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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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