/pdf/00-8954.pdf.
8 See id.