Enforcement in New England
Questions & Answers About the Chemical Industry Audit Project
What was the Purpose of the Chemical Industry Audit Project?
Conducted in 1997-1998, the Chemical Industry Audit Project was broadly intended to protect human health and the environment by encouraging firms in this sector to conduct compliance and pollution prevention audits of their own operations. Additionally, EPA wanted to increase awareness and use of its Audit Policy and encourage self-disclosures of violations of federal environmental regulations. The project also grew out of EPA and state interest in exploring alternatives to traditional enforcement programs which could secure environmental improvements and regulatory compliance faster and in a less adversarial setting.
What was the Chemical Industry Audit Project?Key project elements included:
- Industries in SIC Code 2869 ( Organic Chemical Manufacturing, not elsewhere classified) and SIC Code 2899 (Chemical Preparations, not elsewhere classified) in Massachusetts, Connecticut, and Rhode Island were encouraged to increase their compliance through auditing and reporting of violations in accordance with EPA's Audit Policy.
- EPA-New England did not emphasize this sector for compliance inspections in FY98 (October 1, 1997 to September 30, 1998) in order to give facilities an opportunity to conduct audits and self-disclose any violations found. EPA or state inspections still occured in FY98 between February and September 1998 due to tips, complaints, or site-specific regulatory or environmental considerations. CT DEP planned some inspections of facilities in this sector during this period in response to already planned program priorities.
- EPA-New England, in coordination with the states, took the lead in providing compliance assistance opportunities throughout FY98 to help facilities comply with federal environmental regulations. Compliance assistance included workshops, mailings, and preparing and making materials available to assist with interpretation of federal and state environmental regulations.
- EPA-New England, in coordination with the states, conducted increased inspections and database reviews of industries in SIC codes 2869 and 2899 in FY99, from October 1, 1998 to September 30, 1999. Where appropriate, enforcement followed inspections.
- The effectiveness of the program was measured and evaluated.
What Determined whether EPA or the State Inspected My Facility?
After October 1, 1998, EPA-New England conducted unannounced inspections in this sector and brought enforcement actions where appropriate, which were closely coordinated with the states. EPA or state inspections still occured during FY98 (October 1, 1997 to September 30, 1998) due to tips, complaints, or site-specific regulatory or environmental considerations. As previously indicated, CT DEP planned some inspections of facilities in this sector during this period in response to already planned program priorities. The focus of inspections was regulatory compliance, not the content of your environmental management system.
What EPA Policies Reward Self-Disclosure?
EPA's "Audit Policy" is entitled "Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations" (Federal Register, Vol. 60, p. December 22, 1995). Under the Audit Policy, EPA will reduce or eliminate the gravity-based portions of penalties for violations of federal environmental requirements, depending on whether some or all of the conditions of the policy are met. In general, the "economic benefit" component of the penalty - the costs delayed or avoided by the regulated facility due to its noncompliance - will not be reduced or eliminated, although economic benefit may be waived if it is determined by EPA to be insignificant. The entire gravity-based portion of the penalty will not be sought if the regulated entity meets all of the conditions of the policy, including, among other conditions, that the violation was found through "systematic discovery" - i.e., the audit was discovered through an environmental audit or an "objective, documented, systematic procedure or practice reflecting the regulated entity's due diligence in preventing, detecting, and correcting violations". EPA will reduce the gravity-based portions of penalties for violations of environmental requirements by 75% if all of the other conditions of the policy are met but the violation was not found through an audit or due diligence procedure. The violation must be fully disclosed to EPA within 10 days after discovery and corrected within 60 days of discovery, the facility must commit to preventing recurrence, and the facility cannot be a repeat violator.
EPA's Policy on Compliance Incentives for Small Businesses ("Small Business Policy") also provides for penalty reduction or elimination based on specific criteria for facilities with less than 100 employees. These criteria are distinct from those in the Audit Policy.
Facilities that self-disclose violations and meet the terms of EPA Audit Policy or Small Business Policy will get their full benefits provided their conditions are met. In addition, even if these policies do not apply, several EPA penalty policies for specific statutes give positive consideration to the fact that a particular violation was self-disclosed in calculating any penalty.
Are there any State Policies Rewarding Self-Policing?
The Massachusetts Department of Environmental Protection (MA DEP) "Interim Policy on Incentives for Self-Policing: Environmental Audit Policy (PDF)" (8 pp, 21K, about PDF), effective April 26, 1997, is generally similar to EPA's audit policy. It also provides for reduction or waiver of the punitive portion of total penalties (the portion of an administrative penalty which reflects the gravity of the violations, duration of noncompliance, behavior and financial condition of the regulated entity and other public interest considerations). MA DEP's policy indicates that it is DEP's practice to collect any economic benefit that may have been realized as a result of non-compliance.
The Connecticut Department of Environmental Protection (CT DEP) has a policy entitled "Policy on Incentives for Self-Policing" (PDF) (6 pp, 72K, about PDF), adopted October 23, 1996 on a pilot basis, and extended until March 30, 2002. It is generally similar to EPA's Audit Policy, with some differences. This policy states that it is "designed to effect greater compliance with laws and regulations that protect human health and the environment by encouraging regulated entities to voluntarily discover, disclose, correct, and prevent violations of environmental requirements through the use of environmental audits. The policy provides three basic incentives for companies to conduct such activities: (1) under the terms of an administrative consent order, full or partial waiver or penalties for violations discovered; (2) no recommendations for civil or criminal prosecution; and (3) no routine request for environmental audits." The policy applies equally to programs delegated to the State by EPA and those regulated solely by state authority. Unlike EPA's Audit Policy, the CT DEP audit policy requires that an administrative consent order be used to effect the purposes of the policy
The State of Rhode Island has passed legislation entitled "The Rhode Island Environmental Compliance Act", which is intended to encourage self-auditing, and a related policy. This law and policy have both important similarities and differences to EPA's Audit Policy. The act and policy are similar to EPA's Audit Policy in that the Rhode Island Department of Environmental Management (RIDEM) will not seek the gravity-based portion of penalties for self-disclosed and corrected violations where the conditions of the policy are met. One important difference is that to take advantage of compliance incentives offered in the Act, facilities must notify RIDEM not less than three business days in advance of an audit.
How will EPA Respond to Self-Disclosures?
Upon receipt of a self-disclosed violation, EPA will assign the matter to an enforcement case team for appropriate action. The team will review the matter to determine the extent to which the Audit Policy applies and what further actions might be necessary to remedy the environmental violations. The case team will process the case in accordance with existing EPA enforcement response policies for the violations at issue, applying any penalty reductions called for by the Audit Policy. Typically, any further actions to be performed by the facility and any penalty to be paid as a result of the violation will be specified in an administrative consent order. The EPA case team will coordinate this process with state counterparts.
What Happened in the Compliance Assistance Part of the Project?
Compliance assistance opportunities occurred from February 1998 to September 1998. Compliance assistance workshops and mailings (fact sheets) focused on problem areas that had been identified by the industry. To help you assess your own operations, EPA has a manual available entitled "Process-based Self-Assessment Tool for the Organic Chemical Industry". This manual can be obtained free of charge through the National Center for Environmental Publications and Information (NCEPI) website or at 1-800-490-9198. Provide the title and publication number (EPA Report No. EPA/305/B/97/002, April 1997).
Was I Inspected if I Came to a Workshop?
EPA assured facilities that whether or not you participated in compliance assistance activities (for example, by attending a workshop) did not affect the likelihood that you were inspected. EPA encouraged participation in compliance assistance and you were not targeted for an inspection because you attended, unless you disclosed information that reflected an imminent and substantial threat to the environment, which was very unlikely. Similarly, your attendance was not a shield against enforcement.
Why was the Chemical Industry Selected?
SIC Codes 2869 and 2899 were selected for this project for several reasons. On a national level, EPA is carrying out a Chemical Sector Strategy that makes these sectors a high priority for compliance review and enforcement. These sectors have broad, multimedia compliance requirements, and will be critically affected by several new federal environmental regulatory programs in the next several years. There have been a number of violations of existing regulations noted in these sectors. The number of chemical manufacturers and preparers in Region I made these sectors attractive for an initiative of this type. Also, the commitment of the industry to assessing its own operations through the Responsible Care Program made it a good candidate for an emphasis on self-assessment.
What was the Role of each State in New England?
The overall Chemical Industry Audit Project was implemented by EPA-New England in Connecticut, Massachusetts, and Rhode Island, in coordination with these three states. A facility in any state could take advantage of the Audit or Small Business Policies if it met the conditions of the specific policy, because these are national EPA policies.
Is Pollution Prevention Encouraged?
Pollution prevention is encouraged and may lead to compliance. Through it, your firm may get under a regulatory threshold or not have to be covered by a regulation. Assessing pollution prevention opportunities in a self-audit could reduce your use of equipment and materials and may save you money. The chemical industry's Responsible Care Program, similarly, has efficient use of materials and energy and pollution prevention as key goals.
Facilities that are considering performing an audit may also wish to consider evaluating pollution prevention opportunities as part of the audit. See the May 1992 EPA "Facility Pollution Prevention Guide" for information on pollution prevention, as well as the previously mentioned "Process-Based Self-Assessment Tool for the Organic Chemical Industry."
How was the Success of the Project Measured?
An evaluation strategy for the project was developed. Key components included: 1) comments by facilities on the effectiveness of workshops and mailings through workshop evaluations, 2) the extent of additional auditing conducted by facilities, and 3) changes in facility compliance status, and 4) changes in use of the EPA Audit Policy.
Is there Published Guidance Available on Performing an Audit?
Yes. See the definition of "audit" as set forth in the Environmental Auditing Policy Statement published in the Federal Register on Wednesday, July 9, 1986 (51 F.R. 25004), the Restatement of Policies Related to Environmental Auditing published in the Federal Register on Thursday, July 28, 1994 (59 F.R. 38455), and in the Audit Policy itself (Federal Register, Friday, December 22, 1995). Environmental Federal Register Notices are also available on the Internet.
Is there Guidance Available on the "Economic Benefit" and"Gravity" Components of EPA Penalties? Are EPA Penalty Policies Available for review?
Calculation of the "gravity" and "economic benefit" components of the penalty will vary with and depend on the specific regulations that have been violated. Gravity refers to the seriousness of the violation and includes such factors as the degree of harm to the environment, the nature and duration of the violation, and the size of the violator. Economic benefit refers to the portion of the penalty that recovers any costs that the regulated entity delayed or avoided through noncompliance.
See EPA's guidance documents for penalties for statutes including the Clean Air Act, the Resource Conservation and Recovery Act, Subtitle C (Hazardous Waste) and Subtitle I (Underground Storage Tanks), and the Emergency Planning and Community Right to Know Act. Many of these penalty policies are publicly available. Contact EPA-New England to request copies. Please specify the document you are requesting.
Where can I Self-Disclose Violations?
To self-disclose a violation to EPA under its Audit Policy, please contact Joel Blumstein, the regional contact for the Audit Policy, at 617-918-1771, or the appropriate EPA regulatory office. For more information on the EPA Small Business Policy or to disclose a violation under this policy, please contact Dwight Peavey, EPA-New England Small Business Ombudsman, at 617-918-1829. To self-disclose a violation of state regulations under the Massachusetts Interim Policy on Incentives for Self-Policing, the Rhode Island Environmental Compliance Incentive Act, or the Connecticut Policy on Incentives for Self-Policing, contact each state's headquarters or regional office.