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EPA's Audit Policy: Tailored Incentives for New Owners

EPA’s April 11, 2000 policy on “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations,” commonly referred to as the “Audit Policy (PDF) (11 pp 262K, About pdf) (65 FR 19618), offers reduced penalties to companies that:

On August 1, 2008, EPA published in the Federal Register (FR) its “Interim Approach to Applying the Audit Policy to New Owners (“Interim Approach),”.  The FR Notice on the Interim Approach states that the Agency intends to tailor Audit Policy incentives for new owners that want to make a “clean start” at their recently acquired facilities by addressing environmental noncompliance that began prior to acquisition. 

The Interim Approach offers a detailed description of how EPA will apply one of its key compliance incentive tools, the Audit Policy, to new owners of regulated facilities.  It is designed to motivate new owners to audit newly acquired facilities and to encourage self-disclosures of violations that will, once corrected, yield significant pollutant reductions and benefits to the environment. 

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Advantages of the Tailored Incentives

The incentives tailored for new owners include clearly defined penalty mitigation beyond what is offered by the Audit Policy, as well as the modification of certain Audit Policy conditions that will allow more violations to be eligible for the Policy. 

This transparent and easily administered approach to resolving disclosures from new owners should help the Agency use the Audit Policy to leverage its ability to make effective use of scarce government resources.  If procedural and transaction costs can be minimized for regulators and self-disclosing new owners, EPA anticipates that the opportunity to work with new owners as they make clean starts at their new facilities can help secure higher quality environmental improvements more quickly and effectively than might otherwise occur.

Rationale for the Interim Approach

In May 2007, EPA published a Federal Register Notice seeking public comment on the idea of offering tailored incentives to new owners, and received public comment supportive of developing an approach to applying the Audit Policy to new owners. 

The Agency believes the most efficient way to effectively test the strategy it has developed, and learn from practical experience, is to implement it on an interim basis.  Accordingly, the Agency has decided to begin applying the Interim Approach, effective upon publication of the August 1, 2008 Federal Register Notice. 

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Public Comment on the Interim Approach

EPA is concurrently seeking public comment on the Interim Approach for a period of 90 days.  Submit comments on regulations.gov to docket number EPA-HQ-OECA-2007-0291.

This docket will also contain:

EPA will be reviewing public comment as it is received and will continue its dialogue with stakeholders on whether refinements to the Interim Approach are needed.  Based on these public comments and after the Agency has gained sufficient experience in implementing the Interim Approach, EPA will decide to finalize, revise or discontinue these tailored incentives for new owners.

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For more information, contact:

Caroline Makepeace
Special Litigation & Projects Division
U. S. Environmental Protection Agency
1200 Pennsylvania Ave, NW MC 2243A
Washington, DC 20460
(202) 564-6012

Compliance Assistance | Compliance Monitoring | Compliance Incentives


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