United States
             Environmental Protection
             Agency
              Office of
              Solid Waste and
              Emergency Response
  &EPA
DIRECTIVE NUMBER:  9891.3
TITLE:  Final EPA Policy on the Inclusion of Environmental
      Auditing Provisions in Enforcement Settlements
             APPROVAL DATE:  November 14, 1986
             EFFECTIVE DATE:  November 14, 1986
             ORIGINATING OFFICE:  OECM
             Q FINAL
             D DRAFT
               LEVEL OF DRAFT
                 13 A — Signed by AA or DAA
                 OB — Signed by Office Director
                 D C — Review & Comment
             REFERENCE (other documents):
S WER       OS WER       OS WER
   DIRECTIVE     DIRECTIVE    Dl

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                  Washington. DC 20460
OSWER  Directive Initiation  Request
                                                                     1. Directive Number

                                                                      9891.3
                                    2. Originator Information
       Name of Contact Person  ,
            Thomas L.  Admas
                   Ma
                              Offi
                                ISSCM
             Telephone Code
                 382-3050
       '3. Title
            Final EPA Policy on the Inclusion of Environmental Auditing Provisions in

            Enforcement Settlements
       4. Summary of Directive (include brief statement of purpose)
            The purpose of  this document is  to provide Agency enforcement personnel with

            general criteria for and guidance on selecting judicial and administrative

            enforcement cases in which EPA will seek to include environmental auditing pro-
            visions among terms of any settlement.
       5'KeyworAudit, Judicial, Administrative
       :a. Does This Directive supersede rrevious Uirective(s)?
       b. Does It Supplement Previous Directive(s)?
                                              No
                                              No
                                    Yes
     What directive (number, title)
                                    Yes    What directive (number, title)
                                   "Guidance for Drafting Judicial Consent Decrees
       7. Draft Level
          I A - Signed by AA/DAA
           X 8 -- Signed by Office Director
C - For Review & Comment
0 - In Oevelopme
8. Document to be distributed to States by Headquarters?
X

Yes


No
       This Bequest Meets OSWER Directives System Format Standards.
      9. Signature of Lead Office Directives Coordinator
         Si
                                                  Date
      10. Name and Title ol Approving Official
                                                  Date
      EPA Form 1315-17 (Rev. 5-87) Previous editions are obsolete.
   OSWER           OSWER                OSWER                (
VE     DIRECTIVE          DIRECTIVE         DIRECTIVE

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             UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                               REGION III
                           841 Chestnut Building
                       Philadelphia. Pennsylvania 19107
      Directives Systems                                  DATE: g|g  « yyy
     ie T. McRernan, Program Analyst
          Waste Management Division  (3HWOO)

Sherry Fielding
Solid Waste And Emergency Response (WH562A)

Attached is a copy of the final EPA  Policy on the  Inclusion of

Environmental Auditing Provisions in Enforcement Settlements.   Since

this policy document has not been included as a part of the OSWER

Directives System, I am inquiring to know if it should be included.


Attachment

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          UNITED .STATES ENVIRONMENTAL PROTECTION AGENCY
                        WASHINGTON, D.C. 20460
                                        NOV 19 1986
MEMORANDUM

SUBJECT:  Final EPA Policy on the Inclusion of Environmental
          Auditing Provisions in Enforcement Settlements
                                  v ,.       _J?    V r\ '     ^X
PROM:     Thomas L. Adams, Jr.  "*^t*,*% ^ .  **-•  —^^sx^x
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Addressees

     On July 17, 1986, this Office circulated a draft EPA
Policy on the Inclusion of Environmental Auditing Provisions
in Enforcement Settlements.  I am pleased to report that Agency
comments were almost uniformly supportive of the draft as
written.  Attached please find a final version of the policy,
including summaries of the known auditing settlements that
Agency personnel have achieved to date and several model audit
provisions that Agency negotiators may use as a starting point
in fashioning settlements that address the circumstances of
each case.

     I believe that the inclusion of environmental auditing
provisions in selected settlements offers EPA the ability
to accomplish more effectively its primary mission, namely,
to secure environmental compliance.  Accordingly, I would
like to renew last July's call for EPA's Offices of Regional
Counsel and program enforcement offices to consider including
audit provisions in settlements where the underlying cases
meet the criteria of the "attached policy statement.

     Inquiries concerning this policy should be directed  to
Neil Stoloff, Legal Enforcement Policy Branch, FTS 475-8777,
E-Mail box 2261, "JS-130A • Thank you for your consideration of
this important ma -.ter.

Attachments

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                              -2-

Addressees:

Assistant Administrators
Associate Administrator for Regional Operations
General Counsel
Associate Enforcement Counsels
Director, Office of Criminal Enforcement and Special Litigation
Director, Office of Compliance Analysis and Program Operations
Headquarters Compliance Program Division Directors
Director, NEIC
Regional Administrators, Regions I-X
Regional Counsels, Regions I-X
Regional Compliance Program Division Directors, Regions I-X
Principal Regional Enforcement Contacts, Regions I-X
Enforcement Policy Workgroup

cc:  Administrator
     Deputy Administrator
     John Ulfelder
     David Buente, Department of Justice (DOJ)
     Nancy Firestone, DOJ

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     EPA POLICY ON THE INCLUSION OF ENVIRONMENTAL AUDITING
             PROVISIONS IN ENFORCEMENT SETTLEMENTS


 I.  Purpose

     The purpose of this document is to provide Agency enforce-
 ment personnel with general criteria for and guidance on selecting
 judicial and administrative enforcement cases in which EPA will
 seek to include environmental auditing provisions among the
 terms of any settlement.  This document supplements the "Guidance
 for Drafting Judicial Consent Decrees."!/

 II.  Background

     On July 9, 1986, EPA announced its environmental auditing
policy statement (Attachment A) which encourages the regulated
community's use of environmental auditing to help achieve and
maintain compliance with environmental laws and regulations. 2/
That policy states that "EPA may propose environmental auditing
provisions in consent decrees and in other settlement negotiations
where auditing could provide a remedy for identified problems
and reduce the likelihood of similar problems recurring in the
future."^/

     In recent years, Agency negotiators have achieved numerous
settlements that require regulated entities to audit their
operations.  (Attachment B is a representative sample of the
auditing settlements that the Agency has achieved to date.)
These innovative settlements have been highly successful in
enabling the Agency to.accomplish more effectively its primary
mission, namely, to secure environmental compliance.  Indeed,
auditing provisions in enforcement settlements have provided
several important benefits to the Agency by enhancing its
ability to:

     *  Address compliance at an entire facility or at all
       facilities owned or operated by a party, rather than
       just the violations discovered during inspections;
       and identify and correct violations that may have gone
       undetected (and uncorrected) otherwise.

     *  Focus the attention of a regulated party's top-level
       management on environmental compliance; produce corporate
       policies and procedures that enable a party to achieve
       and maintain compliance; and help a party to manage
       pollution control affirmatively over time instead of
       reacting to crises.

     0  Provide a quality assurance check by verifying that
       existing environmental management practices are in
       place,  functioning and adequate.

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THE POLICIES AND PROCEDURES ESTABLISHED IN THIS DOCUMENT ARE
INTENDED SOLELY AS GUIDANCE FOR GOVERNMENT PERSONNEL.  THEY ARE
NOT INTENDED, AND CANNOT BE RELIED UPON, TO CREATE ANY RIGHTS,
SUBSTANTIVE OR PROCEDURAL, ENFORCEABLE BY ANY PARTY IN LITIGATION
WITH THE UNITED STATES.  THE AGENCY RESERVES THE RIGHT TO ACT
AT VARIANCE WITH THESE POLICIES AND PROCEDURES AND TO CHANGE
THEM AT ANY TIME WITHOUT PUBLIC NOTICE.

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                              -2-

III.  Statement of Policy

     It is the policy of EPA to settle its judicial and admin-
istrative enforcement cases only where violators can assure the
Agency that their noncompliance will be (or has been) corrected.4/
In some cases, such assurances may, in part,  take the form of
a party's commitment to conduct an environmental audit of its
operations.  While this would not replace the need for correction
of the specific noncompliance that prompted an enforcement
action, EPA nonetheless considers auditing an appropriate part
of a settlement where heightened management attention could
lower the potential for noncompliance to recur.  For that
reason, and as stated in the Agency's published policy,
"[environmental auditing provisions are most likely to be
proposed in settlement negotiations when:

     0 A pattern of violations can be attributed, at least in
       part, to the absence or poor functioning of an environ-
       mental management system; or

     0 The type or nature of violations indicates a likelihood
       that similar noncompliance problems may exist or occur
       elsewhere in the facility or at other facilities operated
       by the regulated entity."5/

     This policy is particularly .applicable in cases involving
the owner or operator of extensive or multiple facilities,
where inadequate environmental management practices are likely
to extend throughout those facilities.6/  Nevertheless, even
small, single-facility operations may face the types of compliance
problems that make an audit requirement an appropriate part of
a settlement.

     The environmental statutes provide EPA broad authority to
compel regulated entities to collect and analyze compliance-
related information.7/  Given this statutory authority, and
the equitable grounds for imposing a requirement to audit
under the circumstances outlined in this policy statement,
such a requirement may be imposed as a condition of settlement
or, in the absence of a party's willingness to audit voluntarily,
sought from a court or administrative tribunal.

     EPA encourages state and local reg ilatory agencies that
have independent jurisdiction over regv j.ated entities  to consider
applying this policy to their own enforcement activities,  in
order to advance the consistent and effective use of environ-
mental auditing.8/

a.  Scope of the Audit Requirement

     In those cases where it may be appropriate  to  propose an
environmental audit as part of the remedy, negotiators must
decide which type(s) of audit to propose  in negotiations.   This

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                              -3-

 determination will turn on the nature and extent of the environ-
 mental  management problem, which could range from a specific
 management gap at a single facility 9/ to systematic, widespread,
 multi-facility, multi-media environmental violations .!_Ł/  In
 most  cases,  either (or both) of the following two types of
 environmental audits should be considered:

      1.  Compliance Audit;  An independent assessment of the
 current  status of a party's compliance with applicable statutory
 and regulatory requirements.  This approach always entails a
 requirement  that effective measures be taken to remedy uncovered
 compliance problems and is most effective when coupled with a
 requirement  that the root causes of noncompliance also be
 remedied.ll/

      2.  Management Audit:  An independent evaluation of a
 party's  environmental compliance policies, practices, and
 controls.  Such evaluation may encompass the need for:
 (1) a formal corporate environmental compliance policy, and
 procedures for implementation of that policy; (2) educational
 and training programs for employees; (3) equipment purchase,
 operation and maintenance programs; (4) environmental compliance
 officer  programs (or other organizational structures relevant
 to compliance); (5) budgeting and planning systems for environ-
 mental compliance; (6) monitoring, recordkeeping and reporting
 systems; (7) in-plant and community emergency plans; (8) internal
 communications and control systems; and (9) hazard identifica-
 tion and risk assessment.12/

     Whether to seek a compliance audit, a management audit, or
 both will depend upon the unique circumstances of each case.  A
 compliance audit usually will be appropriate where the violations
 uncovered by Agency inspections raise the likelihood that
 environmental noncompliance exists elsewhere within a party's
 operations.  A management audit should be sought where it
 appears  that a major contributing factor to noncompliance is
 inadequate (or nonexistent) managerial attention to environmental
policies, procedures or staffing.JL3/  Both types of audits
 should be sought where both current noncompliance and shortcomings
 in a party's environmental management practices need to be
 addressed.^/

     In  cases where EPA negotiators determine that an acceptable
 settlement should include an audit provision, the attached
model provisions 15/ may be used as a starting point in fashion-
 ing a settlement tailored to the specific circumstances of  each
case.  The model provisions are based on settlements addressing
a broad  range of circumstances that give rise to audits.

     3.  Elements of Effective Audit Programs.  Most environ-
mental audits conducted pursuant to enforcement settlements
should,  at a minimum, meet the standards provided in  "Elements
of Effective Environmental Auditing Programs," the Appendix to

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                              -4-

the Agency's published policy on auditing.  Those elements
include:

     0 Explicit top management support for environmental auditing
       and commitment to follow-up on audit findings.

     • An environmental audit team separate from and independent
       of the persons.and activities to be audited.

     • Adequate team staffing and auditor training.

     * Explicit audit program objectives, scope/ resources
       and frequency.

     • A process which collects, analyzes, interprets and docu-
       ments information sufficient to achieve audit objectives.

     a A process which includes specific procedures to promptly
       prepare candid, clear and appropriate'written reports  -
       on audit findings, corrective actions,  and schedules
       for implementation.

     * A process which includes quality assurance procedures
       to ensure the accuracy and thoroughness of environmental
       audits.16/

     Agency negotiators may consult EPA's program and enforcement
offices and the National Enforcement Investigations Center,
which can provide technical advice to negotiators in fashioning
auditing provisions -that meet the needs of both the party and
the regulatory program(s) to which it is subject.  Additional
information on environmental auditing practices can be found in
various published materials.17/

     A settlement's audit requirements may end after the party  .
meets the agreed-upon schedule for implementing them.  Neverthe-
less, the Agency expects that most audit programs established
through settlements will continue beyond the life of the settle-
ment.  After the settlement expires, the success of those
programs may be monitored indirectly through the routine inspec-
tion process.

b.  Agency Oversight of the Audit Process

     In most cases, resource and'policy constraints will pre-
clude a high level of Agency participation in the audit process.
Several successful audit settlements indicate that the benefits
of auditing may be realized simply by obtaining a party's
commitment to audit its operations for environmental compliance
or management problems (or both), remedy any problems uncovered,
and certify to the Agency that it has done so.^8/  Other  recent
Agency settlements, also successful, have entailed full disclosure
of the auditor's report of findings regarding noncompliance,

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                              -5-

 and even  access to the company records which the auditors
 examined.r9/  Audit  settlements that require either self-
 certificatTon or  full disclosure of audit results may require
 a  party to  submit to the Agency an environmental management
 or compliance plan (or both) that addresses identified problems,
 to be  implemented on an enforceable schedule.20/

     These  approaches require the Agency neither to devote
 significant resources to oversight of the audit process nor to
 depart from its traditional means of enforcing the terras of
 consent decrees and  agreements.  Although it may—and will-—
 evaluate  audit proposals in terms of the elements described
 in §111.a.3. above,  in all but the most extreme cases 21/
 the Agency  will not  specify the details of a party's internal
 management  systems.  Rather, an independent audit represents
 one step  a  violator  can take toward assuring the Agency that
 compliance  will be achieved and maintained.22/

     Considerations  such as the seriousness of the. compliance
 problems  to be addressed by an audit provision, a party's
 overall compliance history, and resource availability will
 dictate the extent to which the Agency monitors the audit
 process in  particular cases.  Thus, it will usually be approp-
 riate  to withhold approval of an audit plan for a party with
 an  extensive history of noncompliance unless the plan requires:

     •-Use  of an  independent third-party auditor not affiliated
         with the audited entity;
     0 Adherence  to  detailed audit protocols? and
     8 More extensive Agency role in identifying corrective
       action.23/

 c.  Agency  Requests  for Audit-Related Documents

     The various  environmental statutes provide EPA with broad
 authority to. gain access to documents and information necessary
 to  determine whether a regulated party is complying with the
 requirements of a settlement.^/  Notwithstanding such statutory
 authority.  Agency negotiators should expressly reserve EPA's
 right  to review audit-related documents.25/

 d.  Stipulated Penalties for Audit-Discovered Violation?

     Settlements  which require a party to report to EPA audit-
 discovered  violations may include stipulations regarding the
 amount of penalties  for violations that are susceptible to
prediction  and are promptly remedied, with the parties reserving
 their  respective  rights and liabilities for other violations.26/
This policy does  not authorize reductions of penalty amounts
below  those that  would otherwise be dictated by applicable
penalty policies,  which take into account the circumstances

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                              -6-

surrounding violations in guiding the calculation of appropriate
penalty amounts.  It is therefore important that stipulated
penalties only apply to those classes of violations whose
surrounding circumstances may be reasonably anticipated.   The
application of stipulated penalties to violations discovered
during an audit is consistent with Agency policy.27/

e.  Effect of Auditing on Agency Inspection and Enforcement

    1.  Inspections

     The Agency's published policy on auditing states that
"EPA will not promise to forgo inspections, reduce enforcement
responses, or offer other such incentives in exchange for
implementation of environmental auditing or other sound environ-
mental practice.  Indeed, a credible enforcement program provides
a strong incentive for regulated entities to audit."28/

     Consistent with stated Agency policy, the inclusion of
audit provisions in settlements will not affect Agency inspec-
tion and enforcement prerogatives.  On the contrary, a party's-
incentive to accept auditing requirements as part of a settlement
stems from the Agency's policy to inspect and enforce rigorously
against known violators who fail to assure the Agency that
they are taking steps to remedy their noncompliance.  Auditing
settlements should explicitly provide that Agency  (and State)
inspection and enforcement prerogatives, and a party's liability
for violations other than those cited in the underlying enforce-
ment action (or subject to stipulated penalties), are unaffected
by the settlement.29/

    2.  Civil Penalty Adjustments

     Several audit settlements achieved to dac.e have mitigated
penalties to reflect a party's agreement to audit.  In view of
EPA's position that auditing fosters environmental compliance,
EPA negotiators may treat a commitment to audit as a demonstra-
tion of the violator's honest and genuine efforts  to remedy
noncompliance.  This may be-taken into account when calculating
the dollar amount of a civil penalty.30/  In no case will a
party's agreement to audit result in a penalty amount lower
than the economic benefit of noncompliance.

     For judicial settlements where penalties are  proposed to
be mitigated in view of audit provisions, negotiators should
coordinate with the Department of Justice  (DOJ) to ensure
consistency with applicable DOJ settlement policies.

    3.  Confidentiality

     EPA does not view as confidential per se audit-related
documents submitted to the Agency pursuant to enforcement
settlements.  Such documents may, however, contain confidential

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                              -7-

 business  information  (CBI).  Auditing provisions should indicate
 that  EPA  will  treat such information in the same manner that
 all other. CBI  is treated. 3_1/  Where appropriate, negotiators
 may consider defining in advance which categories of audit
 information will qualify for CBI treatment.3^/  Such determina-
 tions shall be concurred in by the Office of General Counsel/
 in accordance  with 40 CPR Part 2.

      The  Freedom of Information Act (FOIA) may provide additional
 bases for protecting privileged information from disclosure.33/
 However,  determinations under FOIA are within the sole discretion
 of the Agency  and therefore are not an appropriate subject of
 negotiation.

 IV.   Coordination of Multi-Facility Auditing Settlements

      When negotiating with a party over facilities located in
 more  than one  EPA region, Agency personnel should consult with
 affected  regions and states to ensure that pending or planned .
 enforcement actions in other regions will not be affected by
 the terms of an audit settlement.  This may be done directly  •
 (e.g., pursuant to existing State/EPA Enforcement Agreements)
 or with the assistance of OECM's Legal Enforcement Policy
 Branch (LEPB), which will serve as a clearinghouse for infor- . .
 mation on auditing in an enforcement context (contact:  Neil
 Stoloff,  LEPB, FTS 475-8777, LE-130A, E-Mail Box EPA 2261).

      In most cases, however, auditing settlements that embrace
 facilities in  more than one region will affect neither the
 Agency's  inspection and enforcement prerogatives nor a party's
 liability for  violations other than those which gave rise to
 the underlying enforcement action.^4/  Accordingly, inter-office
 consultation in most cases will be necessary only for informa-
 tional purposes.   Some multi-facility settlements will fall
within the scope of the guidance document, "Implementing
Nationally Managed or Coordinated Enforcement Actions."35/
 Such  settlements should be conducted in accordance with that
document  and the memorandum, "Implementing the State/Federal
Partnership in Enforcement:  State/Federal Enforcement  'Agree-
ments .'"36/

Attachments

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                               -8-

                            FOOTNOTES

 1.  EPA General Enforcement Policy No.  GM-17,  October 19,  1983.

 2.  51 Fed. Reg. 25004 (1986).

 3.  51 Fed. Reg. 25007 (1986).

 4.  See "Working Principles Underlying EPA's National Compliance/
     Enforcement Programs," at 7 (EPA General Enforcement Policy
     No. GM 24, November 22, 1983).

 5.  51 Fed. Reg. 25007 (1986).

 6.  See, e.g., Owens-Corning Fiberglas Corp.,  Attachment B,
     p. 1; and Attachments D-F.

 7.  See, e.g., the Clean Air Act (CAA)  §§113 and 114, the Clean
     Water Act (CWA) §§308 and 309, and the Resource Conservation
     and Recovery Act (RCRA) §§3007 and 3008.

 8.  See 51 Fed. Reg. 25008 (1986).

 9.  See, e.g., BASF Systems Corp., Attachment B, p. 3.

10.  See Attachment F.

11.  See Attachment C.

12.  See Attachment D.

13.  See Chemical Waste Management, Inc., Vickery, Ohio and
     Kettleman Hills, California facilities, Attachment B, pp. 1
     and 2 respectively? and Attachment D.

14.  See Attachments E and F.

15.  Attachments C-G.

16.  See 51 Fed. Reg. 25009 (1986).

17.  See, e.g., "Current Practices in Environmental Auditing,"
     EPA Report No. EPA-230-09-83-006, February  1984;  "Annotated
     Bibliography on Environmental Auditing," September  19S5,
     both available from EPA's Office of Policy, Planning and
     Evaluation, Regulatory Reform Staff, PM-223, FTS  382-2685.

18.  See, e.g., Crompton and Knowles Corp., Attachment B, p.  1;
     and Attachments C-E).

19.  See, e.g., Chemical Waste Management,  Inc., Vickery, Ohio
     and Kettleman Hills, California facilities, Attachment  B,
     pp. 1 and 2 respectively; and Attachment E.

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                               -9-

20.  See, e.g., United States v. Georgia Pacific Corp., Attachment
     B, p. 2; Attachment D, |"B.3; and Attachment F, §§6(1) and 9.

21.  See, e.g., Attachment G.

22.  See, e.g., Potlatch Corp., Attachment B, p. 1; and Attach-
     ment C.

23.  See Attachment F.

24.  See, e.g., CAA §114, CWA §308, RCRA §3007, CERCLA §103,
     the Toxic Substances Control Act §8, and the Federal Insec-
     ticide, Fungicide and Rodenticide Act §8.

25.  See, e.g., Attachment F, §IV, "Access to Documents."

26.  See Attachment F, §§22, 23, 24, 34, and Appendix 2.

27.  See "Guidance for Drafting Judicial Consent Decrees," at 2-2
     (EPA General Enforcement Policy No. GM-17, October 19, 1983).

28.  51 Fed. Reg. 25007 (1986).

29.  See Attachment C, §A.3; Attachment D, §B; Attachment E,
     §C.3; and Attachment F, §34.

30.  See 51 Fed. Reg. 25007 (1986); EPA's Framework for Statute-
     Specific Approaches to Penalty Assessments, General Enforce-
     ment Policy No. GM-22, at p. 19; and applicable medium-
     specific penalty policies, e.g., TSCA Settlement with
     Conditions, November 15, 1983.

31.  See "Guidance for Drafting Judicial Consent Decrees," at 28
     TEI?A General Enforcement Policy t'O. GM-17, October 19, 1983).

32.  See Attachment F, §§5(2), 14, and 15.

33.  See, e.g.,-5 U.S.C. §552(b)(4), which encompasses voluntarily
     submitted information the disclosure of which would impair
     a Government interest such as EPA's interests in the settle-
     ment of cases and in ensuring compliance with statutes
     under its authority.

34.  See Attachment F, §25.b.

35.  General Enforcement Policy No. GM-35, January 4,  1985.

36.  General Enforcement Policy No. GM-41, June 26, 1984.

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                               -10-

                      SUMMARY OF ATTACHMENTS

 ATTACHMENT A;   Environmental Auditing  Policy Statement,
 51  Fed.  Reg.  25004,  July  9, 1986.

 ATTACHMENT B;   Representative  Sample of Environmental Auditing
 Settlements Achieved to Date,  revised  10/9/86.

 Attachment C;   Model Environmental  compliance audit provision,
 with  requirement  for certification  of  compliance.

 Attachment D;   Model Environmental  management audit provision,
 with  requirement  for submission of  plan for improvement of
 environmental  management  practices, to be  completed on an
 enforceable schedule.

 Attachment E;   Model Environmental  compliance and  management
 audit provision,  with all audit results submitted  to EPA, all .
 Agency  enforcement prerogatives reserved.

 Attachment F;   Model Environmental  compliance and  management
 audit provision,  with extensive Agency oversight,  audit results_
 disclosed,  stipulated penalties applied to most  prospective
 violations, and all  Agency enforcement prerogatives reserved
 for other  violations.  [Most appropriate for party with an
 extensive  history of noncompliance.]

 Attachment G;   Model Emergency environmental management reorgan-
 ization  provision.   [Appropriate  for cases where a party's
•environmental  management  practices  are wholly inadequate  and
 action  is  necessary  without waiting for the results of an
 audit.]

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              Attachment A
Wednesday
July 9, 1986
Part IV

Environmental
Protection  Agency
Environmental Auditing Policy Statement;
Notice

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 25004
Federal Register /Vol. 51. No. 131  /  Wednesday. July  9. 1986  /  Notices
 ENVIRONMENTAL PROTECTION
 AGENCY
 Environmental Auditing Poflcy
 Statement

 AGENCY: Environmental Protection
 Agency (EPA).
 ACTION; Final policy statement _

 suMMAftr: It is EPA policy to encourage
 :he use of environmental auditing by
 regulated entities to help achieve and
 maintain compliance with
 environmental laws and regulations, as
 well as to help identify and correct
 unregulated environmental hazards.
 EPA first published this policy as
 interim guidance on November 8. 1985
 : 50 FR 46504). Based on comments
 received regarding the interim guidance.
 the Agency is issuing today's final
 policy statement with only minor
 changes.
   This final policy statement
 specifically:
   • Er.courages regulated entities to
 >->ve;op. implement and upgrade
 environmental auditing programs; •'•
   • Discusses when the Agency may or
 may not request audit reports;
   • Explains how EPA's inspection and
. enforcement activities may respond to
 regulated entities' efforts to assure
 compliance through auditing;
   • Endorses environmental auditing at
 federal facilities;
   • Encourages state and local
 er.v-ronmental auditing Initiatives: and
   • Outlines elements of effective audit
 .•vcjrams.
   Environmental auditing includes a
 variety of compliance assessment
 techniques which go beyond those
 1- gaily required and are used to identify
 actual and potential environmental
 problems. Effective environmental  -
 -.editing can lead to higher levels of
 .  era 11 compliance and reduced risk to
 ••.-.Tidn health and the environment EPA
 •j-dorses the practice of environmental
 -... Jitir.g and supports its accelerated
 .-•> by regulated entities to help meet
 •-.e goals of federal, state and local
 •'—.iror.T.ental requirements. However.
 -•? ••xtstence of an auditing program
 •-••»s r.ot create any defense to. or
 .•he .-wise limit, the responsibility of any
 • -j.iated entity to comply with
 .rriicabie regulatory requirements.
   S:::es are encouraged to adopt these
 v-  ?:milar and equally effective policies
 :n :rder to advance the use of
 •^r.v.ror.mental auditing on a consistent.
 nationwide basis.
 OATIS: This final policy statement is
       ff July 9. 1938.
                   FOR RJfttMM INPOWAATIOM CONTACT:
                   Leonard Fleckenstein. Office of Policy.
                     Planning and Evaluation. (202) 382-
                     2728;
                         or
                   Cheryl Wasserman. Office of
                     Enforcement and Compliance
                     Monitoring. (202) 382-7550.
                   SUmJMfMTAMV INPOftMATION:
                   ENVIRONMENTAL AUDITING
                   POLICY STATEMENT
                   L Preamble
                     On November 8.1985 EPA published
                   an Environmental Auditing Policy
                   Statement effective as interim guidance.
                   and solicited written comments until
                   January 7.1988.
                     Thirteen commenters submitted
                   written comments. Eight were from
                   private industry. Two commenters
                   represented industry trade associations.
                   One federal agency, one consulting firm
                   and one law firm also submitted
                   comments.
                     Twelve commenters addressed EPA •
                   requests for audit reports. Three
                   comments per subject were received
                   regarding inspections, enforcement
                   response and elements of effective
                   environmental auditing. One commenter
                   addressed audit provisions as remedies
                   in enforcement actions, one addressed
                   environmental auditing at federal
                   facilities, and one addressed the
                   relationship of the policy statement to
                   state or local regulatory agencies.
                   Comments generally supported both the
                   concept of a policy statement and the
                   interim guidance, but raised specific
                   concerns with respect, to particular
                   language and policy issues in sections of
                   the guidance.

                   General Comments
                     Three commenters found the interim
                   guidance to be constructive, balanced
                   and effective at encouraging more and
                   better environmental auditing.
                     Another commenter. while
                   considering the policy on the whole to
                   be constructive, felt that new and
                   identifiable auditing "incentives" should
                   be offered by EPA. Based on earlier
                   comments received from  industry, EPA
                   believes most companies would not
                   support or participate in an "incentives*
                   based" environmental auditing program
                   with EPA. Moreover, general promises
                   to forgo inspections cr reduce
                   enforcement responses in exchange for
                   companies' adoption of environmental
                   auditing programs—the "incentives"
                   most frequently mentioned in this
                   context—are fraught with legal and
                   policy obstacles.
                     Several commenters expressed
                   concern that states or localities might
use the interim guidance to requin
auditing. The Agency disagrees that the
policy statement opens the way for
states and localities to require auditing.
No EPA policy can grant states or
localities any more (or less) authority
than they already possess. EPA believes
that the interim guidance effectively
encourages voluntary auditing. In fact
Section ILB. of the policy states:
"because audit quality depends to a
large degree on genuine management
commitment to the program and its
objectives, auditing should remain a
voluntary program."
  Another commenter suggested that
EPA should not expect an audit to
identify all potential problem areas or
conclude that a problem identified in an
audit reflects normal operations and
procedures. EPA agrees that an audit
report should clearly reflect these
realities and should be written to point
out the audit's limitations. However.
since EPA will not routinely request
audit reports, the Agency does not
believe these concerns raise issues
which need to be addressed in the
policy statement
   A second concern expressed by the
same commenter was that EPA should
acknowledge that environmental audits
are only part of a successful
environmental management program
and thus should not be expected to
cover every environmental issue or
solve ail problems. EPA agrees and
accordingly has amended the statement
of purpose which appears at the end of
this preamble.
   Yet another commenter thought EPA
should focus on environmental
performance results (compliance or non-
compliance), not on the processes or
vehicles used to achieve those results. In
general. EPA agrees with this statement
and will continue to focus on
environmental results. However. EPA
also believes that such results can be
improved through Agency efforts to
identify and encourage effective
environmental management practices.
and will continue to encourage such
practices in non-regulatory ways.
   A final general comment
recommended that EPA should sponsor
seminars for small businesses on how to
start auditing programs. EPA agrees that
such seminars would be useful.
However, since audit seminars already
are available from several private sector
organizations. EPA does not believe it
should intervene in that market,  with the
possible exception of seminars for
government agencies, especially federal
 agencies, for which EPA has a broad
 mandate under Executive Order 12088 to

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                   Federal  Register  /  Vol.  51. No.  131 / Wednesday. July 9. 1986 / Notices
                                                                    25005
 provide technical assistance for
 environmental compliance.

 Requests for Reports
  EPA received 12 comments regarding
 Agency requests for environmental audit
 reports, far more than on any other topic
 in the policy statement One commenter
 felt that EPA struck an appropriate
 balance between respecting the need for
 self-evaluation with some measure of
 privacy, and allowing the Agency
 enough flexibility of inquiry to
 accomplish future statutory missions.
 However, most commenters expressed
 concern that the interim guidance did
 not go far enough to assuage corporate
 fears that EPA will use audit reports for
 environmental compliance "witch
 hunts." Several commenters suggested
 additional specific assurances regarding
 the circumstances under which EPA wiU
 request such reports.
  One commenter recommended that
 EPA request audit reports only "when
 the Agency can show the information it
 needs to perform its statutory mission
 cannot be obtained from the monitoring.
 compliance or other data that is
 otherwise reportable and/or accessible
 to EPA. or where the Government deems
 an audit report material to a criminal
 investigation." EPA accepts this
 recommendation in part The Agency
 believes it would not be in the best
 interest of human health and the
 environment to commit to making a
 "showing" of a compelling information
 need before ever requesting an audit
 report While EPA may normally be
 willing to do so, the Agency cannot rul»
 out in advance all circumstaaces in
 which such a showing may not be
 possible. However, it would be helpfrl
 to further clarify that a request for an
 audit report or a portion of a report
 normally will be made when needed
 information is not available by
 alternative means. Therefore. EPA has
 revised Section IEA.. paragraph two
 and added the phrase: "and usually
 made where the information needed
 cannot be obtained from monitoring.
 reporting or other data otherwise
 available to the Agency."
  Another commenter suggested that
 (except in the case of criminal
 investigations) EPA should limit
 requests for audit documents to specific
 questions. By including the phrase "or
 relevant portions of a report" in Section
 m.A.. EPA meant to emphasize it would
not request an entire audit document
when only a relevant portion would
suffice. Likewise. EPA fully intends not
 to request even a portion of a report if
needed information or data can be
otherwise obtained. To further clarify
this point EPA  has added the phrase.
"most likely focused on particular
information needs rather than the entire
report" to the second sentence of
paragraph two. Section IILA.
Incorporating the two comments above,
the first two sentences in paragraph two
of final Section OLA. now read: "EFA's
authority to request an audit report or
relevant portions thereof, will be
exercised on a case-by-case basis where
the Agency determines it is needed to
accomplish a statutory mission or the
Government deems it to be material to a
criminal investigation. EPA expects such
requests to be limited, most likely
focused on particular information needs
rather than the entire report and usually
made where the information needed
cannot be obtained from monitoring.
reporting or other data otherwise
available to the Agency."
  Other commenters recommended that
EPA not request audit reports under any
circumstances, that requests be
"restricted to only those legally
required." that requests be limited to
criminal investigations, or that requests
be made only when EPA has reason to
believe "that the audit programs or
reports are being used to conceal
evidence of environmental non-
compliance or otherwise being used hi
bad faith." EPA appreciates concerns
underlying all of these comments and
has considered each carefully. However.
the Agency believes that these
recommendations do not strike the
appropriate balance between  retaining
the flexibility to accomplish EPA's
statutory missions hi future, unforeseen
circumstances, and acknowledging
regulated entities' need to self-evaluate
environmental performance with some
measure of privacy. Indeed, based on
prime informal comments, the small
number of formal comments received.
and the even smaller number  of advene
comments. EPA believes the final policy
statement should remain largely
unchanged from the interim version.
Elements of Effective EavinamaatoJ
Auditing
  Three commenters expressed
concerns regarding the seven general
elements EPA outlined in die  Appendix
to the .iiterim guidance.
  One commenter noted that  were EPA
to further expand or more  fully detail
such elements, programs not specifically
fulfilling each element would then be
judged inadequate. EPA agrees that
presenting highly specific and
prescriptive auditing elements could be
counter-productive by not taking into
account numerous factors which vary
extensively from one organization to
another, but which may still result in
effective auditing programs.
Accordingly. EPA does not plan to
expand or more fully detail these
auditing elements.
  Another commenter asserted that
states and localities should be cautioned
not to consider EPA's auditing elements
as mandatory steps. The Agency is fully
aware of this concern and in me interirr
guidance noted its strong opinion that
"regulatory agencies should not attempt
to prescribe the precise form and
structure of regulated entities'
environmental management or auditing
programs."  While EPA cannot require
state or local regulators to adopt this or
similar policies, the Agency does
strongly encourage them to do so. both
in the interim and final policies.
  A fl***i commenter thought the
Appendix too specifically prescribed
what should and what  should not be
included in an auditing program. Other
commenters. on the other hand, viewed
the elements described as very general
in nature. EPA agrees with these other
commenters. The elements are in no
way binding. Moreover. EPA believes
that most mature, effective          '
environmental auditing programs do
incorporate each of these general
elements in some form, and considers
them useful yards ticks for those     '     -
considering adopting or upgrading audit   •
programs. For these reasons EPA has
not revised the Appendix in today's
final policy statement

Other Comments                       -\
   Other significant comments addressed  :!-
EPA inspection priorities for.  and
enforcement responses to. organizations -•:
with environmental auditing programs.
   One commenter. stressing that audit
programs are internal management
tools, took  exception to the phrase in the
second paragraph of section nL&L of
the interim guidance which states that
environmental audits can 'complement'
regulatory  oversight By using the word
'complement' in this context EPA does
not intend  to imply that audit reports
must be obtained by the Agency in orde:
to supplement regulatory inspections.
'Complement' is used in  a broad sense
of being in addition  to inspections and
providing something (Le- self-
assesament) which otherwise would be
lacking. To clarify this point EPA has
added the  phrase "by providing self-
assessment to assure compliance" after
"environmental audits may complement
Inspections" in this  paragraph.
   The same commenter  also  expressed
 concern that as EPA sets inspection
 priorities,  a company having an audit
 program could appear to be a 'poor
 performer' due to complete and accurst
 reporting when measured against a

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 25006
Federal  Register / Vol. 51. No. 131  / Wednesday. Juiy 9. 1966 /  Notices
 company which reports something less
 than required by law. EPA agrees that it
 is important to communicate this fact to
 Agency and state personnel and will do
 so. However,  the Agency does not
 believe a change in the pattcy statement
 is necessary.
   A further comment suggested EPA
 should commit to take auditing
 programs into account when assessing
 ail enforcement actions. However, in
 order to maintain enforcement flexibility
 under varied circumstances, the Agency
 cannot promise reduced enforcement
 responses to violations at all audited
 facilities when other factors may be
 overriding. Therefore the policy
 statement continues to state that EPA
 may exercise its decretion to consider
 auditing programs as evidence of honest
 rind genuine efforts to assure
 compliance, which would then be taken
 into account in fashioning enforcement
 responses to violations.
   A final commenter suggested the
 phrase "expeditiously correct
 environmental problems"  not be used in
 •:he enforcement context since it implied
 EPA would use an entity's record of
 corrpctir.g nonreguiated matters when
 evaluating regulatory violations. EPA
 did not intend for such an inference to
 be made. EPA intended the term
 "environmental problems" to refer to the
 underlying circumstances  which
 eventually lead up to the violations. To
 clarify this point. EPA is revising the
 First two sentences of the paragraph  to
 •.vhich this comment refers by changing
 "environmental problems" to "violations
 and underlying environmental
 prrblems" in the first sentence and to
 'underlying environmental problems" in
 th« second sentence.
   (n a separate development EPA is
 preparing an update of its January 1964
 F.-dercl Fcalities Compliance Strategy.
 •.vir.ch is referenced in section ID. C. of
 :he auditing policy. The Strategy should
 be crr.pleted and available on request
 :'.-orn EPA's Office of Federal Activities
 Liter -'-.:s year.
   FPA thanks all commenters for
 rn-ri:nd:r.g to the Novembers. 1985
 ~..:)iir;ir:on. Today's notice is being
 •v-ued to inform regulated entities and
 •::•: subllc cf EPA's final policy toward
  •v rrnmental auditing. This policy was
  •-. '.'loped to help (a) encourage
 • u-idted entities to institutionalize
  •->c;:ve audit practices as one means of
 '-.rrovirs compliance and sound
 "•• ;r.)nmentai management, and (b)
 .:-::-.ie internal EPA actions directly
 ••;'..i:sd to regulated entities'
•."-v::cr.mental auditing programs.
  EPA will evaluate implementation of
•~.:s final policy to ensure it meets the
.-. ove goals and continues to encourage
                    better environmental management
                    while strengthening the Agency's own
                    efforts to monitor and enforce
                    compliance with environmental
                    requirements.

                    IL G«aeral EPA Policy on
                    Environmental Auditing

                    A. Introduction

                      Environmental auditing is a
                    systematic, documented, periodic and
                    objective review by regulated entities '
                    of facility operations and practices
                    related to meeting environmental
                    requirements. Audits can be designed to
                    accomplish any or all of the following:
                    verify compliance with environmental
                    requirements: evaluate the effectiveness
                    of environmental management systems
                    already in place: or assess risks from
                    regulated and unregulated materials and
                    practices.
                      Auditing serves as a quality  assurance
                    check to help improve the effectiveness
                    of basic environmental management by
                    verifying that management practices are
                    in place, functioning and adequate.
                    Environmental audits evaluate, and are
                    not a substitute for. direct compliance
                    activities such as obtaining permits.
                    installing controls, monitoring
                    compliance, reporting violations, and
                    keeping records. Environmental auditing
                    may verify but does not include
                    activities required by law.  regulation or
                    permit (e.g.. continuous emissions
                    monitoring, composite correction plans
                    at wastewater treatment plants, etc.).
                    Audits do not in any way replace
                    regulatory agency inspections.  However.
                    environmental audits can improve
                    compliance by complementing
                    conventional federal, state and local
                    oversight.
                     The appendix to this policy statement
                    outlines some basic elements of
                    environmental auditing (e.g.. auditor
                    independence and top management
                    support) for use by those considering
                    implementation of effective auditing
                    programs to help achieve and maintain
                    compliance. Additional information on
                    environmental auditing practices can be
                    found in various published materials.1
                              entities" include private fi.-ms and
                   puolic agencies with faculties subject 10
                   environmental regulation. Public agencies can
                   include federal, state or local agencies as well as
                   jpecai-purpost organizations such it reg'ionii
                   lewagt commissions.
                     : See. e.g.. 'Current Practices -jj Environmental
                   A-jcr.mg." EPA Report No. E.°A-:30-O9-U-OO8.
                   February 198*: "Annotated Bibliography on
                   Environmental Audinng.' Fifth Edition. September
                   1*5. botn available from: Regulatory Reform Statf.
                   PM-23. EPA. 401 M S;ree- SW. Washington. DC
                   2M60.
  Environmental auditing has developed
for sound business reasons, particularly
as a means of helping regulated entities
manage pollution control affirmatively
over time instead of reacting to crises.
Auditing can result in improved facility
environmental performance, help
communicate effective solutions to
common environmental problems, focus
facility managers' attention on current
and upcoming regulatory requirements.
and generate protocols and checklists
which help facilities better manage
themselves. Auditing also can result in
better-integrated management of
environmental hazards, since auditors
frequently identify environmental
liabilities which go beyond regulatory
compliance. Companies, public entities
and federal facilities have employed a
variety of environmental auditing
practices in recent yean. Several  •
hundred major firms in diverse
industries now have environmental
auditing programs, although they often
are known by other names such as
assessment survey, surveillance, review
or appraisal.
  While auditing has demonstrated its
usefulness to those with audit programs.
many others still do not audit
Clarification of EPA's position regarding
auditing may help encourage regulated
entities to establish audit programs or
upgrade systems already  in place.
8. EPA Encourages the Use of
Environmental Auditing
  EPA encourages regulated entities  to
adopt sound environmental
management practices to  improve
environmental performance. In
particular.  EPA encourages regulated
entities subject to environmental
regulations to institute environmental
auditing programs to help ensure the
adequacy of internal systems to achieve.
maintain and monitor compliance.
Implementation of environmental
auditing programs can result in better
identification, resolution and avoidance
of environmental problems, as well as
improvements to management practices.
Audits can be conducted  effectively by
independent internal or third party
auditors. Larger organizations generally
have greater resources to devote to an
internal audit team, while smaller
entities might be more likely to use
outside auditors.
  Regulated entities are responsible for
taking all necessary steps to ensure
compliance with environmental
requirements, whether or not they adopt
audit programs. Although environmental
laws do not require a regulated facility
to have an auditing program, ultimate
responsibility for the environmental

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                     Federal  Register / Vol. 51. No.  131 / Wednesday. July 9.  1986 / Notices
                                                                       250'
 performance of the facility lies with top
 management which therefore has a
 strong incentive to use reasonable
 means, such as environmental auditing.
 to secure reliable information of facility-
 compliance status.
   EPA does not intend to dictate or
 interfere with the environmental
 management practices of private or
 public organizations. Nor does EPA
 intend to mandate auditing (though in
 certain instances EPA may seek to
 include provisions for environmental
 auditing as part of settlement
 agreements, as noted below). Because
 environmental auditing systems have
 been widely adopted on a voluntary
 basis in the past, and because audit
 quality depends to a large deg-ye upon
 genuine management commitment to the
 program and its objectives, auditing
 should remain a voluntary activity.

 III. EPA Policy on Specific
 Environmental Auditing  Issues

 A. Agency Requests for Audit Reports
   EPA has broad statutory authority  to
 request relevant information  on the
 environmental compliance status of
 regulated entities. However. EPA
 believes routine Agency  requests for
 audit reports * could inhibit auditing in
 the long run. decreasing both the
 quantity and quality of audits
 conducted. Therefore, as a matter of
 policy. EPA will not routinely request
 environmental audit reports.
   EPA's authority to request an audit
 report  or relevant portions thereof, will
 be exercised on a case-by-case basis
 where the Agency determines it is
 needed to accomplish a statutory
 mission, or where the Government
 deems it to be material to a criminal
 investigation. EPA expecis such
 requests to be limited most likely
 focused on particular  information needs
 rather than  the entire  report and usually
 made where the information needed
 cannot be obtained from monitoring.
 reporting or other data otherwise
 available to the Agency.  Examples
 would likely include situations where:
 audits are conducted under consent
 decrees or other settlement agreements:
 a company has placed its management
 practices at issue by raising them as a
 defense: or state of mind or intent are a
 relevant element of inquiry, such as
 during a criminal investigation. This list
  1 An "environmental audit report" n a wnren
report which candidly and thoroughly present!
f:nd:res from a review, conducted at pan of an
environmental audit ai descntxd in xenon U.A.. of
facility environmental performance and practice*.
An audit report ta not a substitute for compliance
monitoring report* or other reoon* or record* which
may be required by EPA or other regulatory
agenciei.
 is illustrative rather than exhaustive.
 since there doubtless will be other
 situations, not subject to prediction, in
 which audit reports rather than
 information may be required.
   EPA acknowledges regulated entities'
 need to self-evaluate environmental
 performance with some measure of
 privacy and encourages such activity.
 However, audit reports may not shield
 monitoring, compliance, or other
 information that would otherwise be
 reportable and/or accessible to EPA.
 even if there is no explicit 'requirement'
 to generate that data.4 Thus, this policy
 does not alter regulated entities' existing
 or future obligations to monitor, record
 or report information required  under
 environmental statutes, regulations or
 permits, or to allow EPA access to that
 information. Nor does this policy alter
 EPA's authority to request and receive
 any relevant information—including that
 contained in audit reports—under
 various environmental statutes (e.g..
 Clean Water Act section 308. Clean Air
 Act sections 114 and 208) or in other
 administrative or judicial proceedings.
  Regulated entities also should be
 aware that certain audit findings may by
 law have to be reported to government
 agencies. However, in addition to any
 such requirements. EPA encourages
 regulated entities to notify appropriate
 State or Federal  officials of findings
 which suggest significant environmental
 or public health risks, even when  not
 specifically required to do so.

B. EPA Response to Environmental
Auditing

 1. General Policy

  EPA will not promise to forgo
 inspections, reduce enforcement
responses, or offer other such incentives
 in exchange for implementation of
 environmental auditing or other sound
 environmental management practices.
 Indeed, a credible enforcement program
 provides a strong incentive for regulated
 entities to audit.
  Regulatory agencies have an
obligation to assess source compliance
status independently and cannot
eliminate inspections for particular firms
or classes of firms. Although
environmental audits may complement
 inspections by providing self-
 assessment to assure compliance, they
 are in no way a substitute for regul a ton-
oversight. Moreover, certain statutes
 (e.g. RCRA) and Agency policies
establish minimum facility inspection
frequencies to which EPA will adhere
  However. EPA will continue to
address environmental problems on a
priority basis and will consequent!;.
inspect facilities with poor
environmental records and practice;
more frequently. Since effective
environmental auditing helps
management identify and prompt;.
correct actual or potential problem-:
audited facilities' environmental
performance should improve. Thur
while EPA inspections of self-audr.r .
facilities will  continue, to the exter.-. ::.
compliance performance is cor.sidt."  .
in setting inspection priorities, faci;1.'.:-
with a good compliance history may I
subject to fewer inspections.
  In fashioning enforcement respcrse-
to violations.  EPA policy is to take ir.<<
account,  on a case-by-case basis, the
honest and genuine efforts of regulate.
entities to avoid and promptly correc-
violations and underlying environrner
problems. When regulated entities.!;:'>
reasonable precautions to avoid  •
noncompliance. expeciiiiously correr'
underlying environmental problems
discovered through audits or.other
means, and implement measures to
prevent their  recurrence. EPA may .
exercise  its discretion to consider sue!-
actions as honest and genuine efforts  t
assure compliance. Such considerstior
applies particularly when a  regulated
entity promptly reports violations or
compliance data which otherwise we--
not required to  be recorded  cr reportc:
to EPA.
2. Audit Provision? as Remedies in
Enforcement Actions

  EPA may propose environmental
auditing provisions in consent decree:
and in other settlement negotiations
where auditing could provide a remsd;
for  identified problems and  reduce the
likelihood of similar problems recurrin
in the future.* Environmental auditing
provisions are most likely to be
proposed in settlement negotiations
where:
  • A pattern of violations can be
attributed, at leas', in par:, to the
absence  or poor functioning of an
environmental management system: o:
  • The  type or nature of violations
indicates a likelihood that similar
noncompliance problems may exist or
occur elsewhere in :he facility or at
other facilities operated by  the res-la:
entity.
  4 See. for example. "Outie* to Report or OiKloa*
Information on the Environmental Aspect* of
Bu*me*( Activities." Environmental Law Institute
report to EPA. final report. September 1965.
  * EPA K developing guidance for use by Aaenc
negotiators in structur.np appropriate enviror.me:
audit provision* for consent decree* and other
tettlement negotiations.

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 25008
Federal Register / VoL  5L No.  131 / Wednesday. July 9. 1986 / Notice*
   Through this content decree approach
 nnd other means. EPA may consider
 how to encourage effective auditing by
 publicly owned sewage treatment works
 (POTWs). POTWs often have
 compliance problems related to
 operation and maintenance procedures
 which can be addressed effectively
 chrnugh the use of environmental
 auditing. Under it* National Municipal
 Policy EPA already is requiring many
 POTWs to develop composite correction
 pians to identify and correct compliance
 problems.

 C. Environmental Auditing at Federal
 f-icilities
   EPA encourages all federal agencies
 subject to environmental laws and
 '•"gulations to institute environmental
 •uditing systems to help ensure the
 iJequacy of internal systems to achieve.
 T-.riintain and monitor compliance.
 Environmental auditing at federal
 Utilities can be an effective supplement
 to EPA and state inspections. Such
 federal facility environmental audit
 programs should be structured to
 promptly identify environmental
 problems and expenditiously  develop
 schedules for remedial action.
  To the extent feasible EPA will
 provide technical assistance to help
 federal agencies design and initiate
 audit programs. Where appropriate. EPA
 will enter into agreements with other
 -uencies to clarify the respective roles,
 responsibilities and commitments of
 each agency in conducting and   v
 responding to federal facility
 ITA iror.mental audits.
  With respect to inspections of self-
 audited facilities (see section  QLB.1
 •ibcve) and requests for audit reports
 isee section III.A above). EPA generally
 •A ill respond to environmental audits by
 rVtirral facilities in the same manner aa
 ;: Joes for other regulated entities, in
 ke?pina with the spirit and intent of
 executive Order 12088 and the EPA  -
 Federal Facilities Compliance Strategy
 'January 1984. update forthcoming in
 late 1988). Federal agencies should.
 htswever. be aware that the Freedom of
 Information Act will govern any
 disclosure of audit reports or audit-
 aenerated information requested from
 fr-Jaral agencies by the public.
  '.Vhen federal agencies discover
 ^unificant violations through  an
 environmental audit EPA encourages
 •h-m to submit the related audit findings
 •in J remedial action plans expeditiously
 :o ;he applicable EPA regional office
;.md responsible state agencies, where
appropriate) even when not specifically
required to do so. EPA will  review the
 audit Findings and action plans and
either provide written approval or
                   negotiate a Federal Facilities
                   Compliance Agreement EPA will utilize
                   the escalation procedures provided ia
                   Executive Order 12088 and the EPA
                   Federal Facilities Compliance Strategy
                   only when agreement between agencies
                   cannot be reached. In any event federal
                   agencies are expected to report pollution
                   abatement projects involving costs
                   (necessary to correct problems
                   discovered through the audit) to EPA in
                   accordance with OMB Circular A-106.
                   Upon request and in appropriate
                   circumstances. EPA will assist affected
                   federal agencies through coordination of
                   any public release of audit findings with
                   approved action plans once agreement
                   has been reached.

                   IV. Relationship to State or Local
                   Regulatory Agenda*
                     State and local regulatory  agencies
                   have independent jurisdiction over
                   regulated entities. EPA encourages them
                   to adopt these or similar policies, in
                   order to advance the use of effective
                   environmental auditing in a consistent
                   manner.
                     EPA recognizes that some  states have
                   already undertaken environmental
                   auditing initiatives which differ
                   somewhat from this policy. Other states
                   also may want to develop auditing
                   policies which accommodate their
                   particular needs or circumstances.
                   Nothing in this policy statement is
                   intended to preempt or preclude states
                   from developing other approaches to
                   environmental auditing. EPA encourages
                   state and local authorities to consider
                   the basic principles which guided the
                   Agency in developing this policy:
                     • Regulated entities must  continue to
                   report or record compliance  information
                   required under existing statutes or
                   regulations, regardless of whether such
                   information is generated by  an
                   environmental audit or contained in an
                   audit report. Required information
                   cannot be withheld merely because it ia
                   generated by an audit rather than by
                   some other means.
                     • Regulatory agencies cannot make
                   promises to forgo or limit enforcement
                   action against a particular facility or
                   class of facilities in exchange for the use
                   of environmental auditing systems.
                   However,  such agencies may use their
                   discretion to adjust enforcement actions
                   on a case-by-case basis in response to
                   honest and genuine efforts by regulated
                   entities to assure environmental
                   compliance.
                     • When setting inspection priorities
                   regulatory agencies should focus to the
                   extent possible on compliance
                   performance and environmental results.
                     • Regulatory agencies must continue
                   to meet minimum program requirements
(e.g~ minimum inspection requirements,
etc.).
  • Regulatory agencies should not
attempt to prescribe the precise form
and structure of regulated entices'
environmental management or auditing
programs.
  An effective state/federal partnership
is needed to accomplish the mutual goal
of achieving and maintaining high levels
of compliance with environmental laws
and regulations. The greater the
consistency between state or local
policies and this federal response to
environmental auditing, the greater the
degree to which sound auditing
practices might be adopted and
compliance levels improve.
  Dated: June 28. 1966.
Administrator.

Appendix— Elements of Effective
Environmental Auditing Programs

  Introduction: Environmental auditing
is a systematic documented, periodic-
and objective review by a regulated
entity of facility operations and
practices related to meeting
environmental requirements.
  Private sector environmental audits of
facilities have been conducted for
several years and have taken a variety
of forms, in part to accommodate unique
organizational structures and
circumstances. Nevertheless, effective
environmental audits appear to have
certain discernible elements in common
with other kinds of audits. Standards for
internal audits have been documented
extensively. The elements outlined
below draw heavily on two of these
documents: "Compendium of Audit
Standards" ("1983. Walter Willbom.
American Society for Quality Control)
and "Standards for the Professional
Practice of Internal Auditing" (1981.
The Institute of Internal Auditors. Inc.).
They also reflect Agency analyses
conducted over the last several years.
  Performance-oriented auditing
elements are outlined here to help
accomplish several objectives. A general
description of features of effective.
mature audit programs can help  those
starting audit programs, especially
federal agencies and smaller businesses.
These elements also indicate the
attributes of auditing EPA generally
considers important to ensure program
effectiveness. Regulatory agencies may
use these elements in negotiating
environmental auditing provisions for
consent decrees. Finally,  these elements
can help guide states and localities
considering auditing initiatives.

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                     Federal Register / Vol. 51. No.  131 / Wednesday. July 9. 1966 / Notices
                                                                        250C
   An effective environmental auditing
 system will likely include the following
 general elements:
   L Explicit top management support for
 en vironmental auditing and
 commitment to follow-up on audit
 findings. Management support may be
 demonstrated by a written policy
 articulating upper management support
 for the auditing program, and for
 compliance with all pertinent
 requirements, including corporate
 policies and permit requirements  as well
 as federal, state and local statutes and
 regulations,
   Management support for the auditing
 program also should be demonstrated
 by an explicit written commitment to
 follow-up on audit findings to correct
 identified problems and prevent their
 recurrence.
   11. An environmental auditing function
independent of audited activities. The
status or organizational locus of
environmental auditors should be
sufficient to ensure objective and
unobstructed inquiry, observation and
testing. Auditor objectivity should net
be impaired by personal relationships.
financial or other conflicts of interest.
interference with free inquiry or
judgment, or fear of potential
retribution.
  m. Adequate learn staffing and
auditor training. Environmental auditors
should possess or have ready access to
the knowledge, skills, and disciplines
needed to accomplish audit objectives.
Each individual auditor should comply
with the company's professional
standards of conduct. Auditors, whether
full-time or part-time, should maintain
their technical and analytical
competence through continuing
education and training.
  IV. Explicit audit program objectives.
scope, resources and frequency. At a
minimum, audit objectives should
include assessing compliance with
applicable environmental laws  and
evaluating the adequacy of internal
compliance policies, procedures and
personnel training programs to ensure
continued compliance.
  Audits should be based on a process
which provides auditors: all corp~-ate
policies, permits, and federal. sta;e. and
local regulations pertinent to the facility.
and checklists or protocols addressing
specific features that should be
evaluated by auditors.
   Explicit written audit procedures
generally should be used for planning
audits, establishing audit scope.
examining and evaluating audit findings.
communicating audit results, and
following-up.
   V. A process which collects. anal)-zes.
interprets and documents information
sufficient to achieve audit objectives:
Information should be collected before
and during an onsite visit regarding
environmental compliance^).
environmental management
effectiveness^), and other matters (3)
related to audit objectives and scope.
This information should be sufficient.
reliable, relevant and useful to provide a
sound basis for audit findings and
recommendations.
  a. Sufficient information is factual.
adequate and  convincing so that a
prudent,  informed person would be
likely to reach the same conclusions as
the auditor.
  b. Reliable information is the beat
attainable through use of appropriate
audit techniques.
  c Relevant  information supports audit
findings and recommendations  and is
consistent with the objectives for the
audit
  d. Useful information helps the
organization meet its goals.
  The audit process should include a
periodic review of the reliability and
integrity  of this information and the
means used to identify, measure.
classify and report it Audit procedures.
including the testing and sampling
techniques employed, should be selected
in advance, to the extent practical, and
expanded or altered if circumstances
warrant. The process of collecting.
analyzing, interpreting, and
documenting information should provide
reasonable assurance that audit
objectivity is maintained and audit goals
are met.
  VI. A process which includes specific
procedures to  promptly prepare candid.
clear and appropriate written reports on
audit findings, corrective actions, and
schedules for  implementation.
Procedures should be in place to ensure
that such information is communicated
to managers, including facility and
corporate management, who can
evaluate the information and ensure
correction of identified problems.
Procedures also should be in place for
determining what internal findings are
reportable  to  state or federal agencies.
  YD. A process which includes qua!:-
assurance procedures to assure the
accuracy and thoroughness of
environmental audits. Quality assurer.
may be accomplished through
supervision, independent internal
reviews,  external reviews, or a
combination of these approaches.
Footnote* to Appendix
  (1) A comprehensive assessment of
compliance with federal environmental
regulations requires an analysis of facility
performance against numerous
environmental statutes and implementing
regulations. These statutes include:
Resource  Conservation and Recovery Ac-
Federal Water Pollution Control Act
Clean Air Act
Hazardous Materials Transportation Ac:
Toxic Substances Control Act
Comprehensive Environmental Response.
  Compensation  and Liability Act
Safe Drinking Water Ac:
Federal Insecticide. Fungicide and
  Rodenticide Act
Marine Protection. Research and Sanctuar
  Act
Uranium Mill Tailings Radidti.cn Contrc! A
  In addition, state and local government ?.
likely to have their own environmental iau
Many states have been delegates author:;.
administer federal programs. Many lor*!
governments' building, fire, safety and he.*:
codes also hive environmental requ tremor.
relevant to an audit evaluation.
  (2} An environmental audit couid go -A<
beyond the type of compliance assess^erv
normally conducted during regulatory
inspections, for example, by evaluating
policies and practices, regardless cf whu-  •
they are part of the environmental «>ster- ,
the operating and maintenance procedure?
Specifically, audits can evaluate the e\:».v
which systems or procedures:
  1. Develop organizational environment:
policies which; a. implement r««u'.ator\
requirements: b. provide management
guidance  for environmental hazard; ni:t
specifically addressed in reg::i.>:i>.•:.;
  2. Train and motivate facility person:-.?!
work in an environmentally-acceptable
manner and to understand and compK « •
government regulations and the en:  !\ «•
environmental policy:
  3. Communicate relevant env.ror..Te.-.:^:
developments expeditiously to facii:ti c.-..:
other personnel:
  4. Communicate effectively non-
government and  the public regHra;r.c ;-.- .•
environmental incidents:
  5. Require third parties workir.j for. i\--"-
on behalf of the organization to ftii>«. :•>
environmental procedures:

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(r-spocially emergency) procedures:
  ". Incorporate environmental protection
-.r.tu written operating procedure* .
  4. Apply best management practices and
• .l. Exploit source rtducrion. recycle dnd
  •.:** p.i$G of thf !iMSt-hazardous suhstancM
:•• :-;;;iit».
  : •'> \::diturs >.i;uld also assess
-n\ lrnnmi»nt;«l rsk't .md uncertainties.

'FP. One. a»-l54a F;|pd r-A-JW 8:4S am|
       coot «SM-*O-M

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                                                     Attachment B

                                                 Revised 10/17/86

                    A REPRESENTATIVE SAMPLE OF

       ENVIRONMENTAL AUDITING SETTLEMENTS ACHIEVED TO DATE*

 REGION II:

 Crompton and Knovles Corporation, Consent Agreement and Final
 Order (CAPO), II TSCA-PCB-82-0108, 1/28/86.  Compliance audit
 of 28 facilities, covering TSCA PCS requirements, with certifica-
 tion of compliance.  EPA attorney:  Randye Stein, FTS 264-8157.

 REGION V:

 BASF Wyandotte Corporation, CAFO,-TSCA-V-C-410, 4/25/86.
 In settlement of a premanufacture notification action under TSCA,
 BASF agreed to conduct an audit (actually called a "review") of
 all chemicals subject to TSCA §5 inventory requirements that
 are produced, imported or used by 13 BASF facilities.  BASF also
 agreed to certify that (1) all chemicals manufactured by or
 imported/purchased from its parent or an affiliate company are
 listed on the TSCA Chemical Substances Inventory* and (2) to the
 best of its knowledge, all chemicals purchased from unrelated
 parties are listed on the TSCA inventory.  EPA attorney: 'Art
 Smith, FTS 886-4253.

 Chemical Waste Management, Inc. (Vickery, Ohio facility), CAFO,
 TSCA-V-C-307, RCRA-V-85R-019, 4/5/85.  Management audit covering
 all RCRA and TSCA requirements.  Audit also addresses personnel
 training, spill response, operations and maintenance, interim
 stabilization, and quality control and assurance.  EPA attorneys:
 Rodger Field, FTS 886-6726; Michael Walker, FTS 475-8697.

 Detroit Metropolitan (Wayne County Airport), CAFO, TSCA-V-C-468,
 7/30/86.PCB compliance audit of all facilities with certification
 or compliance and submission of inventory of each facility which
 specifies general location and quantity of all PCBs and PCB items
 subject to the requirements of 40 CFR Part 761.  EPA attorney:
 Dorothy Attermayer, FTS 886-6776.

 Michigan Department of Mental Health, CAFO, TSCA-V-C-231, 1/4/85.
 PCB compliance audit of air facilities, wi'th certification of
 compliance.  EPA attorney:  Michael Walker, FTS 475-8697.

Michigan Department of Corrections, CAFO, TSCA-V-C-187, 10/9/83.
 PCB compliance audit of all facilities, with certification of
 compliance.  EPA attorney:  Michael Walker, FTS 475-8697.

Owens-Corning Fiberglas Corporation, CAFO, TSCA-V-C-101, 6/8/84.
PCB compliance audit of 63 facilities, with certification of
compliance.  EPA attorney:  Michael Walker, FTS 475-8697.

 * Note:   Some of the settlements identified herein may  not  fall
  within the strict definition of "environmental auditing" but
  contain requirements sufficiently similar to auditing to
  warrant their inclusion.

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                               -2-

Potlatch Corporation, CAFO, TSCA-V-C-137,  8/31/83.   PCS  compliance
audit of all facilities, with certification of compliance.   EPA
attorney:  David Sims, FTS 353-2094.

Ren Plastics, an operating unit of Ciba-Geigy Corp.  (E.  Lansing,
Michigan), CAFO, TSCA-V-C-411,  2/12/86.   CAFO requires review of
the chemicals manufactured by Ciba-Geigy plants with certification
that all chemicals are on the TSCA inventory.  Respondent also
agreed to conduct an environmental seminar for plant personnel
with a section on TSCA compliance; respondent intends to continue
refining its employee training program.   EPA attorney:  Dorothy
Attermeyer, FTS 886-6776.

REGION VI:

USA v. Georgia-Pacific Corporation, Nos. 84-457-B and 85-136-B
(D.LA., entered 2/6/86).Clean Air Act Consent Decree requires
implementation of compliance plan produced by presettlement
audit, covering CAA National Emissions Standard for vinyl chloride.
EPA attorney:  Elliott Gilberg, FTS 382-2864.

REGION IX:                '

Chemical Waste Management, Inc. (Kettleman Hills, California
facility), CAFO, RCRA-0984-0037, TSCA-09-S4-0009, 11/7/85.
Management audit covering all RCRA and TSCA requirements.  Audit
also addresses personnel training, spill response, operations and
maintenance, interim stabilization, and quality control and
assurance.  EPA attorneys:  Bill Wick, FTS 454-8039; Keith Onsdorff,
FTS 382-3072.

REGION X:

Allstate Insurance Company, CAFO, X83-09-09-2614, 5/25/84.  PCS
audit of 140 buildings nationwide, formulation of PCB inspection
plan and guidelines to be distributed to facility managers, and
follow-up training conferences and review of program implementation.
EPA attorney:  Ted Rogowski, FTS 399-1185.

Bonneville Power Administration, Memorandum of Agreement with
EPA, 2/20/85.MOA provides for:   (1) training of personnel
conducting TSCA inspections, CERCLA preliminary assessments, and
site investigations;  (2) conduct of environmental audits covering
TSCA PCB requirements;  (3) testing and evaluation of  facilities
to determine status of compliance with TSCA and to assess  threatened
or actual release of  "hazardous substances" as defined by  CERCLA;
and (4) remedial actions to be taken based upon risk  assessment
that utilizes criteria and information in the National Contingency
Plan.  EPA attorney:  Ted Rogowski, FTS 399-1185.

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                               -3-

 Chem Security Systems/ Inc. (Arlington/ OR), CAFOs,  TSCA 1085-
 07-42-2615P, 12/26/85; and RCRA 1085-06-08-3008P, 12/2/85.
 Four compliance audits (performed quarterly over a one-year period)/
 covering all RCRA requirements and PCB requirements under TSCA.
 EPA attorney:  Barbara Lither/ FTS 399-1222.

 Crown Zellerbach Corporation, CAFO, X83-06-08-2614,  11/30/83.
 Settlement provides for refinement of existing corporate-wide
 compliance program for TSCA PCB requirements, including certification
 of compliance.  EPA attorney:  Ted Rogowski, FTS 399-1185.

 Roseburg Lumber Company, CAFO, X83-05-02-2614, 1/10/85.  Settlement
 provides for development of a training program and manual describing
 PCB compliance requirements and procedures; and a program to bring
 12 facilities into full compliance with TSCA PCB requirements
 within one year of settlement.  EPA attorney:  Ted Rogowski,
 FTS 399-1185.

 Washington State University, CAFO, X83-05-02-2614, 5/30/84.
 Settlement provides for development of guidance manual for employees
 regarding proper handling of PCBs, followed by training sessions
 to ensure employees' familiarity with PCB compliance procedures.
 EPA attorney:  Ted Rogowski, FTS 399-1185.

 HEADQUARTERS:

 American Petrofina Company of Texas, Nos. 1217 and 1293, 9/5/85.
 Consolidated Clean Air Act Settlement Agreement requires institu-
 tion of annual visitation program by Respondent to verify the
 existence of proper unleaded gasoline handling procedures at all
 branded gasoline retail outlets.  EPA attorneys:  Rich Kozlowski,
 FTS 382-2633; Rich Ackerman, FTS 382-4410.

 Ashland Oil, Inc. (Catlettsburg, KY refinery), No. 	
 (E.D. Kentucky, entered              ).  Clean Water Act consent
 decree requires the performance of a "Wastewater Treatment System
 Engineering Study" by an independent party and the implementation
 of those recommendations agreed upon by the parties.  Settlement
 also mandates the commencement of a "Best Management Practices
 Study" in order to minimize potential significant releases;
 includes the development of a toxicity testing and control plan
 and establishes a stipulated penalty schedule for daily and
monthly violations of effluent limits contained in Defendant's
 NPDES permit.  EPA attorney.  Joseph Moran, FTS 475-8185.

BASF Systems Corporation, CAFO, TSCA-85-H-04, 5/28/86.
Environmental management audit and development of procedures  for
handling chemical substances imported from BASF's German parent
 corporation.  BASF will pay a stipulated penalty of $10,000  per
 "safe" chemical not listed on the TSCA Chemical  Inventory.   EPA
will apply the TSCA PMN penalty policy to violations for  unregis-
tered "bad" chemicals discovered in the "review" process.   EPA
attorney:  Michael Walker, FTS 475-8697.

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                               -4-

Chapman Chem. Co., et al., FIFRA 529, et al_.,  Filed 9/30/85.
The industry parties to the settlement agreement agreed to imple-
ment and participate in a voluntary Consumer Awareness Program
to provide users of treated wood products with use, handling,
and precautionary information.  The focus of the program is a
Consumer Information Sheet which contains language approved by
the Agency.  Industry agreed to conduct an audit of the program
within a year after settlement and to submit the results of
the audit to EPA within 30 days of its completion.  EPA attorney:
Cara Jablon, FTS 382-2940.

Chemical Waste Management, Inc. (Eraelle, Alabama facility), CAFO,
TSCA-84-H-03, 12/19/84.Management audit covering all RCRA and
TSCA requiraraents.  Audit also addresses personnel training,
spill response, operations and maintenance, interim stabilization,
and quality control and assurance.  EPA attorneys:  Keith Onsdorff,
FTS 382-3072? Alex Varela, FTS 475-8690; Arthur Ray, FTS 382-3050.

Conoco Inc. and Kayo Oil Company, CAA (21D-449, 520, 596, 709, ...
and 710, S/31/83.  Settlement Agreement requires (or confirms):
(1) revision of Conoco's Jobber Franchise Agreement to include  .
provision for unleaded gasoline sampling on a quarterly basis at
each Conoco Jobber retail outlet; (2) all drivers of Conoco
company cars to certify that no tampering has occurred which
would allow the introduction of leaded gasoline into a vehicle
requiring unleaded gasoline; (3) posting of public information
notices designed to inform Kayo customers of problems related to
fuel switching; and (4) training to inform Kayo employees of
EPA unleaded fuels regulations.  EPA attorneys:  Rich Kozlowski,
FTS 382-2633; Rich Ackerman, FTS 382-4410.

Department of Defense, Federal Facility Compliance Agreement,
12/30/83.Agreement covers all DoD facilities where PCBs are
stored for disposal; establishes compliance plan designed to
achieve and maintain compliance with all applicable PCS storage
and disposal requirements.  EPA attorney:  Deeohn Ferris,
FTS 475-8690. •
                 i

Diamond Shamrock'Corporation, CAFO, TSCA-S5-H-03,  7/15/85.
Compliance audit of 43 facilities, covering all TSCA requirements.
EPA attorneys:  Deeohn Ferris, FTS 475-8690; Bob Pittman, FTS
475-8690.

General Electric Co. (Waterford, NY  facility). No.  84-CV-681
(N.D.N.Y., entered 	).  Clean Water Act  consent decree
requires the implementation of an engineering study to  insure
compliance with Defendant's N/SPDES permit.  Settlement also
requires monthly progress reports to be submitted  to EPA  with
provisions for stipulated civil penalties  for discharge violations.
EPA attorney:  Joseph Moran, FTS 475-8185.

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                                -5-

 Mac Oil Company d/b/a Circle Oil,  No.  FOSD-1908,  5/21/85.   Clean
 Air Act Settlement Agreement requires:  (1)  institution  of  an
 unleaded gasoline sampling and testing program at all  facilities
 receiving unleaded gasoline from Respondent;  (2)  inspections of
 the gasoline pumps at all facilities  to which Respondent delivers
 gasoline to determine compliance with nozzle/  label  and  warning
 sign requirements; and (3) maintenance of a  company  unleaded
 gasoline policy that informs all employees,  agents and common
 carriers of gasoline handling and. compartment labeling procedures.
 EPA attorney:  Dean Uhler, FTS 382-2947.

 National Convenience Stores, Inc.  d/b/a Stop 'n Go,  Nos.  FOSD-1140
 and FOSD-1404,  8/16/84.Consolidated Settlement  Agreement  requires:
 (1) institution of a program for compliance  with  EPA unleaded  fuels
 regulations at  all retail gasoline outlets that Respondent  operates
 under any name,  including periodic verification that nozzle require-
 ments are met;  and (2) submission to  EPA of  a Certificate of Complianci
 EPA attorney:  Rich Kozlowski,  FTS 382-2633.

 Phillips Petroleum Company,  Consolidated Clean Air Act Settlement
 Agreement,  3/11/85.Settlement requires Phillips to:   (1)  estab-
 lish,  implement and maintain a program for unleaded  gasoline
 quality assurance among its branded marketers and retailers;
 (2) conduct a threephase program of sampling unleaded  gasoline at
 all branded retail outlets in the United States;  (3) conduct annual
 inspections of  ten percent of its branded retail  outlets in the
 United States for compliance with EPA unleaded gasoline  regula-
 tions; (4)  at the time of contract renewal,  review with  its
 marketers and retailers their contractual obligations  pertaining
•to the sale,  handling, and distribution of unleaded  gasoline;  and
 (5) conduct a review of its Unleaded  Gasoline Quality  Assurance
 Program after the first year of operation and submit a written
 report to EPA assessing the program's effectiveness  in improving
 the quality of  unleaded gasoline and  reducing the potential or
 actual number of violations of the regulatory limits for lead.
 EPA attorney: Rich Kozlowski, FTS 382-2633.

 R.I.  Marketing,  Inc.,  No. FOSD-1611,  10/5/84.  Clean Air Act
 Settlement Agreement requires institution of a fuel  switching
 preventativo action program, at each  of approximately  200 retail
 outlets,  designed to prevent leaded gasoline from being  introduced
 into vehicles requiring unleaded fuel.  EPA  attorney:   Rich
 Kozlowski,  FTS  382-2633.

 Savoca's Service Center, Inc.,  No. FOSD-2101, 10/17/85.  Clean Air
 Act Settlement  Agreement requires institution of  a fuel  switching
 preventative action program, at all retail outlets,  designed to
 prevent leaded  gasoline from being introduced into vehicles
 requiring unleaded fuel.  EPA attorney:  Rich Kozlowski, FTS
 382-2633.

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                               -6-

Union Carbide Corporation, CAPO, TSCA-85-H-06,  2/26/86.   Settlement
provides for development of a training program emphasizing pre-
manufacture notification requirements under TSCA,  followed by
a test program to monitor responses for compliance with TSCA.
EPA attorney:  Alex Varela, FTS 475-8690.

United American Fuels, Inc., No. FOSD-1578, 12/18/84.  Clean Air
Act Settlement Agreement requires implementation of a fuel additive
quality control and testing program.  EPA attorney:  Rich Kozlowski,
FTS 382-2633.

USA v. Parma, Ohio, No. C-85-208, (N.D. Ohio, February 28, 1985).
Clean Air Act Consent Judgment requires Defendant to:  (1) replace
catalytic converters that had been removed illegally; (2) inspect
(periodically for two years) all city vehicles for tampering with
emission controls; (3) tune-up and test (periodically for two
years) all city vehicles for emissions; (4) report all tampering
found to EPA and take appropriate remedial measures; (5) train
mechanics in compliance with EPA standards; (6) distribute pamph-
lets discussing tampering and fuel switching to all households in
Parma, Ohio; and (7) display for one year posters cautioning
against tampering and fuel switching.  EPA attorney:  Debra
Rosenberg, FTS 382-2649.

USA v. State of Maine, No. 84-0152-B (D. Maine, November 19, 1985).
Clean Air Act Consent Decree requires State to (1) inspect all
Maine Forest Service vehicles for tampering with emission control
devices, and correct deficiencies; (2) inspect each gasoline
fueling facility owned or operated by the Maine Department of
Conservation for compliance with label, notice and nozzle size
requirements, and correct deficiencies;  (3) publicize to Maine
Forest Service personnel and the public the importance of comply-
ing with mobile source requirements; and (4) implement fully the
catalytic converter and inlet restrictor inspection program
mandated by Si.ate law, and audit at least 90 percent of  licensed
inspection facilities to verify compliance.  EPA attorney:
Richard Friedman, FTS 382-2940.

Note:  The settlements identified herein relating  to mobile  source
enforcement under the Clean Air Act are representative of approxi-
mately 200 such settlements that have been achieved  to date.

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     A Note Concerning Application of the Model Provisions

     Attachments C-G represent model provisions for the
incorporation of environmental auditing requirements within
enforcement settlements.  These models are based upon medium-
specific settlements and necessarily reflect the circumstances
surrounding those settlements.  Accordingly, Agency negotiators
should not hesitate to alter them as necessary to meet the
needs of a particular case.  An attempt has been made to
fashion the models in such a manner that they can be used
in any enforcement settlement; however, some language has
been retained which applies to only one or two EPA programs.
Even where specific language is found to be inapposite, the
general headings under which such language is found should
provide helpful guidance to Agency personnel in identifying
the categories of issues which a particular type of auditing
settlement should address.

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