By Jeryl L. Olson and Patrick D. Joyce

Seyfarth Synopsis: The U.S. Environmental Protection Agency Office of Inspector General (OIG) determined that USEPA has not been giving proper attention to voluntary disclosures, and recommended that the Agency update the way it screens and follows up on voluntary disclosures.

In a report dated June 30, 2022 (Report No. 22-E-0051) OIG criticized the Agency’s response to voluntary disclosures performed  by industry under the “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations” (65 Fed. Reg 19618, April 11, 2000), also known as the “Audit Policy. OIG concluded that “…EPA cannot ensure that it effectively screens regulated entities’ self-disclosure of environmental violations to identify and mitigate significant environmental concerns”.

The OIG Report notes that there is no formal written guidance for the Agency to screen disclosures (which are now performed under the web-based “eDisclosure System”), potentially leading to significant cases slipping through the cracks. OIG noted that the eDisclosure System is not designed to flag significant concerns (criminal conduct, imminent and substantial endangerment, ongoing discharge or release) and points out the lack of uniformity in how different USEPA regions screen voluntary disclosures. The Report specifically notes that certain Regions admit they are not staffed appropriately to allow proper screening or have believed mistakenly that headquarters, and not Regions, are to do screening.  The Report also notes that some Regions, (specifically Region 5), do not even have access to the e-Disclosure system. While OIG had concerns about EPCRA disclosures as well as non-EPCRA disclosures, it is mostly concerned about non-EPCRA disclosures.

In response to the OIG report, USEPA Office of Enforcement and Compliance Assurance (OECA) is undertaking the following tasks:

  1. developing national guidance for USEPA screening e-disclosures for significant concerns;
  2. training USEPA personnel in the regions and headquarters;
  3. developing performance measures for reviewing e-disclosures; and
  4. identifying areas for improvement.

OECA says they will complete task two by September 30, 2022, and the other tasks by September 30, 2023.

For industry, the Audit Policy has long been a key consideration in mitigation of potential violations and associated penalties. However as reported by OIG, it is generally the larger, more sophisticated companies that take advantage of the program that was originally aimed at smaller entities. 28,000 facilities self-disclosed violations between 1995 and 2020, and USEPA denied the penalty relief sought under the Audit Policy fewer than 12 times.  That is, the Audit Policy has been highly successful in mitigating penalties disclosed to the Agency. In light of the OIG Report and OECA response however, this success rate for industry is likely to change, and companies should carefully consider whether they specifically meet (or don’t’ meet) the factors that qualify a disclosure for penalty mitigation, before notifying the Agency of violations. The National Law Review has stated its belief that non-EPCRA disclosures will be more thoroughly reviewed, with greater scrutiny as to whether a disclosure qualifies under the audit policy, and with more follow-up inspections of sites that make disclosures.

Seyfarth has considerable experience in the use of the Audit Policy to self-disclose both non-EPCRA and EPCRA violations to avoid gravity-based penalties, and in the processes for eDisclosure and formal disclosures. For more information on this or any related topic, please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Environmental Compliance, Enforcement & Permitting Team.