CLEAN AIR ACT COMPLIANCE! ENFORCEMENT POLICY COMPENDIUM 1996 Volume 1 A-i -A-27 ------- CLEAN AIR ACT (CAA) COMPLIANCE! ENF ORCEMENT POLICY COMPENDIUM 1996ed Sorted by TITLE ------- Clean Air Act (CAA) Compliancc(Enforcement Policy Compendium, 1996ed By TITLE 1992-May-i 1992 Volatility Question and Answer Document KF38 12 E584 nJl4 1993-Aug-5 1993 Diesel Desutfunzation Question and Answer KF3812 Document E584 nJl8 1994-Jun-27 Acid Rain Compliance/Enforcement Guidance KF3812 E584 nHO2 1996-May Acid Rain Program Update No 3 Technology and KF38i2 Innovation E584 n}103A 1997-July-16 Administrative Assessment of Civil Penalties Against KF38 12 Federal Agencies Under the Clean Air Act E584 nB29(1) 1990-Aug-b Aftermarket Converter Enforcement and Penalty Issues KF38i2 E584 nJO9 1980-Jan-lO Alternate Procedure for § 110(1) Relief in Localized, Short KF38 12 Term Energy Emergencies E584 nCO3 1986-Dec-5 Application of August 7, 1986 Policy on LST Schedules in KF3812 Consent Decrees E584 nBl4 1993-Nov-03 Approaches to Creating Federally-Enforceable Emissions KF3812 Limits E584 aClO 1994-Dec-13 BEN, ABEL, and CASHOUT Models on National LAN KF38 12 Platform E584nAi7 1984-Jun-i Benzene NESHAPs Guidance KF3812 E584 nEl2 l995-Sep-6 Calculating Potential to Emit (PTE) for Emergency KF38 12 Electrical Generators E584 nB24b l992-Oct-19 Change in Methodology for Determining the BEN Model’s KF38i2 Discount Rate E584 nAO8 l993-Jan-14 Civil Penalty Policy for Administrative Hearings KF3812 E584 nJi6 1988-Apr-i8 Civil Penalty Policy for Incorrect Aftermarket Catalytic KF3812 Converter Apphcations E584 nJO4 1990-Fcb-23 Clarification of EPA NESHAP Policy - Noniriable KF3812 Asbestos £584 nEO7 1980-May-9 Clanfication of Requirements for Inclusion of Continuous KF38 12 Emission Monitoring (CEM) Provisions in SIPs E584 nCO4 l995-Jul-23 Clarification on the Use of Appendix I of the CAA KF38i2 Stationamy Source Civil Penalty Policy E584 nB28 01/10/2000 i ------- Clean Air Act (CAA) Compliance/Enforcement Policy Compendium, 1996ed By TITLE 1994-Apr-17 Clarification Package Guidance on the Timely and KF3812 Appropriate Enforcement Response to Significant Air E584 nB26a Pollution Violators (SVT&A Guidance) 1995-Apr-17 Clarification Package Guidance on the Timely and KF3812 Appropriate Enforcement Response to Significant Air E584 nB26 Pollution Violators (SVT&A Guidance) 1992-Jan-17 Clarifications to the October 25, 1991 CAA Stationary KF3812 Source Civil Penalty Policy E584 nBl9 1996-May Clean Air Act CAA Compliance/Enforcement Policy KF3812 Compendium E584 nl-103 Acid Rain Program Update No 3 Technology and Innovation 1993-Oct-29 Clean Air Act Regulation ICR Review KF3812 E584 nDlOa 1988-Mar-31 Compliance Monitoring Strategy for FY89 KF3812 E584 nFO7 1983-Nov-14 Compliance Strategy for Stationary Sources of Air KF3812 Pollution E584 nBO5 1980-Dec-22 Conduct of Settlement Negotiations KF3812 E584 nJO2 l992-Mar-17 Consent Decree Provisions Requiring Information on KF3812 Unsuccessful Demolition/Renovation Bids in Asbestos E584 nElO NESHAP Civil Actions 1991-Jun-03 Credentials Certification Policy KF3812 E584 nAO6 1984-Mar-27 Decision m “United States v Kaiser Steel Corp “, No KF3812 CV-82-2623-IH (CD Cal 8-Feb-1984) E584 nBO6 1982-Jun-21 Definition of”Coniinuous Compliance” and Enforcement KF3812 of O&M Violations E584 nBO3 1998-July 10 Delegation of 40 CFR Part 63 General Provisions KF3812 Authorities to State and Local Air Pollution Control E584 nB34 Agencies 1990-Aug-09 Docunienting Penalty Calculations and Justifications in KF3812 EPA Enforcement Actions E584 nAO4 199 1-Mar-28 Draft Guidance on Retroactive Application of CAA KF38 12 Provisions That Enhance Enforcement Authority E584 nB3 1 1990-Aug-13 Draft Revision of the March 25, 1987 CAA Stationary KF3812 Source Civil Penalty Policy E584 nB32 01/10/2000 2 ------- Clean Air Act (CAA) Compliance(Enforcement Policy Compendium, 1996ed By TITLE 1995-May-24 Drafting Guidance for Revised Interim Supplemental KF3812 Environmental Projects Policy E584 nA2 1 1983-Jun-28 Enforcement of National Emissions Standard for Vinyl K13812 Chloride E584 nEi4 1976-Apr-26 Enforcement of NSPS Requirements KF3812 E584 nDOl 1976-May-3 Enforcement of NSPS Requirements KF3812 E584 nDO2 1988-Dcc-22 Enforcement Policy for Aftermarket Catalytic Converter KF3812 Violations E584 flJ07 1985-Nov-27 Enforcement Policy Respecting Sources Complying with KF3812 Clean Air Act Requirements by Shutdown E584 nBO8 1991-May-15 Enforcement Role in the 33/50 Program (industrial Toxics KF3812 Project) E584nB18 1993-Jan-22 EPA Enforcement Authority with Respect to Sources KF3812 Based on a Finding of a State t s Failure to comply with E584 n105 New Source Requirements the Effect of the 1990 Amendments --Legal Opinion 1999-Dec-6 EPA Process for Responding to Public Petitions for Title KF38 12 V Permit Objections E584 nJ22 1983-Dec-iS Execution of Confidentiality Agreements under Section KF38 12 ll4oftheCleanAirAct E584nF04 1994-Jan-12 The Exercise of Investigative Discretion KF3812 £584 nAil 1991-Nov-i Fact Sheet Conversion of Vehicles and Engines to KF38 12 Operate on Natural Gas or Propane E584 nJl3 199 1-Apr-2 Fact Sheet Engine Switching KF3812 E584 n112 199 1-Mar-13 Fact Sheet Exhaust System Repair Guidelines KF3812 £584 nil! 1984-Sep-6 Final Guidance on Use of Unannounced Inspections KF3812 E584 nFO6 1994-Nov-3 Final Lists of Nationally Significant Clean Air Act Issues KF3812 and Categonc Opt Out Cases E584 nIO I 1986-Apr-22 Guidance Enforcement Applications of Continuous KF3812 Emission Monitoring System Data E584 nBl2 1999-00-00 Guidance for Funding Air and Radiation Activities Using KF3812 the State and Tnbal Assistance Grant (STAG) E584 nJ23 01/10/2000 3 ------- Clean Air Act (CAA) Compliance/Enforcement Policy Compendium, 1996ed By TITLE Appropriation 1977-Dec-2 Guidance for Section 114(d) of thc Clean Air Act (CAA) KF3812 E584 nFOl 1988-Jul-25 Guidance on Certification of Compliance with KF3812 Enforcement Agreements E584 nAO2 199 1-Oct-29 Guidance on Choosing the Appropriate Forum in CAA KF3812 Stationary Source Civil Enforcement Actions E584 nB2O 199 1-Oct-29 Guidance on Choosing the Appropriate Forum in CAA KF3812 Stationary Source Civil Enforcement Actions E584 n102 1985-Jun-28 Guidance on Complying with the Notification KF3812 Requirements in Section 11 3(a)(1) and 11 3(a)(4) of the E584 nBO7 Clean Atr Act 1982-Jun-8 Guidance on Determination of Asbestos Content of KF3812 Fnablc Materials E584 nEO2 1986-Dec-16 Guidance on Determining a Violato?s Ability to Pay a KF3812 Civil Penalty E584 nAOl 1995-Jan-25 Guidance on Enforceability Requirements for Limiting KF3812 Potential to Emit through SEP and 112 Rules and General E584 nB35 Permits 1983-Dcc-14 Guidance on Enforcement of Prevention of Significant KF3812 Deterioration Requirements under the Clean Air Act E584 nGOl 1998-Oct-9 Guidance on Implementation of EPA ’s KF3812 Penalty/Compliance Order Authority Against Federal E584 nB29 Agencies Under the Clean Air Act (CAA) 1989-Jan-27 Guidance on Inclusion of Environmental Auditing KF3812 Provisions in Clean Air Act Settlements E584 nBl5 1989-Jun-l3 Guidance on Limiting Potential to Emit in New Source KF3812 Permitting E584 nGO3 1982-Feb-25 Guidance on NESHAP Asbestos Standards KF3812 E584 nEOl 1982-May-4 Guidance on Policy for Enforcement of (VE)Visible KF3812 Emissions Violations Against Sources Which are Meeting E584 nDO6 an Applicable Mass Emission Standard 00-Apr-1999 Guidance on Section 303 of the Clean Air Act (CAA) KF3812 E584 nBO4a 1992-Feb-7 Guidance on ‘Timely and Appropriate” (1 & A), KF3812 Enforcement Response to Significant Air Pollution E584 nB22 Violators” (SVs) 01/10/2000 4 ------- Clean Air Act (CAA) Compliance/Enforcement Policy Compendium, 1996ed By TITLE 1995-Dec-15 Guidance on Use of Penalty Policies in Administrative KF3812 Litigation E584nA25 1 983-Scp-15 Guidance on Use of Section 303 of the Clean Air Act KF38 12 E584 nBO4 1986-Oct-i Guideline S-26 - Enforcement fo the Arsenic NESHAP for KF3812 Glass Manufacturing Plants (40 CFR Part 60 Subpart N) E584 nEll 1995-Dec-22 Incentives for Self-Policing Discovery, Disclosure, KF3812 Correction & Prevention of Violations E584 nA26 1990-Jun-5 Inclusion of CERCLA Section 103(a) Counts in Asbestos KF3812 NESHAP Cases E584 nEO8 1987-Aug-27 Inclusion of Soot-Blowing Emissions in SubpartD KF3812 Compliance Testing E584 nDO9 i995-Jul-3 Initial Operating Permit Application Compliance KF3812 Certification Policy E584 nB27 1985-Jul-lO Injunctive Relief in Asbestos Demolition and Renovation KF3812 Cases E584 nEO3 i979-Mar-12 Integration of Soot-Blowing Emissions with Routine KF3812 Operating Data of Existing Facilities E584 nDO4 1990-Jun lntcrgrating EPA’s Asbestos Programs A Mission KF3812 Statement E584 nEl5 1989-Apr-18 Interim Asbestos NESHAP Enforcement Guidance-- KF3812 “Friable Asbestos” 1% by Area or Volume vs 1% by E584 nEO6 Weight 1989-Apr-18 Interim Asbestos NESHAP Enforcement Guidance -- KF3812 “Friable Asbestos” 1% by Area or Volume vs 1% by E584 n103 Weight 1994-Fcb-8 Interim Diesel Civil Penalty Policy KF3812 E584 nJl9 1992-Jul-13 Interim Draft AMCC Record-Keeping Policy KF3812 E584 nJl5 1997-Apr-29 Interim Policy and Guidance on the Use of “Credible KF3812 Evidence’ in Air Enforcement Activities E584 nA27 1995-Jun-23 Interim Policy on Compliance Incentives for Small KF3812 Businesses E584 nA22 1996-Jan-22 Interim Policy on Federal Enforceability of Limitations on KF3812 Potential to Emit E584 nB24a l993-Jun-25 Interim Procedures for Streamlining the Review of KF3812 Signature Packages in Civil Practice Area E584 nAO9 01/10/2000 5 ------- Clean Air Act (CAA) Compliance/Enforcement Policy Compendium, 1996ed By TITLE 1974-Jwi-25 Interim Tampering Enforcement Policy (Mobil Source KF3812 Enforcement Memordnduln No IA) E584 nJO 1 198 1-Feb-23 Issuance of § 113(a) Orders to NSPS Sources for Failure KF38 12 to Conduct Performance Tests E584 nBO2 1980-Aug-26 Issuance of Administrative Compliance Orders in Light of KF3812 “Harrison v PPG Industhes, Inc”, 446 US 578 (1980) E584 nBOl 1995-May-03 Issuance of Interim Revised Supplemental Environmental KF3812 Projects Policy E584 nA2O 1986-Jan-17 Issues #3(e) & #5 of the VOC Issue Resolution Process KF3812 Establishmg Proof of VOC Emissions Violations, and E584 nBO9 Bubbles in Consent Decrees Resolving Civil Actions under Section 113(b) of the Clean Air Act 198 1-Jul-17 Liability Agreement Between EPA Contractors and KF3812 Stationary Air Pollution Sources E584 nFO3 1 993-Mar-3 1 Manufacturers Programs Branch Interim Penalty Policy KF3S 12 E584 nJl7 1995-Apr-5 Memorandum of Understanding between the US EPA and KF3812 US Dept of Energy E584 nB25 199 1-Mar-5 Model Notice of Violation KF3812 £584 nBl7 l988-Jul-5 New Agreement Between FOSD, FMD, and Claims KF3812 Officer for Processing of FOSD Collcctables E584 nJO6 1993-Apr-19 New Criminal Enforcement Responsibilities Under 1990 KF3812 CAA Amendments E584 nB23 1979-Jun-3 NSPS Detennination - Subpart D KF3812 E584 nDO3 1995-Jun-9 NSPS, NESHAP and HON Applicability Determination KF3812 E584 nEl3 1994-Nov-08 OECA/Regional Procedures for Civil Judicial and KF3812 Administrative Enforcement Case Redelegation E584 nAl6 1994-Oct-3 1 OECAs Operating Principles for the Common Sense KF3812 Initiative E584nAl5 1995-Jan-25 Options for Limiting the Potential to Emit (PTE) of a KF3812 Stationary Source under § 112 and Title V of CAA E584 nB24 1 990-Oct-26 Outside Communications Regarding Matters Under KF38 12 Investigation, in Pre-Liligation Stages, or in Litigation E584 nAO5 1993-May-il Paperwork Reduction Act ICR Lapses and 0MB Control KF38 12 Number Display for Clean Air Act Regulations E584 nD 10 01/10/2000 6 ------- Clean Air Act (CAA) Compliance/Enforcement Policy Compendium 1996ed By TITLE 1994-Jun-22 Parallel Proceedings Policy KF3812 E584 nAl2 1983-Feb-15 Policy on Excess Emissions During Startup, Shutdown, KF3812 Maintenance and Malfunctions [ clarifies memorandum of E584 nCO5 same title dated 28-Sep-1982J 1995-Nov-22 Policy on Flexible State Enforcement Responses to Small KF3812 Community Violations E584 nA24 1986-Aug-7 Policy on SIP Revisions Requesting Compliance Date KF3812 Extensions for VOC Sources E584 nCO7 1986-Aug-7 Policy on the Availability of Low Solvent Technology KF3812 Schedules in Clean Air Act Enforcement Actions E584 nBl3 1982 -Apr-22 Postponement of Enforcement Action During NSPS KF38 12 Review E584 nDO5 1988-Jul-15 Procedures for EPA to Address Deficient New Source KF38 12 Permits under the Clean Air Act E584 nGO2 1987-Sep-28 Procedures for Pre-Referral Settlements of Asbestos KF3812 Demolition and Renovation Cases E584 nEO4 1992-Sep-04 Procedures for Processing Request to Redesignate Areas KF38 12 to Attainment E584 nCl2 1993-Jan-25 Procedures to Improve Coordination before the KF3812 Environmental Appeals Board E584 nAO7 1995-Mar-03 Processing Requests for Use of Enforcement Discretion KF3812 E584 nAl8 l991-Jan-2 Proposed Policy for Enforcing the New Defeat Device KF38 12 Authority with Regard to Catalyst Replacement Pipe E584 nJiO Manufacturers and Sellers 1995-Sep-19 Qs and As on Interim Policy on Compliance Incentives for KF38 12 Small Businesses E584 nA23 1994-Jul-i 1 Redclegalion of Authority and Guidance on Headquarters KF38 12 Involvement in Regulatory Enforcement Cases E584 nAl3 1994-Jul-I Reformulated Gasoline and Anti-Dumping Regulations KF3812 Question and Answer Document E584 nJ2 1 l981-May-13 Regional Office Criteria for Neutral Inspections of KF38 12 Stationaiy Sources--Amended Guidance E584 nFO2 1979-Mar-6 Response to Energy Emergency, Implementation of § KF3812 110(f) of CAA, as Amended E584 nCOl 1986-Feb-28 Responses to Four VOC Issues Raised by the Regional KF3812 OfficesandDOJ E584nB11 01/10/2000 7 ------- Clean Air Act (CAA) CompliancefEnforcement Policy Compendium, 1996cd ByTITLE 1986-Jan-3 I Responses to Two VOC Questions Raised by the Regional KF3812 Offices E5S4nB1O 1982-May-7 Restatement of Guidance on Emissions Associated with KF3812 Soot-Blowing E5 84 nDO7 1 994-Jul-28 Restatement of Policies Related to Environmental Auditing KF38 12 E584 nAl4 1987-Sep-23 Review of State Implementation Plans and Revisions for KF3812 Enforceability and Legal Sufficiency E584 nCO8 1988-Mar-3 1 Revised Asbestos NESHAP Strategy KF38 12 E584nE05 1995-Feb-07 Revised Capture Efficiency Gwdance for Control of KF3812 Volatile Organic Compound Emissions E584 nB33 1989-Fcb-8 Rcvised Guidance Concerning Compliance by Use of Low KF3812 Solvent Technology in VOC Enforcement Cases E584 nBl6 1991-Mar-i Revised Guidance on Enforcement During Pending State KF3812 Implementation Plan Revisions E584 nCO9 l995-Apr-24 Revised Guidance on the Treatment of Federal KF3812 Implementation Plan (FtP) Clocks Following Section 179 E584 nCll Findmgs 1 986-Aug-5 Sale and Use of Aftermarket Catalytic Converters KF38 12 E584 nJO5 1998-July 10 Second Extension of January 25, 1995 Potential to Emit KF3812 Transition Policy and Clarification of Interim Policy E584 nB3O 1983-Jul-29 Source Specific SIP Revisions KF3812 E584 nCO6 1991-Aug-20 Suing Owners in Asbestos Demolition and Renovation KF3812 Cases E584 nEO9 1991-Nov-I Supplemental Environmental Projects in EPA Settlements KF3812 Involving Early Reductions Under the CAA E584 nB2 1 1979-Jun-19 Supplemental Guidance Regarding Implementation of KF3812 110(1) CAA--Action Memorandum E584 nCO2 l994-Feb-28 Tampering and Defeat Device Civil Penalty Policy for KF3812 Notices of Violation E584 nJ2O 1985-Jun-27 Tampering Settlement Agreement Memo KF3812 E584 nJO3 l983-Jun-28 Technical Evaluation of Vinyl Chloride Discharge Reports KF3812 E584 n104 01/10/2000 8 ------- Clean Air Act (CAA) Compliance/Enforcement Policy Compendium, 1996ed By TITLE 1985-Jul-9 Timely and Appropriate Guidance and Asphalt Plants KF3812 E584 nDO8 1993 Use of Acid Rain CEMS as NSPS CEMS KF3812 E584 nHOl 1984-Feb-22 Use of Contractors to Conduct Clean Air Act Inspections KF3812 after the Supreme Court’s Decision in “United States v E584 nFO5 Stauffer Chemical Co “, No 82-1448 decided Jan-10-1984 1993-Aug-19 Use of Inspections to Obtain Evidence of Crimes KF3812 E584 nAtO 1990-Jan-24 Usc of Stipulated Penalties in EPA Settlement Agrccments KF3812 E584 nAO3 1989-Dec-I Volatility Civil Penalty Policy KF3812 E584 niOS l995-Apr-03 Voluntary Environmental Self-Policing and KF3812 Self-Disclosure Interim Policy Statement E584 nAl9 01/10/2000 9 ------- SECTION A Cross Media Policies and Guidance A ------- 1 SECTION A DOCUMENT 1 Guidance on Determining a Violator’s Ability to Pay a Civil Penalty 12/16/86 ------- ft i ; ‘ %I’ i:) UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON. D.C. 20460 DEC 6 986 ocrn Eo £NcOR EMFN7 £740 coMmJA74r.t h O,4IT0 lIP.G MEMORANDUM SUBJECT: Guidance on Determining a Violator’s Ability to Pay a Civil Penalty FROM: Thomas L. Adams, Jr. - . Assistant Adminstrator for Enforcement and Compliance Monitoring TO: Assistant Administrators Regional Administrators I. PURPOSE This guidance amplifies the discussion in the Uniform Civil Penalty Policy on how to adjust a penalty target figure when a violator claims paying a civil penalty would cause extreme financial hardship. This guidance was developed to meet the commitment made in the Uniform Civil Penalty Policy issued February 16, 1984, and in response to Regional Office requests for amplification of the “Framework for Statute— Specific Approaches to-Penalty P ssessments” (GM-22). II. APPLICABILITY This guidance appliesto the calculation of civil penalties under medium—specific policies issued in accordance with the Uniform Civil Penalty Policy that EPA imposes on: 1. For—profit publicly or closely held entities; and 2. For—profit entities owned by not—for—profit entities. This guidance does not apply to: 1. The calculation of civil penalties that EPA imposes on municipalities and other not—for—profit entities; or 2. A violator who files for bankruptcy or is in bankruptcy proceedings after EPA initiates the enforcement action. ------- III. SCOPE This guidance only gives a general evaluation of the financial health of a violator and the possible effects of paying a civil penalty for the purpose of settlement negotiations. It describes when to apply the ability to pay factor and provides a methodology for applying the factor using a coIr uter program, ABEL. The guidance does not prescribe the amount by which EPA may reduce a civil penalty if the ability to pay factor is applied. The methodology in this guidance will not calculate a specific dollar amount that a violator can afford in civil penalties nor does it provide a way to predict whether paying a certain amount for a civil penalty will cause an already financially troubled firm to go out of business. For an ability to pay analysis, EPA needs specific financial information from a violator (see section V). EPA includes the financial data in a litigation report only when the data are requested by the Department of Justice or offered by the violator.. IV. THE ABILITY TO PAY FACTOR Under the Uniform Civil Penalty Policy, EPA may consider using the ability to pay factor to adjust a civil penalty when the assessment of a civil penalty may result in extreme financial hardship. Financial hardship cannot be expressed in absolute terms. Any limitation on a violator’s ability to pay depends on how soon the payments must be made and what the violator has to give up to make the payments. A violator has several options for paying a civil penalty: 1. Use cash on hand; 2 . Sell assets; 3. Increase debt by commercial borrowing: 4. Increase equity by selling stock; 5. Apply toward a civil penalty for a period of time what would otherwise be distributed as profit; or 6. Use internally—generated future cash flows by deferring or eliminating some planned future investments. Each of these options will affect a for—profit violator’s operations to some degree. EPA must decide whether to adjust ------- —3— a proposed penalty amount and by how much, taking into account the gravity of the violation and other criteria in medium— specific guidance. V. INFORMATION TO DETERMINE ABILITY TO PAY If ability, to pay is at issue, EPA may request from a violator any financial information the Agency needs to evaluate the violator’s claim of extreme financial hardship. A violator who raises the issue has the burden of providing information to demonstrate extreme financial hardship. Financial information to request from for—profit entities may include the most recent three to five years of: 1. Tax returns; 2. Balance sheets; 3. Income statements; 4. Statements of changes in financial position; 5. Statements of operations; 6. Retained earnings statements; 7. Loan applications, financing agreements, security agreements; 8. Annual reports; or 9. Business services, such as Compustat, Dun arid Bradstreet, or Value Line. Tax returns are the most complete and in the most consis- tent form for analysis. Tax returns also provide financial information in a format for direct input into ABEL.. Annual reports are the most difficult to analyze and may require the assistance of a financial analyst. When requesting information informally or through interrogatories or discovery, EPA should ask for three to five years of tax returns along with all other financial information that a violator regularly maintains as business records. If a violator refuses to give EPA the information to evaluate the violator’s ability tO pay, EPA should seek the full calculated penalty amount under the assumptiOn that the violator can pay. ------- —4— VI. CONFIDENTIALITY OF FINANCIAL INFORMATION A violator can claim confidentiality for financial information submitted to EPA. In accordance with the regu— lations on confidential business information, 40 CFR 2.203, EPA must give notice to a violator that the violator may assert a business confidentiality claim. EPA’s notice must contain the information required in 40 CFR 2.203. The notice must include a statement that if the violator submits financial information without a confidentiality claim, EPA may release the information without further notice to the violator. The violator can make a claim of confidentiality for financial information in a cover letter accompanying the information. Information in published annual reports would not be entitled to confidential treatment. VII. APPLYING THE ABILITY TO PAY FACTOR Under the terms of a consent decree, a violator pays a civil penalty in addition to making any capital investment necessary to come into compliance. EPA considers the costs of attaining compliance when applying the ability to pay factor to a civil penalty calculation. EPA determines whether to apply the ability to pay factor using a four—step process: 1. Determine, if possible, whether a violator plans to claim extreme financial hardship; 2. Determine whether criteria in the Uniform Civil Penalty Policy and medium—specific guidance require consideration of ability to pay; - 3. Evaluate the overall financial health of a violator’s operations by analyzing financial information provided by a violator or from other sources, such as business services; and 4. Project the probabilities, of a violator having future internally—generated cash flows to evaluate how paying a proposed civil penalty ay affect a violator’s financial decisions. VIII. FINANCIAL COMPUTER PROGRAM EPA’S computer program, ABEL, assists in evaluating the financial health of for—profit entities, based on the estimated 5trerlgth of internally—generated cash flows. ABEL uses financial ‘information on a violator to evaluate the overall financial health of a violator (step 3 above). The program uses standard ------- —5— financial ratios to evaluate a violator’s ability to borrow money and pay current and long-term operating expenses, ABEL also projects the probable availability of future internally—generated cash flows to evaluate some of a violator’s options for paying a civil penalty (step 4 above). EPA is developing a user’s manual to provide self instruction in the use of ABEL in addition to the documentation and help aids in the computer program. Exhibit 1 is a hypothetical use of ABEL to evaluate a violator’s financial health. If the ABEL analysis indicates that a violator may not be able to finance a civil penalty w ith internally—generated cash flows, EPA should check all available financial information for other possible sources of cash flows for paying a civil penalty. For example, in corporate tax returns, item 26 of Schedule A (cost of goods sold) sets forth deductions for entertaining, advertising, and professional dues. Schedule E shows the compensation of officers. In Schedule L (balance sheets), item 8 sets forth invest1 tents that may include certificates of deposit or money market funds. These types of assets and expenses do not directly affect operations and may vary considerably from year to year without adversely affecting the violator’s operations. Because a civil penalty should be viewed as a one—time expense, these kinds of assets and expenses could be sources of cash for a civil penalty. Using the sources of financial information from the example. above, liquid assets such as certificates of deposit and money market funds could be used to pay a penalty. Expenses for advertising, entertaining, or professional dues could be reduced for a short period to pay a civil penalty. A corporate officer might even be willing to take less compensation for a short period. A combination of options like these may produce enough cash flow to pay a civil penalty without causing the violator extreme financial hardship in meeting operating expenses. At ta chrnent ------- SECTION A DOCUMENT 2 Guidance on Certification of Compliance with Enforcement Agreements 07/25/88 ------- 01/11/1900 14:37 FROM TO 82604201 P.03 I 1) ‘ I ri: E\’ IRO\ML.\T.%L PROTUTIO’ ;CE CY _____ • t ‘HI\(.TO”. D.C.. — - JL25 .. s. ..i • i..•. .. S *¼1.. %I? 5’. te. .%. EMOR NDUM SU JFC’ : (uidance on Ce:tit’iCatiofl of Com,liance wit E fotcemeflt oreementS Thomas t. . dams, :r. Asststaflt p dmintstratOr for Enforcement and Co ipliance monitoring TO: As$tSt aflt Administrators ReqiOna3. Administrators Regional CounSels I. 8AC GROO Over the past several years, EPA has Initiated record numbers of civil udjcial and administrative enfOtCefl flt aCtiOflS . The vast majority of such actions have been resolved by judicial consent aecree or administrative consent order. The terms of many of these settlementS require the violator to oerform spectric tasks necessary to returfl to or demonstrate comoliance, to accomplish sDeciftc envirOn ertt&l cleanup or other remeatal steps. anø to take prescribed environmentallY beneficial act I on. Settlement agreements typically specify that the violator perform certain resuired activities and tt ereafter report tne r accomolishment to EPA. YerifiCation that the required activities have actually been accomplished is an essential element tfl the overall succeSs of the Agency’s enforcement program. Ir. PURPQ The focus of this advisorY auidaflce is on verification of comp1i anCe with settlement aareemeflts wbiCfl requite epecific performance to achieve or maintain compliance with a regulatory standar’ . EP has oncoinc t SpOfl ibtlitY 0t ensuring tnat settling parties ate in compliance with the terms of their neqotiat d acreementS. To tnts end, the agency may require that a responsible official (as th&t term is defined herein) p tson lly atte9t to thC accuracy of information contained in comoliance documentS made available to EPA pursuant to the tQ I S of a settl* flt agreement. ------- 01/11/1900 14:39 FROM 10 92604201 P.04 —2— The inspection programs of !PA and other federal regulatory qencles arebaeed of necessity on the concept that a limited number of r 4aeed facilities viii be inspected each year. Conversely,tMs means that a large number of regulated parties can operat. for extended periods of time without being the Sub eet of an on—site tnsDection by EPA staff. ?ence, it is crucial to ensure that all recuired compliance reports are received trQm tr e regulated facility in a timely tD nher. tn addition—rand ecuelly as imoortartt-—tiruely review of such reports must be,undertaken by EPA to ensure that the reports ace: deau.ate under the terms of the settlement agreement. EPA experience showS that the majority of regulated parties make cood faith efforts to eomDly with their responsibilitiez under th environmental laws and regulations. Nevertheless, trie ency must have effective monitoring procedures to detect instances of noncompliance witn a settlement agreement. A vita]. component of these orocedures will be to ensure that the environ- mental re uits Obtained in the enforcement action are indeed achieved and that criminal sanctions, where appropriate, are available to respond to instances of intentional misrepresentation or fraud committed by such violators. EPA will ensure that all responsiole officials entering into settlement aqreements with the Agency are held accountable for their subseauent actions aria the actions of any subordinates respon3ible for the information contained In compliance reports ubmiteec to the Agency. 111. GUIDANCE A. certification by Responsible co otate _ Qfjicia r e terms of settlement agreements, as well as any certifi- cation languaae in eubsequent reports to the Agency, should be draftec in a manner to triqger the sanctions of 18 C.S.C. ‘1001, / in the event that false information is knowingly and willfully sub ittod to EPA. Submission of suCh false information jjUnited—State Code, Title 18, Section 1001 provides: WhoeVer, in any matter within the jurisdiction of any department or agency of the United States know- ingly and willfully falsifies, concea1S r covers up by trick, scheme, or device a material fact, or makes any false, fictitious or fraudulent tatemeflt5 or representations. or makes or uses any false writing or document knowing the same to contain any false, fjetitious or fraudulent statement or entry, shall be 3 ------- 01/11/1900 14:38 FROM TO 82504201 P.05 —3— may also expose the defendant(s) in judicial consent decree 41sifieattOn incidents to both Civil and criminal Ontempt This provision of lay is a key sanctior within the federal criminal code for dtscour 1glna any person from intentionally deceivina or misleadina the tjnjted States covernment. .•] $icnatori _ Peoort Set -1e ent aareeme ts s tou1d specify that a3.l future repcrts by the settling parry to t e gency, hich purport to document compliance with the terms of any acreement, shall be signed by a responsible offictal. The term TM responsible official means a foUows:, ’ a. or a coroor tion : a responsible corporate otricer. resPonsible corporate o icer weeps; (a) A president, secretary. treasurer or vice—president of the corporation in charge of a principal business function, or any other person who performs similar policy— or decision—making functions for the corporation, or (b) the manager of one or aore manufacturing, oroduction, or operating facilities employing more than 250 persons or having gross annual sales or expenditures exceeding S 5 million (in 1987 dollars when the consumer Price Index was 34S.3) if authority to sign documents has been assigned or lelegated to the manager in accordance with corporate procedures. b. Pot a partnership or sole _ Droprietoraht a aeneral partner or the proprietor, respectively. 2. When to e ji .re a CertjfiCatiOfl _ $t4t! flt The recuirement for an attestation by a responsible offtci l is always useful as a natter of Sound regulatory manacement practice. Such a requirement is wore urgent, (Note 1, cont’d) fined not more than $10,000 or Imprisoned not more than five ytars,or both.’ There are four basic elements to a SectIon 1001 offense: (1) a statement: (2) falsity: (3) tne talse statement be wade ‘know— inaly and willfully”: and (4) the false statement be made in a matter within the urisdLction of any department or agency of the Onited States . Jnited States v. ( 4archlsiO , 344 £.2d 653, 666 (2d cir. 1965). 2/ For t PDE matters, the definitions of “responsible official’ end ‘certification’, as set forth in 40 Cfl 5122.22, way be used s alternative language to this guidance. 4 ------- ø1/11/19 14:39 FROM TO 826 42O1 P. 6 however, where a regulated party has a history of noncompliance or where prio_r violations place one’s veracity into question. 3/ 3. Thr!a _ ef a CerticatjoSt t. ent An example of an appropriate certification statement for n reports suomitteø to tne Agency by regulated parei .es who re .siqnatory to a settlement agreement is as fo11o s: “t ceettty that tne information contained in or accomoanyina this (submission) (document) is true, curate, an complete. “As to (the) (those identified portion(s) of thLs (submission) (document) for which I cannot personally verify (its) (their) truth and accuracy, I certify as the company official havtnc supervisory responsibility for the person(s) wno, acting under my direct instructions, made t e verification, tha this information is true, accurate, and complet .” 4 / 8. Documentation to Verify Compliance Typical settlement agreements reauire specific steps to be undertaken by the Violator. As CPA statf members engage in settlement negotiations and the drafting of settlement documents, they ShQUld identify that documentatIon which constitutes t e 3/While oersonal liability is desirable to promote compliance, It Snould be noted that corporations may De convicted under 18 u.s.c. siool as well. A corporation may be held criminally responSible for the criminal aces or its employees, even if the actions of the employees were against corporate policy or express instructions. see u.S. _ v. Automated Medical boratories , 770 F.2d 339 (4th dr. 1985); D.S v. Richmond , 700 F.2d 1183 (8th CU. 1983). Moreover, both a corporation and its agents may be convicted-for the same offense. See U.S. V. Basic Construc- tion Co. , 711 r. 2d 570 (4th Cit. 1983). -— V 4/ it is inevitable that .n negotiating consent agreements, Counsel for respondents will seek to insert Language in the certUlcation statement as to the truth of the submissions to be to tfle beet information’ or to t e “fullest understanding” or “belief” of the certifier. Such qualifiers should not be incorporated, since the provisions of 18 U.S.C. 51001 proviae for prosecution for making false statements knowingly and wIJltuily— —not for forming erroneous beliefs, etc. 6 ------- 01/11/1900 14:40 FROM TO 82604201 P.0? most userul evidence tnat the action required nas actually been undertaken. The most useful evidence would be that information or doCumet’*t ’Dn that best and most easily allows trie Agency to verify compliance with the terms (including milestones) of A settlement agreement. Examples of documentation to substantiate compliance include, but are not limited tO, invoices, work orders, dt. posal records, and receipts or manifests. Attachment is a suacested type of checklist that can be dev L.oped tor use within e Ch program area.j( The Checklist irk1uc1e. xaz ples or ciEic doeum ritary evidence wh Cn can be required to substantiate that prescribed actions have, in fact, Deen undertaken. V. SUMMARY This cuidance is to orovide assistance to CPA employees who negotiate and dra t Settlement documentS It is appropriate when circumstances so dictate that such documents contain sufficLent certification language for ensuring, to t e maximum extent possible 1 that all reports made to EPA, pursuant to the terms of any settlement agreement, are true, accurate, and complete, and that such reoorts are attested to by a responsible official. The Aqency must incorporate within its overall re’uletory framework all reasonable means for assuring compliance by the regulated community. The inclusion of compliance certification language, suoported by precise documentation requirementa, in necotiated settlement agreements may, in appropriate instances, mean the difference between full compliance with botfl tfl letter and the spirit of the !a , and something less than full. compliance. In the case of the latter, the violating patty is then subiect to the Sanctions of the federal criminal code. Attachment A 5/ EPA or a State may beunable to confirm the accuracy or certifications for an extended period of time. Therefore, It is suggested that, whenever certification by a respondent/ defendant is recuired. the order/decree provide that back up documentation-—SUCh as I.aDoratory notes an materials of the types listed in the examples in the text above——be retained for an appropriate period of tirne, suctt as three years. See, tor example, the 3 year retention time in 40 CF 5122.41(j)(2). ( 2 ------- MEAP O CP.R’rTPYiPP 4PLDRCE WITh C S UT ?IGREDm rS (Examples) ct on Pequl red By c sen QTe t purchase polluti i ccmtrol 3 equLpnent. ‘Insta) lat Inn J osxpo}na operiitlcn and in- I tenance Meet ttscharge levels I tratsfonners 4 Do risk gtuty 3’Hire oy,e9 ‘Use ccr lying coat it%9 / * ajn q)1( PeeS 1 .g.. work I’set up environmental au4ittnq I unl’ Violator’s utticial I Certifies That: ‘ qu1pnent pirchased lxcuments ft cccn anyInq Certif k &LLOn •tnvo iCe p •lntrotce (or work with photo’grapb *cont nucAts oiirorIn .p tape ‘per jodfr sdmp1 ? (I?SL*It ‘Maintenance of records r ‘Cant triucus monitoring tapes ‘periodic sample results ‘Photographs 4 study rerxrt and recoivendatlons 3 Persoflne1 records •Poeit Ion descriptions ‘Entry on duty dates ‘Salary data 1 ’bocuments to verity VOC content •P dueat tonal m terta s and reocrdp of e ce at *S p as above re: personnel ‘thartec of audil qrc*ip ‘Equl pnent ‘Operating Installed and tested as required ‘niacharge levels have been x et ‘Transformers have been Labeled ‘ ,dy has been con leted ‘ rçIoyeeS have been hired ‘Verifylrici c çlyincj coatings ‘ ployea trainIng baa been p1pted ‘UnLt baa beer, established j ’Orlentation and LnstrucUon I ccnpleted —4 0 on nP t paqe) M1AO YI’ A ------- (continued rr i prevU is paqe) M2.ANS OP cgm’ COWLTANCE wim cu& (ER tes) I I I C Action Required By consent AqTtei %cl* Violator’s Off Ictal Cert:ifie8 That: Documents AcorpanyIr g Cert1fication ‘Dispose or pc I’Pcas disposed of In lawful I rr nnec I ’Coples of manifests I ’Replace PCB transfo wier8 New transfonners Installed •Ccipies o purchase and In3tal— Jat ion receipts I ’Reaiater pesticide certirl— f ’Appllcator certification has cation of applicator- I been accorpliahed J*copl s 01 certificates I ‘Remove cancelled prO&ct fran the market I I 1 ’Tlemoval has been acco.pllshed ‘Copies 01 correspondance with I customers and cFocwtwntat ion J of removal I I’Copies of custaner Lists or p independent verification by —--—-—---____j.EPA and states I p •ccirply with asbestos removal ‘Cc plIance with asbestos removal ‘(.1st of locations o all joi s and disposal re ilations and disposal regu 1ations on a jth-by—job basis I p * nft waste stream ‘ *tate stream has been property ‘Dløcharqe Honitoring Report I 1 monItored ‘S1udC r nova1 ‘Sludge removed by milestone ‘Copies of invoices on sludge deadline removal ‘Croundw tet monitoring acccr- ‘2/Pt (quality analysts) testes pushed in appropriate manner certification by laboratoy I ’Soi1 sairpiea collected and I’Same a above I I analyzed in specified mar ner I •ContamrInated soils removed and ‘Copies of contract documéi ts disposed of in oonpliance and manifests with RC A -—— f ‘COnJJCt qr( Jflt%iater monitorIF*(1 ‘Collect arid analyze soil 1*Remove contaminated soils nd dIgIx)se of In cxrpltarice with RCR?. — ii 0 - 0 ------- SECTION A DOCIJNENT 3 Use of Stipulated Penalties in EPA Settlement Agreements 01/24/90 3 ------- UNITED STATES ENVIRONMENTAL PROTEC’J IO AGENCY WASI(INGTON,D.C.2o460 43 JAN 2 4 1993 I \ I ‘.1 • (,1P1 I ’ I. I , MEMORANDUM SUBJECT: Use of Stipulated Penalties in EPA Settlement Agreements _ _.—‘ - FROM: James M. Strock_.f J Assistant Administrator TO: Addressees This memorandum provides guidance on the use of stipulated penalties in settlement of enforcement actions. For each issue discussed, a preferred approach is stated along with its rationale. These preferred approaches should be followed “absent unusual circumstances dictating an alter- native approach. The guidance applies to judicial settle- ments except that it does not supersede the September 21, 1987 Guidance on the Use of Stipulated Penalties in Hazardous Waste Consent Decrees. It also applies to administrative cases where EPA has legal authority to assess stipulated penalties. Stipulated penalties are penalties agreed to by the parties to a settlement agreement for violation of the agree- ment’s provisions. These penalties are then made a part of the agreement, and are enforceable if it is violated. In EPA settlement agreements, the primary goal of a stipulated penalty is to act as an effective deterrent to violating the settlement agreement. I. Types of Requirements to Which Stipulated Penalties Should Apply Any clearly definable event in a settlement agreement may be appropriate for stipulated penalties in a given case. Such events include testing and reportingrequirements, interim and final milestones in compliance schedules, and final demonstration of compliance. The government litigation team assigned to a case should carefully consider which ------- —2— consent agreement provisions are appropriate for stipulated penalties and be prepared to vigorously enforce them. Stipu- lated penalties can even be attached to consent agreement provisions requiring payment of up-front penalties so long as the stipulated penalties are higher than the interest, - ccmputed at the statutory interest rate, onthe underlying amount. Every consent agreement requirement to which stipu- lated penalties are attached should be drafted to ensure that the standards for determining compliance are clear and objec- tive, and that any information required to be submitted to EPA is clear and unequivocal. In general, stipulated penalties are particularly impor- tant for requirements of the consent agreement which do not represent regulatory or statutory violations for which the agency could potentially get statutory maximum penalties. Such provisions may include a requirement to install specific control equipment where the regulations and statute involved require only compliance with a discharge or emissions stan- dard, or environmental auditing or management requirements designed to ensure future compliance. Without stipulated penalty provisions, penalties for violation of such provi—- sions in judicial cases are only available at the judge’s discretion in a contempt action under the court’s inherent authority to enforce its own order. Attaching.stipulated penalties to violations of consent agreement provisions which are also violations of a statute or regulation with a specified statutory maximum penalty has advantages and disadvantages which Agency attorneys should consider carefully in the context of a particular case. The advantage is ease of enforcement. The Agency can pursue violations without having to bring a new enforcement action or, in the judicial context, a contempt action. The disad- vantage is where stipulated penalties for such violations are set at less than the statutory maximum, parties may argue that the government has bargained away some of its enforcement discretion. If a particularly egregious statutory or regulatory violation occurs for which the government feels the applic- able stipulated penalties are not adequate, sources may claim the government is equitably estopped from pursuing other enforcement responses. Sources may argue in the context of a contempt action or new enforcement action that the govern- ment has already conceded in the consent agreement that a fair penalty for this type of violation is the stipulated penalty, and therefore, the court should not require any ------- —3— additional penalty. Sources may make this argument even if the government has reserved all rights to pursue various enforcement responses for consent agreement violations. 1 II. vel of Stipulated Penalties Because the statutes EPA is charged with enforcing vary so widely, penalty schedules for all media or types of viola- tions are not practical. There are, however, several impor- tant criteria which should always be considered in setting stipulated penalty amounts. Each program office, in concert with the appropriate OECN Associate Enforcement Counsel, may want to consider providing further, more specific guidance on appropriate levels or ranges for stipulated penalties based on the criteria below. One key element which applies to setting the levels of all stipulated penalties for violation of a consent agreement provision is that the defendant is by definition a repeat offender when the provision is violated. For this reason, such stipulated penalties should be higher on a per day basis than the initial civil penalties imposed. See Guidelines for Enforcing Federal District Court Orders in Environmental Cases (GM—27). The economic benefit accruing to a source due to a violation should be recovered in order for the stipulated penalty to be an effective deterrent. For some types of violations, such as notice provisions, the economic benefit of noncompliance may be minimal, though significant stipu- lated penalties may be appropriate based on other criteria as discussed below. For these types of violations, no formal BEN analysis is necessary. For violation of provisions which involve quantifiable delayed or avoided costs, such as installation of control equipment as part of a compliance schedule, the minimum stipulated penalty should be the economic benefit of noncompliance. However, the recidivism factor will nearly always justify a penalty well above this minimum, which often serves as the point of departure for a minimum initial penalty. The source’s ability to pay can be another important criterion to consider. How much of a deterrent a stipulated penalty is will depend on how financially significant it is to the source. The same stipulated penalty may be 1n considering whether to attach penalties to violations uncovered by an environmental audit, the November 14, 1986 Final EPA Policy on the Inclusion of Environmental Auditing Provisions in Enforcement Settlements (GM-52) should be consulted. ------- —4— financially crippling to one source, while merely a routine business expense for another. However, the burden is always on the defendant to raise such issues during negotiations and to justify lower stipulated penalties than the government has proposed. Financial ability to pay a penalty can be determined using the ABEL computer program for corporate violators and the MABEL computer program for municipal violators. It should be emphasized that this factor should not be considered a reason for lowering the level of stipulated penalties below the level equal to the economic benefit. It would mainly affect the degree to which this base minimum amount is increased to account for the recidivist nature of the violation. The key concern is that stipulated penalties should be set at levels which are significant enough to deter violations rather than resulting in a “pay-to—pollute” scheme. Another criterion which should be considered in setting stipulated penalty amounts is the gravity of the violation, i.e. , how critical is t ie requirement to the overall regulatory scheme and how environmentally signif i-cant is the violation. The environmental significance factor should include consideration of potential and actual harm to human health and the environment. In general, consent agreement provisions which are central to a particular regulatory scheme should have higher stipulated penalties than provisions that are considered less significant. It is up to each enforcement program to ma ce judgments about the relative importance of respective requirements. As previously noted, some consent agreement requirements such as notice provisions may have little or no associated economic benefit, but may nevertheless be critical to the regulatory program in question and would warrant high stipulated penalties. Another consideration related to the gravity component is the source’s history of compliance. If the source has a record of previous violations, a high r stipulated penalty may be necessary because earlier enforcement responses were ineffective in deterring subsequent violations. Another option to consider whenever setting stipulated penalty levels is an escalating schedule, in which the stipulated penalty increases with the length of the violation. For example, violations of up to two weeks might have stipulated penalties of $1000 per day while violations of two to four weeks might have stipulated penalties of $2000 per day, and so on. ------- —5— III. Method of Collection Settlement agreements should state the method by which stipulated penalties will be collected. Two options are for the settlement agreement to provide that the penalty is - automatically due upon the occurrence or n6n-occurrence of a specified event, or it may make the penalty payable only on demand by the government. Automatic payment is the preferred approach. It saves resources which would otherwise be devoted td making demands for payment and may put the government in a more advantageous position should the source declare bankruptcy. If payment is made on demand, the consent agreement should make it clear that the legal liability of the source for the stipulated penalty attaches immediately upon violation, and it is only payment of the penalty to the Agency which is not due until demand is made. Settlement agreements should always state where and how the penalty should be paid and how the check should be draft- ed. See EPA Manual on Monitoring and Enforcing Adjitinistra- tive and Judicial Orders for additional guidance. In addition, settlement agreements should riot agree to pre- enforcement review of accrued stipulated penalties. IV. Timing of Enforcement Responses Prompt action to collect stipulated penalties due under any consent agreement is crucial. If stipulated penalties are due on demand, it is very important such demands be timely. The government encounters significant difficulty collecting stipulated penalties if it sits on its rights. Delay allows penalties to increase to levels parties may argue are inequitable. Sources may also raise equitable defenses such as laches or estoppel, arguing that the govern- ment cannot fail to exercise its rights for extended periods of time allowing stipulated penalties to continue to accrue and then move to collect unreasonably high penalties. The government, of course, can and should always rebut such claims by arguing it is simply enforcing the decree or agree- ment as agreed to by defendant, and is not subject to such equitable defenses. However, this unnecessary complication should be avoided. A cap on the amount of stipulated penalties which can accrue is generally not a preferred solution to this problem. The stipulated penalty would lose its deterrent value once the cap is reached. Also, the main goal of any enforcement action must be compliance with the law so that public health and welfare is protected. If consent agreement provisions ------- —6— are allowed to be violated long enough for a cap to be reach- ed, serious environmental consequences may have occurred. Providing that stipulated penalties only apply for a specific, reasonably short period of time in conjunction with reserving to the government all available enforcement respon- ses for violation of the consent agreement, however, solves many of the problems mentioned above. By its own terms, stipulated penalties will not accrue to levels defendants can argue are inequitable. The government will be in a strong position when it pursues other enforcement options, such as contempt actions or a new enforcement action to get additional penalties, because it can argue that the penalties in the original consent agreement were not enough to deter the defendant from further violations and the possibility of additional penalties was clearly contemplated. V. Reservation of Ri hts All consent agreements must contain a provision which reserves to the government the right to pursue any legally available enforcement response for violation of any consent- agreement provision. These enforcement responses would include civil contempt proceedings and injunctive relief, and criminal contempt proceedings for particularly egregious violations. However, for provisions mandated by statute or regulation and which have stipulated penalties attached, a reservation to pursue statutory penalties is suggested but not required. For model language, see the October 19, 1983 Guidance for Drafting Judicial Consent Decrees (GM-17). VI. Collection of Stipulated Penalties The government should be prepared to collect the full amount of stipulated penalties due under a consent agreement. No agreement should ever anticipate compromise by specifying instances where it will be allowed, aside from a standard force majeure clause. In rare, unforeseeable circumstances, however, the equities of a case may indicate that the govern- ment may compromise the amount it agrees to collect. For penalties payable on demand, the government may also exercise prosecutorial discretion by declining to proffer a demand for stipulated penalties for minor violations of a consent agree- ment. It may also be appropriate to provide that stipulated penalties for violation of interim milestones in a compliance schedule will be forgiven if the final deadline for achieving compliance is met. This is clearly inappropriate where there is significant environmental harm caused by the defendant missing the interim deadlines. If such a provision is used, ------- —7— the defendant should generally be required to place accrued penalties in an escrow account until compliance by the final deadline is achieved. In judicial cases, the Attorney General and his - delegatees in the Department of Justice (DOJ) have plenary prosecutorial discretion to cdmproxnise stipulated penalties. This authority stems from 25 U.S.C. § 516, which reserves to DOJ authority to conduct the litigation of the United States, including cases in which an agency of the United States is a party, and the cases and regulations broadly interpreting this authority. In administrative cases handled solely by EPA, stipulated penalties should be collected pursuant to the enforcement authority granted to EPA under the statute gover- ning the case. This authority to collect and compromise stipulated penalties varies from statute to statute. Separate from the process for collecting stipulated penalties, EPA must keep track of money owed the federal government ‘(accounts receivable) resulting out of the acti— vities of the Agency, including administrative penalty assessments. A stipulated penalty becomes an account receiv- able when the appropriate Agency official determines that a violation of a consent agreement provision with an attached penalty has occurred. Under Agency financial regulations and policies for monitoring accounts receivable, stipulated penalties due and owing-must be reported within three days to the Regional Financial Management Office (FMO). The FMO is responsible for entering the stipulated penalty as an accounts receivable into the Agency’s Integrated Financial Management System (IFMS). The tt appropriate agency official” who determines the existence of a stipulated penalty account receivable is responsible for keeping the FMO updated on the status of enforcement penalty collection efforts. A more detailed account of these procedures is included in the Manual on Monitoring and Enforcing Administrative and Judi- cial Orders. Addressees: Regional Administrators Regions I-X Deputy Regional Administrators Regions I-X Regional Counsels Regions I-X ------- —8— E. Donald Elliott General Counsel Headquarters Coi pliance Program Divisions Directors Mary T. Smith, Acting Director Field Operations and Support Division Office of Mobile Sources David Buente, Chief Environmental Enforcement Section U.S. Department of Justice Associate Enforcement Counsels Workgroup Members ------- SECTION A DOCUMENT 4 Documenting Penalty Calculations and Justifications in EPA Enforcement Actions 08/09/90 4 ------- it 0 ST 4 1 . UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460 4 L pq AUG 91990 OFFICE OF JEMORANDIJN ENcORCEMENT ceur ..; .u I.I 1.IT&1WIS SUBJECT: Documenting Penalty Calculations and Justifications in EPA Enforcexnen )ç FROM: James 11. s j r Assistant Administrator TO: Addressees This memorandum institutes a uniform system for documenting penalty calculations and explaining how they are consistent with the applicable penalty policy in all EPA enforcement actions. It expands on the September 14, 1987 Guidance on Processing of Consent Decrees (GM-64) and requirements in several media specific penalty policies. The system will allow regional and OE management to assure that EPA settlement agreements comply with applicable penalty policies, and will provide documentation for our actions forpurposes of oversight review. The memorandum sets out the information regarding the penalty which must be discussed at each stage of litigation. The exact format of the discussion is left to the discretion of each program. All discussions of the agency’s settlement position regarding penalties are, of course, strictly enforcement confidential workproduct, should be clearly labeled as such and should not be released. Effective immediately, every settlement package transmitted from the Regional Administrator or Regional Counsel to Headquarters for concurrence must include a written “Penalty Justification.” This should include an explanation of how the penalty, including the economic benefit and gravity component, was calculated. The Region should then discuss in detail the justification for any mitigation of either component. In particular, reference should be made to the factor or language in the penalty policy that is relied upon to justify the mitigation, and a discussion must be included detailing why mitigation is warranted in the particular case. For administrative cases, a Penalty Justification should be prepared for circulation within the Office of Regional Counsel with a final consent agreement or order. It may not be circulated to the agency official who signs the final order as the presiding agency official, usually the Regional Administrator, because it could constitute ex art communication which would have to be shared with defendants under 40 C.F.R. Part 22. Pnnred on Pecy ed Paper ------- —2— when the factor relied upon to justify mitigation is litigation risk, the Region should state the probable outcome of litigation alonq with legal arid factual analysis which supports tts conclusion. For judicial cases, this should be done in consultatLon with the Department of Justice. Specific discussion of the evidentiary problems, adverse legal precedent, or other litigation problems in the case should be included. If the required discussion of the penalty is contained in the litigation report or subsequent correspondence between the ORC and OE, the settlement package from the Region may ref.r.nc. this discussion along with an attachment of the previous documentation. A similar discussion of Penalty Justification should also be included in every settlement package transmitted from the Associate Enforcement Counsels for the signature of the Assistant Administrator. The Headquarters staff may, however, reference the discussion in the regional memorandum when it ii sufficient. Seriously deficient Penalty Justifications will be returned to th• Region to allow a proper analysis to be pr.par.d, before the Assistant Administrator for Enforcement reviews a consent decree for signature. - In addition, each Office of Regional Counsel case fil, and all 0* files in cases in which 0! is involved should contain at all times during the coure. of an enforcement action documentation of the current bottom line agreed upon by the litigation team. For civil administrativ, cases, this will begin with the filing of the administrative complaint. For civil judicial cases, this will begin with the litigation report, which should include the penalty proposed by the Region initially. The litigation report should clearly indicate how the gravity and economic benefit components vsrs calculatad under the applicable penalty policy and discuss in detail any mitigation that is proposed. Significant uncertainties which could result in further mitigation should also be identified. The 0! attorney assigned to the case viii then determine if 0! concurs with tM.p.nalty proposed by the Region in reviewing the referral. OR concurrence will be documented in writing, plac.& La the 0* case til. and provided to the Region. If 0! doss concur with the penalty proposed by the Region in the ref.rr the assigned 0* attorney will prepare a memorandum to the P t stating with specificity the basis(es) of the nonconcurrence. Once the enforc*w t action is initiated or pr.-’filinq negotiations begin, the litigation teem should document any agreed upon cbanqea to the bottom line penalty based upon new information or circumstances which arise during the course of the enforcsav t action. This doc1 ntation must, at a minimum, ------- —3 include a memorandum to the file recording how both the gravity and economic benefit components were calculated, the basis in the applicable penalty policy and in the specific facts of the case for any mitigation, and the changed circumstances or new information which justify modification of the bottom line. This will be especially beneficial in cases where there are changes in the litigation team over time. It will enable new attorneys assigned to the case to know what the current bottom line penalty is and how that has been determined over the course of the case. These requirements will serve several functions. It will ensure that management has adequate information to judge consistency with the applicable penalty policies in specific cases and in the various enforcement programs overall. It also will ensure that every regional case file and all OE files in cases in which OE is involved have written documentation of how the penalty obtained was calculated and justified in terms of the penalty policy. This is essential for reviews or audits of our settlements. Addressees: Regional Administrators Regions I—X Deputy Regional Administrators Regions I—X Regional Counsels Regions I—X E. Donald Elliott General Counsel Headquarters Compliance Program Division Directors Associate Enforcement Counsels Richard B. Stewart Ass istant Attorney General Environment and Natural Resources Division U.S. Department of Justice ------- SECTION A DOCUMENT 5 Outside Communications Regarding Matters Investigation, in Pre—LitigatiOn Stages, or in Litigation NOTE: This is EPA Ethics Advisory 90—2 10/26/90 ------- D ST 4 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASH NGTON,D.C. 20460 L pRO d J 24 ‘ o OFFICE OF GENERAI.COIJNSEL EPA Ethics Advisory 90-2 SUBJECT: Outside Communications Regarding Matters Under Investigation, in Pre-Litigation Stages, or in Litigation FROM: Gerald H. Deputy Gener Counsel Designated 4gency Ethics 0 fi’cial TO: Deputy Ethics Officials The purpose of this Ethics Advisory is to discuss how EPA employees should deal with verbal and written inquiries from outside parties (especially attorneys) concerning EPA matters known to be in litigation, in pre-litigation stages (e.g., negotiation), or under investigation. Unlike litigation between individuals, where an attorney’s communication with a party represented by counsel is strictly limited, 1 an attorney representing a party in litigation with the Agency ma not be prohibited per se from communicating with the Agency,’ depending on the jurisdiction. 3 Accordingly, EPA employees ABA Model Code of Professional Responsibility, Disciplinary Rule 7-104; ABA Model Rules of Professional Conduct, Rule 4.2. 2 ABA Model Rule 4.2 states that communications “authorized by law include, for example, the right of a party to a controversy with a government agency to speak with government officials about a matter.” The Comments on the Rule state that opposing counsel are otherwise generally barred from communicating “with persons having managerial responsibility on behalf of the organization, and with any other person whose act or omission in connection with that matter may be imputed to the organizatjon...or whose statement may constitute an admission....” See also Upiohn Co . v. United States , 449 U.S. 383 (1981). Rule 4.2 of new District of Columbia Bar Rules effective January 1, 1991, require only that attorneys “disclose to such employee both the lawyer’s identity and the fact that the lawyer represents a party with a claim against the employee’s employer.” ------- 2 must be alert to situations where opposing counsel seeks to communicate with EPA attorneys or officers or employees in the affected EPA program office about a matter under investigation or in litigation. In addition to attorneys, outside parties may also include States or members of Congress, as well as the general public. Although EPA maintains a cooperative relationship with States, they may occasionally be adversaries in litigation. In addition, even where EPA could furnish such information to Congress itself, 4 inquiries from individual members of Congress or their staffs regarding matters which are under investigation, in pre-litigation stages or in litigation should be handled the same as any other outside communications. When such communications occur, EPA employees must be careful not to disclose non-public information that will interfere with an investigation or litigation. Providing “expert opinions” and advisory interpretations in connection with such matters should also be avoided (unless such opinions and interpretations have been formally adopted by the Agency).• Communications concerning various types of matters should be handled as follows: Federal Matters in Litigation When a communication concerns a matter in litigation (either an enforcement action or defensive litigation), EPA employee’s must coordinate any response with the lead EPA attorney for the matter. For defensive litigation, this attorney will be in the Office of General Counsel (OGC) or the Office of Regional Counsel (ORC); for enforcement matters, this attorney will be in the Office of Enforcement (OE) or the Office of Regional Counsel (ORC); for enforcement matters arising under Title II of the Clean Air Act, the lead attorney will be in the Office of Mobile Sources within the Office of Air and Radiation (OAR). 5 When a case involving the Federal Government is before a court, the lead EPA attorney must consult with the Justice Department on the matter before providing any response. 4 The “Congress” includes the Speaker of the House, the President tenu ore of the Senate, and chairs of committees and subcommittees. OAR enforcement attorneys will either be in the Field Operations Support Division (FOSD) or Manufacturers Operation Division (MOD). ------- 3 Matters Affectinc State Enforcement Actions When a response may affect a pending State enforcement action, OE should be consulted before EPA provides any response. Criminal Matters When an outside communication concerns a criminal matter which has been referred to the Justice Department, EPA employees must simply refuse to provide a response. Such communications must be forwarded for response to the Department of Justice or the appropriate U.S. Attorney’s Office -- through OE’s Deputy Assistant Administrator for Criminal Enforcement for criminal enforcement matters or through the Inspector General Division in OGC for other criminal matters. As for matters under criminal investigation, EPA employees must state: “EPA has a policy to neither confirm nor deny the existence of a criminal investigation.” See OE memorandum dated December 22, 1989 from Assistant Administrator James Strock. Freedom of Information Act requests for documents concerning a criminal investigation should be directed to the Office of Criminal Enforcement or the Inspector General Division in OGC, as appropriate. *** Finally, EPA attorneys must comply with the duty to maintain the confidences and secrets of the client (that is, EPA) and to keep appropriate EPA personnel informed of communications relevant to the client office. See ABA Model Rule 1.4(a). EPA attorneys ordinarily should not communicate (and must advise other EPA employees not to communicate) with opposing counsel about a matter known to be in litigation, in pre-litigation stages, or under investigation without first consulting with the lead attorney for the matter. 6 Of course, when a matter is before a court, EPA attorneys must also consult with the appropriate attorney at the Department of Justice or the U.S. Attorney’s Office. cc: Office of Government Ethics 6 ABA Model Code of Professional Responsibility, Disciplinary Rule 7—104; ABA Model Rules of Professional Conduct, Rule 4.2. ------- TRANSACTIONS WITH PERSONS OTHER THAN CLIENTS RULE 4.1 TRUTHFULNESS IN STATEMENTS TO OTHERS IN THE COURSE OF REPRESENTING A CLIENT, A LAWYER SHALL NOT KNOWINGLY: (a) MAKE A FALSE STATEMENT OF MATERIAL FACT OR LAW TO A THIRD PERSON; OR (b) FAIL TO DISCLOSE A MATERIAL FACT TO A THIRD PERSON WHEN DISCLOSURE IS NECES- SARY TO AVOID ASSISTING A CRIMINAL OR FRAUDULENT ACT BY A CLIENT, UNLESS DIS- CLOSURE IS PROHIBITED BY RULE 1.6. COMMENT: Misrepresentation [ 1) A lawyer is required to be mithful when dealing with others on a client’s behalf, but generally has no affirmative duty to in- form an opposing party of relevant facts. A misrepresentation can occur if the lawyer incorporates or affirms a statement of another person that the lawyer knows is false. Misrepresentations can also occur by failure to act. The term “third person” as used in para- graphs (a) and (b) refers to any person or entity other than the law- yer’s client Statements of Fact (2) This Rule refers to material statements of fact. Whether a par- ticular statement should be regarded as material, and as one of fact. can depend on the circumstances. Ueder generally accepted con- ventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estin azes of price or val- ue placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim are in this category, and so is the existence of an undisclosed principle except where non- disclosure of the principle would constitute fraud. There may be other analogous situations. Fraud by Client (3 Paragraph (b) recognizes that substantive law may require a lawyer to disclose certain information to avoid being deemed to have assisted the client’s crime or fraud. The requirement of dis- closure created by this paragraph is, however, subject to the obli- gations created by Rule 1,6. RULE 4.2 COMMUNICATION BETWEEN1.AWYER AND OPPOSING PARTIES (a) DURING THE COURSE OF REPRESENTING A CLIENT, A LAWYER SHALL NOT COMMIJNICATE OR CAUSE ANOTHER TO COMMUNICATE ABOUT THE SUBJECT OF THE REPRESENTATION WITH A PARTY KNOWN TO BE REPRESENTED BY AN- OTHER LAWYER IN THE MA1TER, UNLESS THE LAWYER HAS THE PRIOR CONSENT OF THE LAW- YER REPRESENTING SUCH OTHER PARTY OR IS AUTHORIZF1) BY LAW TO DO SO. (b) DURING THE COURSE OF REPRESENTING A CLIENT, A LAWYER MAY COMMUNICATE ABOUT THE SUBJECT OF THE REPRESENTATION WITH A NONPARTY EMPLOYEE OF THE OPPOSING PARTY WITHOUT OBTAINING THE CONSENT OF THAT PARTY’S LAWYER. HOWEVER, PRIOR TO COMMUNICATING WITH ANY SUCH NONPARTY EMPLOYEE, A LAWYER M TST DJS LOSE TO SUCH EMPLOY E1O THE LAWYER’S IDENTI- TYAND THE FACT THAT THE LAWYER REPRE- SENTS A PA!TYYWrrHACLAIM..AGAINST THE EMPLOYEE’S EMPLOYER. (c) FOR PURPOSES OF THIS RULE, THE TERM “PARTY” INCLUDES ANY PERSON, INCLUDING AN EMPLOYEE OF A PARTY ORGANIZATION, WHO HAS THE AUTHORiTY TO BIND A PARTY ORGANIZATION AS TO THE REPRESENTATION TO WHICH THE COMMUNICATION RELATES. (d) THIS RULE DOES NOT PROHIBIT COMMUNI- CATION BY A LAWYER WITH GOVERNMENT OFFICIALS WHO HAVE THE AUTHORITY TO RE- DRESS THE GRIEVANCES OF THE LAWYER’S CU- ENT, WHETHER OR NOT THOSE GRIEVANCES OR THE LAWYER’S COMMUNICATIONS RELATE TO MATI’ERS THAT ARE THE SUBJECT OF THE REPRESENTATION, PROVIDED THAT IN THE EVENT OF SUCH COMMUNICATIONS THE DIS- CLOSURES SPECIFIED IN (b) ARE MADE TO THE GOVERNMENT OFFICIALTO WHOM THE COM- MUNiCATION IS MADE. ------- D C. RULES OF PROFESSIONAL CONDUCT COMMENT: [ I I This Rule does not prohibit communication with a party. or an employee or agent of a party. concerning matters outside the representation For example. the existence of a contioversy between two organizations does not prohibit a lawyer for either from com- municating with nonlawyer representatives of the other regarding a separate matter Also. parties to a matter may communicate direct- ly with each other and a lawyer having independent justification for communicating with the other party is permitted to do so 12] In the case of an organization, this Rule prohibits commnum- cauon by a lawyer for one party concerning the matter in represen- tation with persons having the power to bind the organization as to the particular representation to which the communication relates. If an agent or employee of the organization with authority to make binding decisions regarding the representation is represented in the matter by separate counsel, the consent by that agent’s or employee’s counsel to a communication will be sufficient for purposes of this Rule CompGre Rule 3 4(f) [ 31 The Rule does not prohibit a lawyer from communicating with employees of an organization who have the authority to bind the organization with respect to the matters underlying the representa- tion if they do not also have authonty to make binding decisions regarding the representation itself A lawyer may therefore com- municate with such persons without first notifying the organiza- tion’s lawyer See D.C Bar Legal Ethics Committee Opinion No 129(1983) But before communicating with such a “nonparty em- ployee. -. the lawyer must disclose to the employee the lawyer’s identity and the fact that the lawyer represents a party with a claim against the employer. It is preferable that this disclosure be made in writing The notification requirements of Rule 4.2(b) apply to contacts with government employees who do not have the authori- ty to make binding decisions regarding the representation. [ 4J This Rule also covers any person. whether or not a party to a formal proceeding. who is represented by counsel concerning the matter in question [ 5] This Rule does not apply to the situation in which a lawyer contacts employees of an org n’7 non fbr the purpose of obtaining information generally available to the public, or obtainable under the Freedom of Information Act, even if the information in ques- tion is related to the representation. For example, a lawyer for a plaintiff who has filed suit against an organization represented by a lawyer may telephone the orgarnzanon to request a copy of a press release regarding the representation, without disclosing the law- yer’s identity, obtaining the consent of the organlz2tlon’s lawyer. or otherwise acting as paragraphs (a) and (b) of this Rule require [ 6) Paragraph (d) recognizes that special consalerations come into play when a lawyer is seeking to grievances involving the government. It permits communicanons with those in government having the authority to redress such grievances (but not with any other government personnel) without the prior consent of the law- yer representing the government in such cases. However, a law- yer making such a communication without the prior consent of the lawyer representing the government must make the kinds of dis- closures that are required by paragraph (b) in the case of commu- nications with non-party employees [ 7] Paragraph (d) does not per ”t a lawyer to bypass counsel representing the government on every issue that may arise in the course of disputes with the government It is intended to provide lawyers access to decision makers in government with respect to genuine grievances, such as to present the view that the govern- ment’s basic policy position with respect to a dispute is faulty, or that government personnel are conducting themselves improperly with respect to aspects of the dispute. It is not intended to provide direct access on routine disputes such as ordinary discovery dis- putes. extensions of time or other scheduling matters, or similar routine aspects of the resolution of disputes. [ 8) This Rule is not intended to regulate the law enforcement ac- tivities of the United States or the District of Columbia. A body of law has been developed that recognizes both the authority of the government to seek to obtain statements from a suspect. and the Fifth and Sixth Amendment rights of the suspect The Rules of Professional Conduct do not apply to government conduct that is valid under this body of law. Generally speaking. Rule 4.2 will apply once a defendant is formally charged, elects to be represented by counsel, and obtains or is appointed counsel. But there are sim- anons in which a defendant who is represented by counsel will seek to communicate with the government without defense counsel’s be- ing aware of the communication. Some communications will serve to protect the defendant and to identify sham representations Al- though coninnmnicanons between charged defendants and the govern- ment without notice to defense counsel must be viewed with suspi- cion, such communications cannot be prohibited in all instances. RULE 4.3 DEAUNG WITH UNREPRESENTED PERSON IN DEALING ON BEHALF OF A CLIENT WITH A PERSON WHO IS NOT REPRESENTED BY COUN- SEL, A LAWYER SHALL NOT: (a) GIVE ADVICE TO THE UNREPRESENTED PER- SON OilIER THAN THE ADVICE TO SECURE COUNSEL, IF THE INTERESTS OF SUCH PERSON ARE OR HAVE A REASONABLE POSSIBILiTY OF BEING IN CONFLICT WITH THE INTERESTS OF THE LAWYER’S CLIENT; (b) STATE OR IMPLY TO UNREPRESENTED PER- SONS WHOSE INTERESTS ARE NOT IN CONFLICT WITH THE INTERESTS OF THE LAWYER’S CLI- ENT THAT THE LAWYER IS DISINTERESTED. WHEN THE LAWYER KNOWS OR REASONABLY IV—2 ------- SECTION A oocu wr 6 Credentials Certification Policy 06/ 13/9 1 6 ------- ‘I S UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460 .‘ I...’-, ... OFFiCE OF ENFORCEMENT MEMORANDUM SUBJECT: Credentials Certificatio licy FROM: Raymond B. Ludwiszew i Acting Assistant Adininist ator\ TO: Regional Administrators, Regions I - X This policy establishes minimum requirements for a credentials certification program for EPA technical enforcement staff prior to their designation or use as Agency witnesses. Background In August 1990, this office developed an options paper for establishing a credentials certification program for EPA technical enforcement staff. We distributed this options paper to the Regional Counsels for their initial reactions. The paper reviewed issues and options for establishing an EPA policy to require our technical enforcement personnel to certify the accuracy of their credentials. The need for this policy was underscored this past summer when we discovered that our main factual and expert witness on two water cases in one Region had misrepresented her academic credentials in a deposition and in an affidavit.’ The comments we received on the options paper raised a number of concerns, primarily related to resource investment. In accordance with these comments, we modified the initial program to reduce resource costs by allowing for greater regional flexibility in implementation. We distributed a draft of a revised credentials certification policy on February 15, 1991, for review to all Regional Counsels and Deputy Regional Administrators. Seven Regions responded to this modified policy, two of which were pleased with the revised policy and had no substantive comments. Two Regions continued to express some concerns about the resources needed to implement these certification requirements. The employee has since resigned from the agency, been indicted by a federal grand jury, and pled guilty to one count of perjury. She was sentenced on May 17, 1991 to six months home detention, five years probation, and a $2,000 fine. Printed on Recycled Paper ------- —2— In contrast, another Region was concerned that the revised policy’s reliance on a visual examination of a framed degree would not be adequate to determine if the degree was authentic and from an accredited institution. While this may be a valid concern, given our limited resources and the fact that we have not to date encountered any instances in which an employee has secured a degree through fraudalent means, we are prepared at this juncture to rely upon visual examination of degrees as a minimum certification. Another Region pointed out that even if personnel offices are performing an appropriate credentials review at the time of hiring, a problem may arise when an employee obtains additional credentials during his or her tenure at EPA. Since these new credentials would not have been subject to the initial hiring scrutiny, this Region suggested each Region require a periodic (e.g., yearly) sworn credentials update by each employee. We agree that keeping track of changes in credentials is a problem area. 2 The suggested annual update to address the problem appears to be a reasonable approach. It should work best if employees are required to provide official copies of the supplemental credentials to the personnel office or another central office. Regions are free to use this approach or they may rely on the ORC attorney initiated certification checks conducted before an EPA employee is identified as a witness. Several Regions expressed support for working with personnel offices to ensure that adequate proáedures are in place for verifying credentials at the time of hiring. Further, one Region pointed out the need to apply the policy to headquarters witnesses and to OE attorneys when OE attorneys are the lead attorney on the case. We found these and other comments helpful, and the final policy has been revised accordingly. In summary, as we all recognize, there is a trade-off between resources that may be devoted to implementing a certification program and the risk of a potential credentials falsification incident. We believe that we could not design and implement a certification program that would completely eliminate the risk of falsification. Thus, we have tried to structure a policy that will significantly reduce the risk of future credentials falsification problems without unduly straining limited enforcement resources. The policy should be flexible enough to allow each Region to develop an appropriate credentials certification program. 2 Indeed, this was the situation which caused the recent perjury incident. ------- —3— We are now asking each Region to establish a program that,. at a minimum, satisfies three basic requirements : Certification Check Each Office of Regional Counsel must establish procedures by which the ORC staff attorneys perform a credentials check of all EPA witnesses in our enforcement cases, before an EPA employee or contractor is allowed to sign an affidavit/declaration, be deposed, or testify on behalf of EPA. Similarly, we would not submit a list of witnesses to the opposing side (for a judicial trial or an administrative hearing) until the ].itigatioh team had verified the accuracy of the credentials of all of our witnesses. Each ORC attorney may ask the immediate EPA supervisor of, or the contracting officer for, each witness to perform an appropriate check of the credentials of his or her employee, or contractor, who will be a witness. The verifying official may perform this credentials check either by asking to see the person’s credentials (e.g., degree) or by calling the awarding institution. If the degree or professional accreditation is on display in our witness’s office, the credentials check may be as simple as reviewing the displayed credentials. If the verifying official has previously verified the employees’s credentials, there will be no need to perform another check (assuming the employee’s credentials have not changed). Alternatively, the Region may establish a central point (such as in the Region’s personnel or administrative office) to conduct such verifica- tions, or the Region may decide to have ORC attorneys conduct the credentials check themselves. 3 The verifying official, if not the ORC attorney, should document in a memorandum to the ORC attorney, that this verification has been completed and how the verification was accomplished. A standard form for this purpose can be developed. If the ORC attorney does the verification, the attorney should document this information in a memorandum to the file. This verification process applies to all persons who may testify on behalf of EPA, including EPA employees in the Regions, at EPA laboratories, or at Headquarters, and all contractors or consultants retained by EPA or the Department of Justice. If the ORC attorney has difficulty performing a credentials check of an EPA witness located at EPA Headquarters, the ORC attorney should solicit the assistance of the appropriate OE staff attorney. In Since witness lists and affidavits are often prepared during the press of litigation, Regions should ensure that the verifying procedures they establish can be implemented simply and quickly. ------- —4— cases where OE is the lead Agency attorney, the OE attorney is responsible for performing the certification checks (with the assistance of an ORC attorney for witnesses located in a Regional office). One option a Region may wish to explore is to have the - Region’s personnel office do a one-time independent verification check of the credentials of all Regional employees. If this was done for all existing employees and new employees were properly screened at the time of hiring, then ORC attorneys would only need to verify any new or additional credentials that an EPA Regional employee may have obtained during his or her tenure at EPA. While this option may entail the expenditure of considerable resources initially, in the long run it may save resources and will minimize the need to do full credentials checks during the rush of litigation. L.. Education and Training Each Region should educate their enforcement staff on the importance of truthfully representing their credentials in all dealings with the public, including enforcement cases. All employees should be informed of the negative consequences of falsification of credentials, both to the Agency and to the individual. Specifically, employees should be reminded what constitutes perjury, that it is a felony to lie under oath, and that falsification or even exaggeration of credentials may be grounds for immediate removal from their jobs and referral for criminal prosecution. In addition, employees should be reminded of the importance of truthfully stating their professional opinions. This information could be communicated via a memorandum to all Regional employees and should be integrated into Regional training programs. The Office of Enforcement will be stressing these same points in our basic inspector training manual. 3. Personnel Procedures Each Region should set up a meeting to review how its personnel office verifies that EPA Regional employees have the credentials they claim they have at the time of hiring. Please emphasize to your personnel offices the importance of their role in independently verifying credentials. These three requirements must be institutionalized as part of each Region’s standard operations and should be reviewed periodically to ensure that the procedures are being implemented. Please keep in mind that these three requirements are only a minimum and by themselves may not be a perfect system for eliminating the risk that the Agency will be hurt by a misrepresentation. ------- —5— Reauired Action Each Region should complete implementation of these procedures by August 15, 1991. Please advise me by no later-than August 30, 1991, of the actions you have taken to implement this policy. If you have any questions regarding this policy, you may call Scott Fulton, Director of Civil Enforcement, at 382-4540. David Hindin is the OE staff attorney contact, 475-8547. Thank you for your cooperation and assistance. Attachment cc: Regional Counsels, Regions I - X Charlie Grizzle, OAR ! ’! Associate Enforcement Counsels, OE Robert Heiss, OE Frank Covington, CE (NEIC) John Cruden, DOJ ------- SECTION A DOCUMENT 7 Procedures to Improve Coordination before the Environmental Appeals Board 7 xx/xx/ 92 ------- (C -, /h UNITED STATES ENVIRONMENTAL. PROTECTION AGENCY WASHINGTON DC 20460 1LPRO1t’ MEMORANDUM SUBJECT: Procedures to Improve before the Environmental Appea is FROM: Ray Ludwiszewski Acting General Counsel Off ice of General (LE—130) Herbert H. Tate, Jr. Assistant Administrator Office of Enforcement (LE-133) TO: Environmental Appeals Judges Nancy B. Firestone, Ronald L. McCallum and Edward E. Reich Attached to this memorandum are procedures which we are adopting to improve coordination among the Office of General Counsel (OGC), Office of Enforcement (OE) and the Offices of Regional Counsel (ORC) on positions taken by each of these offices before the Environmental Appeals Board (EAB). These procedures were developed directly in response to a request from the EAB and incorporate comments made by Ed Reich on behalf of the EAB. These procedures will be effective immediately. We are requesting that the EAB continue its practice of sending copies of all of its final decisions to the Regional Counsels, the Associate General Counsels and the Enforcement Counsels. In addition, we are requesting that, in addition to sending copies of notices to appeal permit decisions to the affected Regional Counsel, the EAB send copies of these notices to the affected Associate General Counsel and Enforcement Counsel. ------- We believe that these procedures will go a long way toward improving coordination among our offices on positions taken before the EAB. These procedures commit our offices to evaluate our success in implementing these procedures and accomplishing our objectives in approximately six months. We welcome your active participation in this process and hope that together we can improve the Agency’s administrative litigation practice. - Attachment cc: Regional Counsels Associate General Counsels Enforcement Counsels ------- , o UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON 0 C 20460 JAH25 1993 MEMORANDUM SUBJECT: Procedures to Improve Coordination before the Environmental Appeals Board FROM: Ray Ludwiszewsk( Acting General Co nse . Off ice of General Cou sel (LE—130) Herbert H. Tate, Jr. Assistant Administrator Off ice of Enforcement (LE—l33) TO: Regional Counsels Associate General Counsels Enforcement Counsels Attached to this memorandum are procedures which we are adopting to improve coordination among the Office of General Counsel (0CC), Office of Enforcement (OE) and the Offices of Regional Counsel (ORC) on positions taken by each of our offices before the Environmental Appeals Board (EAB). As you will recall, the EAB requested that we work together to develop these procedures. The procedures adopted reflect discussions held at the OGC/ORC management retreat in October 1992 and incorporate OE’s existing policy in this area. In addition, these procedures reflect comments received from many of you and comments received from Ed Reich on behalf of the EAB. ------- These procedures will be effective immediately. Under the procedures, each of you responsible for matters which go before the EAB is requested to designate at least one person to serve as a contact person to aide in the coordination process established by the procedures. The option of whether to designate one or more persons to fulfill all these functions is up to you. By February 12. 199:3 , please identify the person(s) you are - designating to coordinate matters related to permit appeals to Susan Lepow (FAX 202—260-7702) and the person(s) you are designating to coordinate matters related to enforcement appeals to Fred Stiehl (FAX 202-260-4201). They will compile a complete list of these contacts and distribute them to you. We believe that these procedures will go a long way toward improving coordination among our offices on positions taken before the EAB. We appreciate the commitment each of you is making to improve the Agency’s administrative litigation practice. These procedures commit our offices to evaluate our success in implementing these procedures and accomplishing our objectives in approximately six months. We encourage you and your staff to actively participate in this process. Attachment cc: Environmental Appeals Board Judges Firestone, McCallum and Reich Regional Administrators Assistant Administrator for Water Assistant Administrator for Air and Radiation Assistant Administrator for Solid Waste and Emergency Response Assistant Administrator for Prevention, Pesticides and Toxic Substances ------- OFFICE OF GENERAL COUNSEL, OFFICE OF ENFORCEMENT AND OFFICE OF REGIONAL COUNSEL COORDINATION ON MATTERS BEFORE THE ENVIRONMENTAL APPEALS BOARD Under the environmental statutes administered by the Environmental Protection Agency, the Administrator has delegated authority to decide appeals of permit decisions made by the - Agency’s Regional Administrator’s and administrative penalty decisions made by the Agency’s Administrative Law Judges to an Environmental Appeals Board (EAB). The specific matters delegated to the EAB are detailed in a final rule published in the Federal Register on February 13, 1992, 57 Fed. Req . 5320. At the request of the EAB, the Office of General Counsel (OGC), the Office of Enforcement (OE) and the Offices of Regional Counsel (ORC) have identified ways to improve coordination on positions taken by each of these offices before the EAB. The Office of General Counsel and the Offices of Regional Counsel discussed this issue at the OGC-ORC Management Retreat held in October 1992. The Office of Enforcement has had an existing policy in this area. Unless and until modified, this memorandum outlines the policies and procedures which will be followed to coordinate positions taken with respect to permit appeals and appeals of enforcement cases (including significant interlocutory appeals) before the EAB. Each Regional Counsel, Associate General Counsel and Enforcement Counsel responsible for matters which go before the EAB will designate at least one individual to serve as a contact person to aide in the coordination process established in this memorandum. A. Permit Appeals The EAB sends notice to the Regional Counsel when a notice of appeal of a permit is filed; the Region has 45 days to file a response with the EAB. We will request the EAB to send a copy of this notice to the affected Associate General Counsel and Enforcement Counsel, as well. After the notice of appeal is received by ORC/OGC, staff in ORC will consult with OGC staff about each case. The discussions will focus on any important issues raised by the case. Each case will be handled in one of three ways: (1) 0CC will sign the response as co-counsel and will have written or participated in writing the response; (2) 0CC will appear as “of counsel” on the response and 0CC will have reviewed the response; or (3) OGC will not be on the response and though ORC will have coordinated with OGC, 0CC will not necessarily review the response. OGC and ORC will both need to consent to the appropriate level of handling for each case. Staff in each office will consult with their supervisors, as appropriate. Any disagreements between the Regional Counsels and the Associate ------- General Counsels will be elevated to the appropriate Deputy General Counsel. It is important to coordinate positions taken in one case with other Regions and with the Headquarters program office. Significant enforcement issues may also be raised in the context of certain permit appeals. In appropriate cases OGC and ORC- staff need to coordinate with QE, other Regions and their respective program offices before a response is filed. Upon receipt of a notice of appeal, the Enforcement Counsel or OE Branch Chief will identify any enforcement issues that should be addressed in the appeal. In most cases it may be adequate for OE and other Regions to be informed of positions taken before the EAB through the monthly OGC/OE/ORC branch chief conference calls. This will be a standing agenda item for the monthly calls; the ORC branch chief will generally be responsible for leading this discussion. It is important for the Regions to coordinate as early as possible with all Headquarters offices on the issues raised in permit appeals and requests for evidentiary hearings so that EPA will be advancing consistent positions. Some of this coordination needs to be initiated by the program offices and some by ORC. B. Enforcement Appeals There is less time for the Agency to decide its position on appeals of enforcement cases. Pursuant to 40 CFR section 22.29(a), enforcement appeals typically obtain as a matter of right, and the Agency must file its notice of appeal and an accompanying brief within 20 days after service of the’ initial decision or order of the Presiding Officer. See 40 CFR section 22.30(a). In a May 3, 1989 memorandum from then Acting Assistant Administrator Edward Reich, a process was established to provide for review of adverse decisions of AI.Js as well as favorable decisions that are appealed by the respondent. (See attached memorandum.) That process is still an appropriate method to provide an efficient way to identify and address important issues in a case that should be raised to the EAB. It should be noted that important legal and policy issues warranting an appeal may be raised in cases even though the Agency prevailed in the relief sought. This memorandum reaffirms the procedures of the earlier memorandum with the following modifications. In appropriate circumstances, agency counsel, however, may seek leave from the EAB for extensions of time in which to file such appeals or briefs, if they can satisfy the requirements of 40 CFR section 22.07(b). Depending on the circumstances, it may be advisable to seek an extension only for the filing of the brief, rather than the notice of appeal. ------- The CRC attorneys will consult directly with the Regional Counsel (or Deputy Regional Counsel if so directed by the Regional Counsel) to discuss their recommendation as to whether EPA should appeal each enforcement case. This view should be included in the summary of the decision forwarded to the OE Branch Chief, the OGC Branch Chief, and the ORC contacts. The Regional Counsels will report on decisions to appeal enforcement cases in their weekly report to Headquarters. Decisions in Headquarters cases will be reported in OE’s Weekly Highlights. As with permit appeals, each case where a decision is made to proceed with an appeal will be handled in one of three ways: (1) CE will sign the brief as co—counsel and will have written or participated in writing the brief; (2) OE will appear as “of counsel” on the brief and CE will have reviewed the brief; or (3) OE will not be on the brief and though ORC will have coordinated with CE, OE will not necessarily review the brief. The Regional Counsels and Enforcement Counsels will take personal responsibility to decide what kind of coordination is necessary with 0CC before a decision is made to seek, or forego, an appeal of an enforcement case. 0CC agrees to identify any generic areas where it needs to be consulted on a routine basis before a decision to appeal or not to appeal is made. C. Headauarters Assistance to EAB Subject to the prohibition on parte communications, nothing in this memorandum is intended to derogate the ability of OGC or OE to provide technical assistance to the EAB when the EAB deems it appropriate. As part of their participation in the review of appeals, OGC and CE should assure that any relevant policies or new regulations are brought to the attention of the Board, since Headquarters offices will often be more aware of such matters than Regional offices. D. Oral Arquments The attorney best able to present the Agency’s position should present oral argument to the EAB. This will be decided on a case by case basis. The Board has a strong preference in favor of having a single attorney present the Agency’s argument. Nevertheless, the Board has allowed more than one attorney to divide the argument where the Agency deemed it essential for the effective presentation of its case. Accordingly, there should be an opportunity for Regional and Headquarters attorneys to argue before the Board in appropriate cases. Any disagreements between the Regional Counsel and the Associate General Counsel or Enforcement Counsel regarding who should present the oral argument to the EAB will, be elevated to the appropriate Deputy General Counsel or Director of Civil Enforcement. ------- The Agency attorney(s) presenting oral argument should be able to represent to the fullest extent possible that the positions taken in argument have been coordinated with, and approved by, ORC, OGC and OE, as appropriate. E. Decisions The EAB sends copies of all final decisions -to the Regional Counsels, the Associate General Counsels and the Enforcement Counsels. F. Follow-up Our success in implementing these procedures and accomplishing our objectives will be evaluated in an ORC/OGC/OE conference call in approximately six months. Attachment ------- IO UNITEDSTATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON. D.C. 20460 4( MAY 3 1989 o”.c o CN Oa Ea.l T i.o CoM’L aMr( IaO.usTOa.. G MEMORAN DUI1 SUBJECT: Strengthening the Agency’s Administrative Litigation Capacity FROM: Edward E. Reich Acting Assistant dminis r ’td’ r TO: Regional Cour.sels Regions I-X In my memorandum to you of January 31, 1989, entitled “Issues Relating to Administrative Litigation”, I asked for comment on a proposed process for dealing with decisions on whether or not to appeal AU decisions. Your comments were generally supportive of the proposal. Following discussion of this issue at its most recent meeting, the Enforcement Management Council affirmed the proposal contained in the earlier draft with the modifications set out below. . Accordingly, we are instituting a process, beginning July 1, 1989, to provide for the incorporation of national program and other Regional perspectives in the decision whether or not to appeal adverse AU decisions. This memorandum describes the mechanism. Administrative enforcement is a significant and dynamic element of the Agency’s enforcement program. As new programs develop and mature programs evolve, decisions by the AUJs and the Chief Judicial Officer (CJO) mold and influence the direction of these programs. Adverse decisions can not only cause problems relative to the specific issue and program giving rise to the decision but can also, particularly when rendered at the CJO level, significantly impact enforcement programs outside of the one immediately addressed in the decision.. For this reason it is important that the Agency’s enforcement managers pay proper attention to the decisions issued by the ALJs and CJO. As I noted earlier, the process set out below was affirmed at the most recent meeting of the Enforcement Management Council. This ------- —2— process is also in line with the agreement reached at the Atlanta Regional Counsels’ meeting. In order to initiate the next phase of this e-f fort, please designate an attorney in your office who will serve as the standing contact for receipt of materials relating to appeals of administrative decisions. This contact will receive material as identified below for all media for appropriate distribution and action in your Region. This person does not necessarily have to be the person representing the Region on the substantive conference calls that will take place but will, as necessary, facilitate the Region’s participation. Please send the name of your designee to Fred Stiehi (LE—134P), by June 1, 1989. ‘Fred will prepare a master list and distribute it to all Regions. Starting in July, the affected Region is to provide to the relevant Associate Eriforcexnent Counsel in OE X and the designated standing contacts in the other Regions a notice and an opportunity to consult on all adverse decisions of the ALJs and all favorable decisions that are appealed to the Chief Judicial Officer by Respondents. This process will allow for consideration of issues of national interest that may go beyond the concerns of the involved Region. The process will be initiated by sending a “fax” of,a copy of the decision and a brief summary of the decision by the Regional Counsel Branch Chief to the appropriate OECM Branch Chief, the appropriate 0CC Branch Chief, and the ORC standing contacts within 3 days of receipt of the adverse decision. That transmission will also notify all parties of the time of an OEcI4-Regional Office conference call to discuss appeals issues. This call should take place as soon as possible after receipt of the summary, but no later than 4 calendar days after the “fax” is sent. 1 ! 0CC will be invited to participate in this call if they choose to do so. If your Region wishes to participate in the appeal decision, your contact should advise the initiating Regional Counsel Branch Chief of your views prior to the phone call to OECM and can choose to participate in the call. The Regional Counsel Branch Chief will advise OE !4 if a conference operator is needed to include more than one Region in the call. In the event of agreement to file an appeal, the discussion will center on identifying issues for appeal, what support will be available to 1I A workgroup is considering amendments to the Consolidated Rules of Practice is lengthen the time for appeal. Until such time aà the rules are changed, however, the Agency has 20 days from service of the order to file this notice of appeal and supporting briefs. 40 C.F.R. 22.30. ------- —3— assist the lead office, and how the national and regional perspectives can be incorporated into the briefs. The views of the Headquarters program office will be solicited by the - Associate Enforcement Counsel and factored into the discussion between the Region and Headquarters. In the event there is disagreement at the Branch Chief level as to whether to appeal, the question will be elevated to the Regional Counsel and the Associate Enforcement Counsel for resolution. Given the very short time available to file appeals, this process will assure, at minimum cost, national program input and regional consistency in a timely manner. The process should be evaluated in light of our experience after one year to see if adjustments are appropriate. cc: Deputy Regional Administrators Enforcement Management Council Headquarters Enforcement Office Directors Deputy General Counsel for Legislation, Litigation, and Regional Operations Associate Enforcement Counsels ------- SECTION A DOCUMENT 8 Change in Methodology for Determining the BEN Model’s Discount Rate 8 10/19/92 ------- r n’i UNITED STATES ENVIRONMENTAL PROTECTION AGENC’ i U WASHINGTON, D.C. 20460 Li ocT 27 1992 —‘ g’ r,—,:r - 1 t’-i.. r. CONFIDENTIAL AND ENFORCEMENT sENsITiv ’ F rtt — QCT I I 2 MEMORANDUM SUBJECT: Change in Methodology for ing the BEN Model 5 Discount Rate FROM: Herbert H. Tate, Jr. Assistant Adminjatrat for En cement TO: Assistant Administrators Regional Administrators Effective thirty days from the issuance of this memorandum, the Office of Enforcement (OE) will employ a different - methodology for calculating the BEN computer model’ a discount rate. As a result of thiS,change, the discount rate will decline from the current 17.2% to 11.9%. The purpose of this memorandum is to notify you and your respective staffs of the change and to discuss some of its implications. Backc x ound The Office of Enforcement first developed an economic benefit model in 1978. One of the central theoretical issues in the model ‘s development was deciding on an appropriate discount rate to evaluate pollution control expenditures. The discount rate is an interest rate employed by the model in performing benefit analyses. After extensive study of this issue, and careful consideration of our corporate finance consultant’ a views, OE decided on an “equity” based rate. The equity discount rate approach was later adopted in 1984 when the Agency developed the BEN computer od 1 The Agency based its decision on its understanding of prevailing corporate financing of compliance expenditures, which was that pollution control investments did not contribute to a firm’s profit-making activities. Thus it was logical to assume that a firm raised the capital for this The ABEL model, which calculates a violator’s financial ability to comply, clean up or pay a civil penalty, will soon employ a WACC discount rale. The discount rate plays a different role in ABEL: ABEL is concerned with a firm’s overall financing as opposed to just the financing of pollution control equipment. e° * te.i on Recycled Pa,oef ------- 2 investment by selling shares of stock (i.e. equity financing), one of the most expensive ways to finance investments. The more expensive the financing of pollution control equipment is, the larger the economic benefit of noncompliance. In choosing an equity-based number, the Agency rejected the main competing theory, known as the weighted average cost of capital (WACC). WACC is an average of the cost of equity and the cost of debt (i.e. borrowing from a bank or issuing corporate bonds), each weighted by its proportion of the firm’s overall financing. The WACC view of pollution control investment is that while firms recognize that the pollution control investments will not by themselves produce revenue, they are like the roof on the factory. The roof does not prothice revenue, but it enables- the firm to make profits. Analogously, the WACC view is that a firm must make pollution control investments to stay in business. Viewed in this context, pollution control is part of the cost of doing business, is supported by the overall capital structure of the firm, and has the same financing as other projects the firm undertakes. The equity financing assumption remains a viable methodology, and is supported by a segment of expert opinion. Taken in that light, the equity financing assumption is not wrong. Nevertheless, it is our view and the view of many top corporate finance experts that the WACC financing assumption is the more convincing theory. In addition, the WACC assumption is more progressive than the equity assumption in that it regards pollution control expenditures as normal business expenses. This is more consistent with the Agency’s perspective in this area and is more in the corporate finance mainstream than assuming only equity financing. For these reasons, the Agency is now adopting a WACC based discount rate for BEN model analyses. A new version of the BEN model, BEN92, will be available on the mainframe computer in thirty days. Users will have a choice of which model to use until February 1, 1993. After that date, only BEN92 will be available. New BEN User Manuals should be in the mail in early January. ImDact ofthe Change on Economic Benefit Calculations Because WACC is a weighted average of both borrowing and selling shares of stock, the cost for financing pollution control investments, as calculated by BEN, is now substantially lower. Since the cost of financing is a key assumption in the BEN model, lowering the discount rate from 17.2% to 11.9% will result in lower benefit calculations for businesses. (It will have no effect on not-for-profit entities.) In a typical case, the ------- 3 benefit analysis will be 25% to 30% lower. 2 The 11.9% standard value represents the average WACC rate for a business. The BEN model automatically defaults to this value unless an alternative WACC rate is substituted. If the Agency’s own expert witness feels a different WACC value is more appropriate, then that value can be substituted. (In some cases, the Corporate—specific WACC rate will actually be higher than the standard WACC value.) EPA enforcement professionals should not make this determination on their own, or on the recommendation of a violator’s expert. Determining alternative WACC values is a complex matter that must be left for the Agency’s experts. At the same time, it is important to note that nothing in this memorandum prohibits EPA ) itiga ion teams from using an eq iity- based discount rate shouldour expert feel it is appropriate. A 1ication to Agency Enforcement Actions The need to recalculate benefit analyses will depend upon what stage the case is in. For purposes of this memorandum, we- will divide the cases into three categories: 1) cases that are settled, 2) cases where no penalty analysis has been transmitted to the defendant other than the figure in the complaint, and 3) cases where a figure has been transmitted to the defendant, but the case has not settled. 1. Settled Cases If a case has settled or there is agreement as to the penalty figure even though there is no final settlement, there should be no recalculation of the benefit. It is important to emphasize that the equity theory is not wrong, and those settlements/agreements were arrived at through good-faith negotiations. There is no reason to disturb those results. 2 • Cases Where the Government Has Not Presented the BEN Analysis to the Defendant If a case is at the stage where the defendant has not yet seen any BEN analysis, then the litigation team will use BEN92 even if that requires recalculating the benefit portion of the penalty. 2 The actual change in the benefit figure may be less than 25% or more than 30%. The 25% to 30% range is for the typical case. The extent of the change depends on the cost and date inputs used in the analysis. For example, a BEN analysis for a short term violation involving a mostly operation and maintenance expenses might only decrease slightly with the new discount rate. ------- 4 3. Cases Where the Government Has Presented the BEN Analysis to the Defendant, But There is No Final Agreement as to the Penalty The more complex situation is where the defendant has seen an Agency benefit analysis, but there is neither an agreement over the penalty nor a settlement. In these cases, the litigation team may decide in its discretion whether to recalculate the benefit component using BEN92. Each case is unique, and it makeS sense to allow this flexibility rather than to impose one rule for all the cases in this category. While we are allowing each litigation team in this situation the flexibility to use either version of BEN, the litigation team should be cognizant of the implIcations of staying with BEN9O, the previous version of BEN. There are two points to keep •in- mind. First, the change in the discount rate will be public information shortly. Many defendants, particularly those facing substantial penalties based on economic benefit, are likely to become aware of the change. The litigation teams that stay with equity—based benefit analyses should carefully consider the impact on negotiations if the defendant hears about the change from sources other than the Agency’s negotiators. Second, if the litigation team negotiates over an equity- based number but starts discovery, our expert witness would most probably support the WACC view since it will be the official Agency position. Thus, the litigation team might be faced with the anomalous situation of seeking a larger economic benefit amount at settlement than it would in discovery or at trial or hearing. Depending on the amount of economic benefit contained in the proposed penalty, this could create an obvious incentive for defendants to hold out for a trial or hearing rather than settle the case. Litigation teams should carefully consider the impact on their cases in deciding whether to recalculate the benefit using BEN 92. Litigation Prpctjcaljtjes Because the WACC-equity dispute became a major issue in a number of our enforcement actions, several litigation teams used it as a reason to justify a lower bottom line settlement penalty. While we entertained those considerations in the past, the change in methodologies will, remove this issue from the “litigation risk” category. So while the bottom line settlement figures may drop due to the recalculation of the benefit number, the bottom line figures should not be affected henceforth by any litigation risk over the discount rate. ------- 5 Should you have any questions about this memorandum, please contact Jonathan Libber of my staff. He may be reached at (202) 260—6777. cc: Enforcement Counsels John Cruden, Department of Justice Regional Counsels BEN Users ------- SECTION A DOCUMENT 9 Interim Procedures for Streamlining the Review of Signature Packages in Civil Practice Area 06/25/93 ------- UNITED STATES ENVIRONMENTAL PROTECTiON AGENCY WASHINGTON, D.C. 20460 •) C , ‘ U • ‘- - OFFiCE OF ENFORCEMENT MEMORANDUM SUBJECT: Interim Procedures for Streamlining the Review of Si n urejJPackages in Civil Practice Area FROM: Assistant Administrator TO: OE Civil Employees Regional Counsels By this memorandum, I am implementing several changes and redelegations which will streamline the OE signature process. With these improvements, I believe that we can significantly reduce the time for tenth floor review of signature packages. • The Deputy Assistant Administrator for Enforcement will no longer review routine case-specific civil matters ( e. . , consent decrees, amendments to decrees, stipulated penalties). However, at the discretion of the AA or the Director of Civil Enforcement, a case-specific matter may be brought to the DAA’s attention. The tenth floor routing for these case—specific matters from the Enforcement Counsel is: (1) Director of Civil Enforcement, (2) Correspondence Control Unit, (3) Assistant Administrator. • I redelegate signature authority to the Enforcement Counsel for civil settlements assessing under $100,000 in civil penalties so long as the settlement recovers economic benefit as calculated by BEN. If the ability to pay calculation indicates that the defendant has an inability to pay the full amount, and that is the reason for a penalty under $100,000, then the Enforcement Counsel may sign of f for the Office ‘of Enforcement even though the settlement does not recover economic benefit. Of course, matters which, in the opinion of the Enforcement Counsel, are precedential or otherwise significant, should be brought to the attention of the AA or the Director of Civil Enforcement. Pnnted on Recycled Paper ------- 2 Please note that a copy of the signed consent decree and accompanying analytical and decision memoranda must be sent to Kathy Bundy in the OE-CCU for the official chron files. Also, a synopsis of each settlement approved pursuant to this delegation must appear in the EC’s weekly report. The Director of Civil Enforcement may develop additional guidance regarding the implementation of this authdrity. • I redelegate signature authority to the Director of Civil Enforcement for civil settlements and parallel proceedings assessing between $100,000 and $500,000 in civil penalties. Again, this redelegation applies only to settlements which recover the economic benefit as calculated by BEN. The Director of Civil Enforcement may sign of f even though economic benefit is not recovered if the ability to pay calculation indicates an inability to pay. Again, a copy of the signed consent decree and accompanying analytical and decision memoranda must be sent to Kathy Bundy in the OE-CCU f or the official chron files, and the settlement must be reported in the relevant EC’s weekly report. Matters which, in the judgment of the Director of Civil Enforcement, are - precedential or otherwise significant should be brought to the attention of the AA notwithstanding the foregoing. • Memoranda transmitting any proposed consent agreement and order for matters pending before the Environmental Appeals Board will continue to be signed by the Deputy Assistant Administrator. • The Assistant Administrator will sign of f on all other settlements. Because, presumptively, these cases are worthy of press or communications attention, all consent decree packages which are sent forward for the AA’s signature should include a communications paragraph suitable for use in an EPA press release which outlines the factual predicate for the case, with particular emphasis on the pollution being abated and the nature of any environmental damage, the terms of the resolution, and any other noteworthy aspects. This paragraph should be included as a separate heading entitled “communications” in all transmittal memos from the Enforcement Counsel (or attorney) to the Assistant Administrator. • For purposes of tenth floor review, rulemaking matters should be brought directly to the attention of the Deputy Assistant Admiftistrator. However, the Enforcement Counsel should provide a synopsis of substantive rulemaking matters in their weekly reports to the Director of Civil Enforcement. Rulemaking packages should be routed as follows: ------- 3 -- For nonconcurrences: (1) Justina Fi gh, Special Assistant, (2) Scott Fulton, Deputy Assistant Administrator, (3) Correspondence Control Unit, (4) Steve Herman, Assistant Administrator; —— For concurrence with substantive comment: (1) Justina Fugh, Special Assistant, (2) Scott Fulton, Deputy Assistant Administrator, (3) Correspondence Control Unit. • The Enforcement Counsel are delegated the authority to concur on rulemaking packages with technical comments. Again, Enforcement Counsel should provide a synopsis in their weekly reports to the Director of Civil Enforcement. A copy of the package is to be provided to the Correspondence Control Unit. • For executive correspondence (controlled as ALS and AXs) originating from OE-Civil and styled for the Assistant Administrator’s signature, the routing for the tenth floor is: (1) Justina Fugh, Special Assistant, (2) Scott Fulton, - Deputy Assistant Administrator, (3) Correspondence Control Unit, (4) Steve Herman, Assistant Administrator. The Director of Civil Enforcement will not be routinely reviewing these packages. For any civil package styled for the Administrator’s signature, the routing from the originating division is: (1) Justina Fugh, Special Assistant, (2) Scott Fu].ton, Deputy Assistant Administrator, (3) Correspondence Control Unit. These packages will be sent directly from the DAA to the Office of the Administrator, unless, in the DAA’s view, the matter requires AA review. • For green border packages involving reorganizations outside of OE, I delegate signature authority to the Deputy Assistant Administrator. Please note that there are a number of caveats with respect to these procedures. First and foremost, they are interim procedures. Based on our experience, these procedures may be later amended or may be expanded to include other parts of the operation. As you know, I will be looking closely at the Headquarters/Regional relationship in the enforcement area. Nothing in this memorandum will operate to the exclusion of appropriate adjustments as a result of this review. Second, these procedures should be strictly construed -- only the matters expressly addressed herein are affected by this memorandum. Third, nothing herein is intended to prevent appeal or ------- 4 appropriate vetting of issues in the event of a disagreement. Fourth, notwithstanding the delegations and authorizations set forth abover the AA, DAA, and Director of Civil Enforcement reserve the right to withdraw any authority conveyed by this memorandum selectively or in total with or without cause, I clearly expect these authorities to be exercised in a manner that comports fully with these procedures and all applicable EPA policies. Failures to do so may result not only in loss of authority but also an unfavorable performance review. I hope that these few changes will allow for quicker review. I look forward to any further suggestions you may have. cc: Administrator Deputy Administrator Regional Administrators, Regions I-X OE Office Directors John Cruden, DOJ ------- SECTION A DOCUMENT 10 Use of Inspections to Obtain Evidence of Crimes 08/19/93 ------- ØD UNITED STATES ENVIRONMENTAL PROTECTiON AGENCY WASHINGTON, D.C. 20460 OFFICE OF ENFORCEMENT AUG I 9 1993 ) !ORANDUM SUBJECT: Use of Inspections to Obtain Evidence of FROM: Elizabeth M. Ojala, Section Chief Criminal Enforcement Counsel Divis, THRU: Kathleen A. Hughes, Director A 4 Criminal Enforcement Counsel tbivision TO: Regional Criminal Enforcement Counsels On occasion, the question arises whether EPA may use inspections, also known as administrative searc hes, to gather evidence of criminal violations of the environmental laws. This memo is a survey of pertinent case law, to assist you in giving advice regarding Fourth . mendment concerns to your CID field offices and the Regional program offices who routinely conduct inspections. This memo is not intended to convey any policy position on the part of the Office of Criminal Enforcement regarding the utilization of inspections with administrative warrants for criminal investigation purposes. The prevailing view in applicable case law is that, if the inspection is objectively reasonable and limited in scope in accordance with the authorizing statutory entry provision and the administrative warrant, the Fourth mendinent is not violated by the lack of a criminal search warrant based on a traditional showing of probable cause, even if the motivating factor is to gather evidence of crimes. Accordingly, an administrative warrant legitimately may be obtained, and evidence gathered in the course of an inspection may be used in a criminal prosecution, where the inspection is undertaken due to suspicions or allegations of criminal violations of the reg..ilatory program in question. Constitutional and Statutory Frantework The Fourth mendment to the United States Constitution states, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause Pnnted on Recycled Paper ------- 2 Fourth Amendment protections apply to regulatory inspections and, with few exceptions, a warrant is required.’ Note that a general rule which applies to all Fourth Amendment searches is that officials who are legitimately present on protected premises may further inspect, without a warrant, those matters and - subjects inadvertently discovered in “plain view.” 2 In addition, persons may “consent” to an intrusion, obviating the need for a warrant, administrative or criminal. 3 Although these doctrines may be invoked in circumstances relating to administrative searches for criminal evidence, the cases discussed herein, for the most part, do not rely on either consent or plain view to justify the search for and seizure of criminal evidence. Inspection and entry provisions, authorizing administrative searches, are provided in the various statutes administered and enforced by EPA. 4 EPA’s statutory inspection provisions are not, by their terms, limited to entries for the purpose of gathering evidence of “civil” violations. However, they do set parameters for the scope and purpose of the inspections, as well as the manner in which they must be conducted, and by whom) ‘The issue of whether EPA’s administrative searches could be executed constitutionally without a warrant (and without consent) is beyond the scope of this memo. 2 Coolidge v. New Hampshire , 403 U.S. 443 (1971). See also, National Engineering & Contracting v. OSHA , 928 F.2d 762 (6th Cir. 1991) ,(OSHA inspectors conducting consensual administrative search of accident site could closely inspect machinery in warehouse in plain view during the search). 3 Schneckloth v. Bustanionte , 412 U.S. 218 (1973). 4 E.g. , Clean Water Act, 33 U.S.C. 1318; Clean Air Act, 42 U.S.C. 7414; Resource Conservation & Recovery Act, 42 U.S.C. 6927; Safe Drinking Water Act, 42 U.S.C. 300j-4; Federal Insecticide, Fungicide & Rodenticide Act, 7 U.S.C. 136f, 136g; Toxic Substances Control Act, 15 U.S.C. 2610. 5 EPA’s criminal investigators, who are law enforcement officers authorized to obtain and execute search warrants, are not necessarily legally authorized to enter property to conduct regulatory inspections under EPA’s authorities, unless: a) on consent, with no illegal misrepresentation; b) they are assisting an authorized inspector in conducting a search under an administrative warrant; or c) they are duly designated as inspectors by the Administrator. (Duly designated inspectors must act in conformance with statutory and constitutional requirements, including the warrant requirement.) ------- 3 Searches Pursuant to Administrative Warrants; Circuit Court Cases There are a number of appellate court cases holding that searches pursuant to an administrative warrant are valid even- when the inspectors suspect or are looking for criminal violations, so long as the search is objectively reasonable and properly limited ii’i accordance with the authorizing statutory provision. The cases discussed below appear in chronological order, and include decisions from the Third, Sixth, Seventh, Eighth, and Ninth Circuit Courts of Appeals. No pertinent administrative warrant cases have been located in the First, 6 Second, 7 Fourth, 8 Fifth, 9 Tenth, ’° or Eleventh Circuits. The Ninth Circuit, in U. S. v. Goldfine , 538 F.2d 815 (9th Cir. 1976), has affirmed criminal convictions based on evidence obtained in an inspection pursuant to an administrative warrant. The defendant pharmacists were under investigation by DEA agents for suspected illegal controlled substances sales, tinder a statutory entry authority similar to those in EPA-administered statutes, the investigator obtained an administrative warrant to conduct an inspection “to determine whether the establishment is conducting its business in compliance with the statutes and regulations under which it is authorized to do business.” The affidavit did not reveal that a criminal investigation was underway. 6 g u.s. v. Blanchard , 495 F.2d 1329 (1st Cir. 1974), in which the First Circuit upheld a conviction based on evidence obtained in an administrative warrant executed by ATF agents. However, the court did not explicitly indicate that the motivation for the search was to obtain evidence of crimes. See also , First Circuit cases, discussed below, in which warrantless administrative searches based on criminal suspicions were upheld. 7 But see , Second Circuit case upholding a warrantlesg administrative search for criminal evidence, discussed below. 8 One pertinent case from the District Court in Maryland is discussed below. U.S. v. Schiffman , 572 F.2d 1137 (5th Cir. 1978), in which the Fifth Circuit upheld a conviction based on evidence obtained in an inspection pursuant to an administrative warrant executed by DEA agents. However, the court did not explicitly address the criminal enforcement motivation. ‘ °But see , Tenth Circuit case, discussed below, addressing warrantless administrative searches for criminal evidence. ------- 4 The Goldfine court “reject [ ed] the proposition that pharmacies as to which there is probable cause to suppose a violation are by that fact rendered exempt from administrative inspection and subject only to search for evidence of crime. The administrative need for and the public interest in inspection continue to provide justification apart from the obtaining of evidence of crime.” Id . at 819. The court held, “If the extent of the intrusion is to be limited to an inspection [ under the applicable statutory authority] an administrative inspection warrant upon probable cause as defined [ in the applicable statutory authority] is all that is required.” Id . On the other hand, the court acknowledged, “If evidence of a crime is sought that would not be disclosed by an inspection [ under the applicable statutory entry authority], limited to the purposes there specified, a search warrant specifying such evidence would be required and would have to be supported by a showing of probable cause to suppo e the presence of that which was sought.” Id. The Third Circuit,” in United States v. Prendergast , 585 F.2d 69 (1978), affirmed a conviction under facts virtually identical to those in Goldfine . A pharmacist was suspected of making illegal prescription drug sales in criminal violation of federal drug laws. A DEA agent obtained an administrative warrant to search the defendant’s pharmacy for evidence to be used against him in a criminal prosecution. The court adopted the reasoning of the Goldfine opinion and found that the inspection pursuant to an administrative warrant was proper.’ 2 “ See also, U.S. v. Montrom , 345 F.Supp. 1337 (1972), aff’d mem. , 480 F.2d 918, 919 (3d Cir. 1973) (Third Circuit discusses administrative warrants, use of evidence in criminal prosecution). court noted that, even under the reasoning of the recently-decided Supreme Court case, U.S. v. LaSalle National Bank , 437 U.S. 298, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978), the administrative warrant would be proper, because there was a continuing potential for civil enforcement by DEA and no commitment to criminal prosecution. LaSalle , which was not a Fourth Amendment case, considered whether evidence obtained by use of an IRS sunmtons, statutorily authorized for civil investigations only, could be used to support a criminal investigation. The Supreme Court held that it could, if the summons was issued in good faith for a civil purpose, and there had been no institutional commitment to pursue a criminal prosecution. Cases on administrative information-gathering since LaSalle have limited it to the IRS context. , e.g., U.S. v. Educational Development Network Corp. , 884 F.2d 737 (3rd Cir. 1989), cert. denied , 494 U.S. 1078 (1990); SEC v. Dresser ------- 5 The Sixth Circuit upheld the use in a criminal prosecution of evidence obtained in an inspection pursuant to an administrative warrant based on criminal suspicion. U.S. v. Consolidation Coal Co. , 560 F.2d 214 (6th Cir. 1977), vacated and remanded , 436 U.S. 942, 98 S.Ct. 2841, 56 L.Ed.2d 783 (1977), judgment reinstated , 579 F.2d 1011 (6th Cir. 1978), cert. denied , 439 U.S. 1069, 99 S.Ct. 836, 59 L.Ed.2d 34 (1979). Dept. of Interior agents obtained administrative warrants to search several mining company offices, based on information received from an informant that the company was falsifying reports in violation of criminal provisions of the Federal Coal Mine Health and Safety Act. The court held that the searches were “reasonable intrusions which were “routine” [ i.e., permissible under the Act] in scope if not in motivation. Their regulatory character was not diminished by the fact that they were predicated upon overt criminal suspicion rather than administrative necessity.” 560 F.2d at 218. Therefore, the court held, the District Court should have sustained these searches as administrative inspections, based on lesser probable cause than would be required for a criminal search warrant. Distinguishing Camara v. Municipal Court (Supreme Court case discussed below), the Consolidation Coal court stated: The ba ic rationale for demanding a more compelling showing of probable cause where the purpose of the intrusion is to uncover crime is inapposite in this context. [ cite omitted.] The scope of the searches became no broader because they were predicated on criminal suspicions than they would have been if justified by administrative exigencies. *** Where a search is routinely permissible on an administrative basis, it would indeed be anomalous if we were to raise the threshold probable cause requirement when the Government presents concrete evidence of irregular conduct ***. Id . at 220. The court bolstered its conclusion by noting that the coal mining industry has a history of close federal regulation, so that mine operators have a reduced expectation of privacy. The court also stated, in terms that would be equally applicable to EPA inspections: If the Government’s burden of persuasion [ to obtain a warrant] significantly increases when it candidly Industries , 628 F.2d 1368 (D.C. Cir. 1980) ( en banc), cert. denied , 449 U.S. 993 (1980); U.S. v. Gel Spice , 773 F.2d 427 (2nd Cir. 1985) (Gel Spice discussed below) ------- 6 discloses its criminal leads, it will have an incentive to withhold this information by couching all of its warrant requests in terms of administrative necessity. In those cases in which criminal suspicions are invoked ***, the magistrate may find it extremely difficult to - select the appropriate standard of review. Any investigation initiated to secure compliance with the Act has potential criminal overtones. Section 819 makes willful noncompliance or fraud criminally actionabl . Prosecution of all infractions is not a foregone conclusion, however, because the Secretary has inherently broad discretion to bypass criminal sanctions in favor of civil penalties. In the context of regulatory enforcement, we are loath to attribute conclusive legal significance to the apparent focus of an investigation. The magistrate’s task will be expedited if all Section 813 search warrant applications are subject to a uniform, administrative standard of review, whether or not criminal violations of the Act are suspected. Id. at 221. Subsequent to this decision, in response to defendants’ petitions, the Supreme Court vacated the judgment and remanded for reconsideration in light of Marshall v. Barlow’s Inc . and Michigan v. Tyler (both discussed below). The Sixth Circuit determined that its earlier decision was fully consistent with those opinions. Therefore, the prior judgment was reinstated f or the reasons set forth in the original opinion. A subsequent petition for certiorari was denied. In United States v. Lawson , 502 F.Supp. 158 (D. Md. 1980), the district court departed from Third Circuit, Sixth Circuit, and Ninth Circuit precedent, and excluded evidence obtained by an inspection under an administrative warrant. In Lawson , a DEA compliance officer had obtained an administrative warrant, at the request of the Assistant U. S. Attorney who was conducting a criminal investigation, to search the defendants’ pharmacies for violations of the Drug Control Act’s record keeping requirements. The court rejected the government’s argument that administrative inspection warrants may be used for any purpose listed in the authorizing statute, including investigations designed solely to result in criminal prosecutions.’ 3 ‘ 3 This is the only case located that is directly on point to the issue addressed in this memo and which has been decided unfavorably to the government. ------- 7 The Sixth Circuit again, in U. S. v. Acklen , 690 F.2d 70 (1982), refused to suppress evidence obtained by use of an administrative warrant. In Acklen , a DEA compliance inspector received a tip from state inspectors indicating that the - defendant’s pharmacy may have made illegal controlled substances sales and forged prescription records. The agent obtained an administrative warrant to inspect the pharmacy, for the purpose of obtaining evidence of violations of the Federal Controlled Substances Act (Search #1, not the subject of the appeal). Following the search, the agent filed a compliance investigation report with the DEA recommending criminal prosecution. Subsequent to his report but before the DEA decided on which course of action to take (although the agent had discussed the matter with the U.S. Attorney), the agent obtained and executed a second administrative warrant under which more records were seized (Search *2, the subject of the appeal). Finally, the agent obtained and executed a third administrative warrant, after DEA had contacted the U.S. Attorney about the results of the earlier inspections (Search #3, not appealed). Defendant moved to suppress evidence seized during all three searches. The district court denied the motion on Search #1, but granted the motion on Searches *2 and #3. The government appealed the suppression of the fruits of Search #2, but did not appeal with regard to Search #3. The Sixth Circuit upheld the administrative search even though it found that the primary purpose was to obtain evidence for criminal prosecution. The court explicitly declined to interpret Michigan v. Tyler (Supreme Court case discussed below) in such a way as to invalidate such a search, finding that the pharmaceutical industry was pervasively regulated, and that pharmacists have a reduced expectation of privacy in records kept in compliance with the Act, therefore an administrative warrant was sufficient to protect their privacy concerns. The court noted that the regulatory statute which authorized the inspection imposed both criminal and civil penalties for its violation: In such a situation, to make the validity of the administrative inspection wholly dependant upon the motivation of the inspector would be to create a rule extremely difficult to administer, since the same violations may lead to either criminal prosecution or civil sanctions. The validity of the administrative warrant should depend not upon the motivation of the inspector but upon the scope of the search and the manner in which it is conducted. 690 F.2d at 14. The court noted that it need not determine if the distinction in LaSalle , between the motivation of the individual ------- 8 agent and the “institutional commitment” to criminal prosecution, should be applied to administrative inspection warrants, because the government had not appealed Search *3. However, the court indicated that LaSalle would not be controlling, because it was decided on the basis of the terms of the IRS’s statutory authorization to issue suzr rtonses, and not on consideration of the 4th Amendment. The Eighth Circuit, in U. S. v. Jamieson-McKames Pharmaceuticals , 651 F.2d 532 (8th Cir. 1981), cert. denied , 455 U.S. 1016 (1982), upheld convictions for the illegal manufacture and sale of counterfeit prescription drugs, based on evidence obtained in an FDA inspection pursuant to an administrative warrant.’ 4 The court rejected the argument that a warrant based on criminal probable cause should have been required because the inspections were part of an ongoing criminal investigation. The court held that “in the case of a pervasively regulated industry warrants based on an administrative showing of probable cause are valid so long as the extent of the intrusion is limited to the purposes specified in the statute.” Ld . at 542. The court further noted that “a different issue would be presented where inspectors used their regulatory authority to gather evidence of a crime or violation outside the scope of the authorizing statute.” The Seventh Circuit, in U. S. v. Nechy , 827 F.2d 1161 (7th Cir. 1987), upheld an administrative search for the purpose of obtaining evidence of criminal violations.’ 5 A DEA compliance investigator had participated with the local police department in a criminal investigation of the defendant’s pharmacy, and had recommended prosecution for controlled substances violations. Subsequently, the DEA agent obtained an administrative warrant to ‘ 4 One search in issue was warrantless. The court found that the drug manufacturing industry was pervasively regulated and therefore subject to the Colonnade-Biswell exception to the warrant requirement, but that Congress, in FDA’s statutory entry authority, had not intended to permit warrantless entry for administrative inspections, where entry was refused. Thus, the court remanded counts based on the warrantless search for a determination as to whether entry had been refused. Because the court’s decision with respect to the inspection pursuant to an administrative warrant was also based on a “pervasively regulated industry” rationale, this case may be more analogous to the cases, discussed below, addressing warrantless entries. ‘ 5 See also, Matter of Searches and Seizures Conducted, Etc. , 665 F.2d 775 (7th Cir. 1981), an earlier opinion in the same case. ------- 9 search the pharmacy pursuant to DEA’s inspection authority (which is similar to EPA’s statutory inspection author ties), on the grounds that the pharmacy never had been inspected, and was engaging in suspicious activities. The primary purpose of the administrative search was to obtain evidence for possible - criminal prosecution. The court noted that the purposes for inspection in DEA’s authorizing statutory provision were comprehensive, including inspection of records, and opined that the inspection provision “undoubtedly exists primarily if not exclusively to facilitate criminal investigations.” at 1166. The court upheld the search and resulting conviction, based on “the general rule that if a search is objectively reasonable, the motives of the officers conducting it will not turn it into a violation of the Fourth Amendment.” at 1167. Warrantless Administrative Searches Circuit Court Cases Where warrantless admitiistrat ive searches authorized by a regulatory statute are constitutional, based on the “pervasively regulated” nature of the industries in question and their “reduced expectation of privacy,”’ 6 the circuit courts have upheld the warrantless inspections, regardless of whether there is a criminal enforcement purpose totally unrelated to the regulatory scheme under which the inspection was conducted. Most rely implicitly or explicitly on the “plain view” doctrine, but dispense with the requirement that the discovery of criminal evidence be inadvertent. These cases may be less analogous to the usual EPA context than those discussed above, because of EPA’s policy of obtaining an administrative warrant (or consent) for inspections, thus providing more Fourth Amendment protection than in the case of a warrantless inspection. Nevertheless, the reasoning of the courts in these warrantless entry cases is pertinent to EPA administrative searches. The First Circuit, in U. S. v. Wilbur , 545 F.2d 764 (1st Cir. 1976), upheld a warrantless administrative search, and use in a criminal prosecution of evidence thereby obtained, even though the ATF agents conducted the search after the defendants had been indicted. ATF agents conducted a warrantless “compliance check” of the defendants’ gun dealership for the purpose of determining whether the store was in compliance with federal record keeping requirements. The defendants already had been indicted on related charges. 16 , Colonnade Catering Corp. v. U.s. , 397 U.S. 72, 90 S.Ct. 774, 25 L .Ed. 2d 60 (1970), and U.S. v. Biswell , 406 U.S. 311, 92 S.Ct. 1593, 32 L.Ed.2d 87 1972). ------- 10 The Supreme Court previously had upheld the constitutionality of warrantless compliance checks by ATF, based on the pervasively regulated status of the firearms industry .and the resultant reduced expectation of privacy. 17 The First Circuit rejected the argument that such warrantless inspections should not be undertaken after an indictment was pending, for the purpose of seizing evidence helpful in the prosecution. The court stated, “A rule allowing federal agents t conduct a warrantless search of a dealer’s premises only until their suspicions were aroused or, as here, the facts establish probable cause, would make little sense.” Id . at 766. The First Circuit again, in U. S. v. Arra , 630 F.2d 836 (1st Cir. 1980), upheld the constitutionality of a warrantless administrative search (document and safety inspection of a vessel) by the Coast Guard where the vessel was suspected of carrying contraband in violation of criminal drug laws. The document and safety inspection was ordered by the Coast Guard’s command center because of the suspect status of the vessel. During the course of the safety inspection, marijuana was discovered, and persons on board subsequently were convicted of drug violations. The Coast Guard officer in charge of the search testified that he would not have conducted the search had the vessel not been suspected of carrying contraband, but that the inspection conducted did not differ from that which routinely takes place on non-suspect vessels. The First Circuit previously had held that document and safety inspections of vessels by the Coast Guard were an exception to the warrant requirement. The court found that the warrantless inspection in Arra was proper in manner and scope, and noted that the marijuana was discovered in “plain view” during the course of the safety inspection. The court rejected the argument that a warrant should have been required because the real purpose of the search was to see if contraband was on board, thus implicitly rejecting an “inadvertence” requirement. The court stated: we do not think the motivation for a particular boarding is relevant where, as here, an objective basis for conducting the document and safety check existed. ** We would see little logic in sanctioning such examinations of ordinary, unsuspect vessels but forbidding them in the case of suspected smugglers. Moreover, the difficulty of applying a subjective standard would be monumental. j at 845 - 846. ‘ 7 U.S. v. Biswell . ------- 11 The Third Circuit, in U. S. v. Demanett , 629 F.2d 862 (3rd Cir. 1980), cert. denied , 450 U.S. 910, also upheld convictions based on evidence found in the course of a warrantless administrative search. In Demanett , a Coast Guard cutter commander spotted the vessel and thought that it was suspicioi.rs. The commander was authorized to conduct a warrantless administrative document and safety inspection. During the course of that inspection, marijuana was discovered in “plain view,” and the persons on board were later convicted of drug smuggling. Defendants argued that the plain view doctrine should not apply, and that the federal officers were not legitimately on board the vessel, because the document and safety inspection was a mere pretext for a criminal investigative search. The court assumed that the interception of the vessel had at least a “dual purpose” (i.e., document and safety inspection reasons, as well as suspicions of drug smuggling), and found that the criminal investigative purpose was irrelevant, where the discovery of contraband is made in the course of an inspection no more intrusive of the normally concealed parts of the vessel than was necessary for document verification. L . at 869. In addition, the court found that the officer had a “reasonable suspicion” of improper documentation, which justified the warrantless boarding. The Ninth Circuit, in U. S. v. Watson , 678 F.2d 765 (9th Cir. 1982), cert. denied , 459 U.S. 1038, also has upheld the seizure of drugs found during a warrantless Coast Guard document and safety inspection, motivated partly by suspicion of drug smuggling. The court held that the stop and search did not violate the Fourth Amendment since it had an “independent administrative justification, and did not exceed in scope what was permissible under that administrative justification.” at 771. The Second Circuit, in U. S. v. Ge]. Spice Co.. Inc. , 773 F.2d 427 (2d Cir. 1985), affirmed convictions for food adulterated by rodent infestation, based on several warrantless administrative inspections by FDA. Before trial, defendants had moved to suppress all evidence obtained through the inspections, claiming that FDA had acted in bad faith by conducting four inspections after having already made a decision to prosecute criminally. The court below found that FDA had not made an institutional decision to prosecute at the time of the inspections, and that defendants had not made a showing of bad faith sufficient to warrant a hearing and discovery on the issue. On appeal, the court rejected the pretext argument entirely, stating: Even when the FDA decides to utilize its criminal enforcement option ***, it may not abandon its civil ------- 12 enforcement responsibilities and it is not thereby prohibited from any further agency surveillance pending the conclusion of criminal proceedings. * * We therefore conclude that, even if the FDA were pursuing criminal enforcement of the Act at the time of - the inspections in question, standing alone this does not imply or suggest that the inspections were conducted in bad faith. Id. at 432.’ The Tenth Circuit, in U.S. v. Johnson , 994 F.2d 740 (10th Cir. 1993), in a case q iite different from the usual EPA search context, recently found that use of a warrantless administrative search by a federal agent, under a state law authorizing warrantless inspections by state agents, to gather evidence of federal criminal violations, was “objectively unreasonable,” and reversed defendant’s conviction. Defendant owned a taxidermy shop, and was convicted of transporting illegally imported animal parts, illegal possession of migratory birds, and related federal charges. The federal agent had a lead to interview Johnson concerning a federal smuggling investigation. The federal agent contacted the state agent and asked the state agent to accompany him to the taxidermy shop. The state agent then decided to conduct a taxidermy inspection for game-tags, inventory and licensing issues under a state statute authorizing warrantless inspections of taxidermists, “solely because the federal agent would be questioning Mr. Johnson.” No federal statute authorized a warrantless search, although the court did refer to taxidermy as a “closely regulated business” subject to “regulatory inspections.” When the agents reached the taxidermy shop, it was discovered that Johnson was not available for questioning, the “ostensible purpose” of the federal agent’s visit. However, “once on the premises, the federal agent actively participated in the [ state’s warrantless administrative) search, transforming the state inspection into a federal investigatory search,” and evidence of federal criminal violations was found. The court stated that an administrative inspection may not be used as a pretext solely to gather evidence of criminal activity, and held that the warrantless search was unreasonable, concluding, “Federal agents may not cloak themselves with the authority The court went on to distinguish LaSalle , as well as to provide an alternative basis for its holding: that even if the LaSalle “institutional conunitment” test were used, the inspections in question would be found to have been conducted in good faith, pursuant to a valid administrative scheme. ------- 13 granted by state inspection statutes in order to seek evidence of criminal activity and avoid the Fourth Amendment’s warrant requirement.” (The Johnson court did not cite or distinguish cases from other circuits which have held that objectively reasonable administrative searches are legitimate even if - motivated by suspicions of criminal vio1ations. Supreme Court Cases on Warrantless Searches The Supreme Court, in the context of cases addressing the constitutionality of warrantless inspections, has discussed in dicta the general issue of administrative inspections, and has indicated that entries for purposes of criminal investigation must be pursuant to a criminal search warrant based on traditional probable cause. However, case law in the circuit courts (discussed above) has developed in such a way that these Supreme Court cases are not the most pertinent precedent. What follows in this section is a survey of selected Supreme Court cases which nevertheless must be considered in this context. In Camara v. Municipal Court , 387 U.S. 523, 18 L.Ed.2d 930, 87 S.Ct. 1727 (1967), the court held that a person could not be criminally charged for refusing to permit a warrantless housing code inspection of his residence by municipal authorities. The court found that a warrant was required to protect 4th Amendment privacy interests. The court noted that, like most regulatory laws, housing codes are enforced by criminal processes, as well as administrative complaints, but upheld the inspection scheme which permitted “area wide” inspections without probable cause to believe that violations would be found at particular premises. The court distinguished the “limited invasion” of privacy associated with an inspection, as compared with a search aimed at the discovery of criminal evidence, and indicated that a showing of a valid public interest would be sufficient for issuance of a suitably restricted search warrant. The court speculated that, as a practical matter, a warrant need not be sought until entry is refused, since most citizens would allow inspections without a warrant. In See v. Seattle , 387 U.S. 541, 18 L.Ed.2d 943, 87 S.Ct. 1737 (1967), a companion case to Camara , the court held that the 4th Amendment forbids conviction of a person for refusing to permit a warrantless inspection of a commercial warehouse. In Marshall v. Barlow’s. Inc. , 436 U.S. 307, 98 S.Ct. 186, 56 L.Ed.2d 305 (1978), the court held that OSHA’s inspection provision was unconstitutional, in that it purported to permit warrantless entries for safety and health inspections. The court stated that when the government intrudes on a person’s property, the privacy interest suffers whether the motivation is to investigate violations of criminal laws or breaches of other standards. The court held that the exception to the warrant ------- 14 requirement for “pervasively regulated businesses,” established in U.S. v. Biswell , 406 U.S. 311 (1972) and Colonnade Catering Corp. v. U.S. , 397 U.s. 72 (1970), did not apply. The court indicated that, to obtain an administrative warrant, a showing of a general administrative plan for the enforcement of the Act - derived from neutral sources would be required, rather than probable cause specific to the premises in question. In Michigan v. Tyler , 436 U.S. 499, 98 S.Ct. 1942, 56 L.Ed.2d 486 (1978), arson conspiracy convictions were overturned because they were based on evidence obtained in violation of the 4th Amendment. The court held that an entry to fight a fire requires no warrant, based on exigent circumstances, and that once in the building, officials may remain for a reasonable time to investigate the cause of the fire. However, additional entries to investigate the cause of the fire must be made pursuant to an administrative warrant. Because there were subsequent entries without a warrant, the court held that the evidence should have been excluded. In dicta, the court noted that evidence of arson discovered in the course of an administrative search is admissible at a criminal trial, but once the investigators had probable cause to believe that arson had - occurred, and if they required further access to gather evidence for prosecution, they were required to obtain a criminal warrant, upon a traditional showing of probable cause. In Tyler , the fire chief and a police officer arrived on the scene of a suspicious fire and checked the building, taking pictures. However, the building was too hot and they returned a few hours later after it had cooled to continue the inspection. Three weeks later a police arson investigator returned to take more evidence in a third search. None of the inspections were under a warrant. The court noted the fire department’s duty to determine the cause and origin of fires, to protect the public and prevent a recurrence, and deemed such entries were equivalent to regulatory inspections, or administrative searches, unless there was probable cause to suspect criminal arson. In Michigan v. Clifford , 464 U.S. 287, L.Ed.2d 601, 107 S.Ct. 2636 (1984), the court restated its position that administrative searches generally require warrants. The warrantless search in question was of a house damaged by fire, by an arson investigator. There were no exigent circumstances, so a warrantless entry was not constitutional. In dicta discussing the warrant requirement, the court stated that, if the primary object of the search is to determine the cause and origin of a recent fire (in order to ensure against the danger of rekindling), an administrative warrant will suffice; if evidence of criminal activity is discovered during the course of a valid administrative search, it may be seized under the “plain view” doctrine. However, the court stated, if the object of the search ------- 15 is to gather evidence of criminal activity, a criminal search warrant based on a showing of probable cause is required. In New York v. Burger , 482 U.S. 691, 107 S.Ct 2636, 96 L.Ed.2d 60 ]. (1987), the Supreme Court upheld the constitutionality of a state statute authorizing warrantlesg searches of automobile junkyards, which were found to be a closely regulated industry subject to an exception to the warrant requirement. The court held that warrantless inspections, in the context of a pervasively regulated business, are constitutional if three criteria are met: 1) there is a substantial government interest behind the regulatory scheme; 2) warrantless inspections are necessary to further the regulatory scheme; and 3) the statute’s inspection program provides a constitutionally adequate substitute for a warrant. As to this last factor, the court stated that the statute must perform the two basic functions of a warrant: 1) advising the owner of the commercial premises that the search is being made pursuant to the law and has a properly defined scope, limiting the discretion of the inspecting officers; and 2) carefully limiting the time, place and scope of the search. The Burger court further found that the discovery of evidence of crimes in the course of an otherwise proper administrative inspection does not render that search illegal or the administrative scheme suspect. The court noted that there was no reason to believe that the inspection in question was actually a “pretext” for obtaining evidence of a criminal violation; it was made solely pursuant to the administrative scheme. cc: Earl Devaney Mary Adler Dale Boll Regional Counsels ------- SECTION A DOCUMENT 11 The Exercise of Investigative Discretion 01/12/94 11 ------- UNITED STATES ENVIRONMENTAL PROTECTION AGENCY • WASHINGTON, D.C. 20460 OFFICE OF EN FORCE MENT Januaiy 12, 1994 MEMORANDUM SUBJECr: The Exercise of Investigative Discretion FROM: Earl E. Devaney, Director d Office of Criminal Enforcement — Jjj TO: All EPA Employees Working in or in Support of the Criminal Enforcement Program I. Introduction As EPA’s criminal enforcement program enters its second decade and embarks on a period of unprecedented growth, this guidance establishes the principles that will guide the exercise of investigative discretion by EPA Special Agents. This guidance combines articulations of Congressional intent underlying the environmental criminal provisions with the Office of Criminal Enforcement’s (OCE) experience operating under EPA’s existing criminal case-screening criteria.’ In an effort to maximize our limited criminal resources, this guidance sets out the specific factors that distinguish cases meriting criminal investigation from those more appropriately pursued under administrative or civll judicial authorities. 2 1 This guidance incorporates by reference the policy document entitled Regional Enforcement Management: Enhanced Regional Case Screening (December 3, 1990). 2 This memorandum is intended only as internal guidan e to EPA. It is not intended to, does not, and may not be relied upon to, create a right or benefit, substantive or procedural, enforceable t law by a party to litigation with the United States, nor does this guidance in any way limit the lawful enforcement prerogatives, including administrative or civil enforcement actions, of the Department of Justice and the Environmental Protection Agency. (J) ecycIedIRecycIabIe 4) Plnted with SoyfCanola Ink on paper that ------- Indeed, the Office of Criminal Enforcement has an obligation to the American public, to our colleagues throughout EPA, the regulated community, Congress, and the media to instill confldex ce that EPA’S criminal program has the proper mechanisms in place to ensure the discriminate use of the powerful law enforcement authority entrusted to us. U. Legislative Intent Regarding Case Selection The criminal provisions of the environmental laws are the most powerful enforcement tools available to EPA. Congressional intent underlying the environmental criminal provisions is unequivocal: criminal enforcement authority should target the most significant and egregious violators. The Pollution Prosecution Act of 1990 recognized the importance of a strong national environmental criminal enforcement program and mandates additional resources necessary for the criminal program to fulfill its statutoiy mission. The sponsors of the Act recognized that EPA had long been in the posture of reacting to serious violations only after harm was done, primarily due to limited resources. Senator Joseph I. Lieberman (Conn.), one of the co- sponsors of the Act, explained that as a result of limited resources, “... few cases are the product of reasoned or targeted focus on suspected wrongdoing.” He also expressed his hope that with the Act’s provision of additional Special Agents, EPA would be able to bring cases that would have greater deterrent value than those currently being brought.” - Further illustrative of Congressional intent that the most serious of violations should be addressed by criminal enforcement authority is the legislative history concerning the enhanced criminal provisions of RCRA: [ The criminal provisions were] intended to prevent abuses of the permit system by thdse who obtain and then knowingly disregard them. It [ RCRA sec. 3008(d)] is not aimed at punishing minor or technical variations from permit regulations or conditions if the facility operator is acting responsibly. The Department of Justice has exercised its prosecutorial discretion responsibly wider similar provisions in other statutes and the conferees - assume that, in light of the upgrading of the penalties from misdemeanor to felony, similar care will be used in deciding when a particular permit violation may warrant criminal prosecution under this Act. H.R. Conf. Rep. No. 1444, 96th Cong., 2d Sess. 37, reprinted in 1980 U.S. Code Cong. & Admin. News 5036. 2 ------- While EPA has doubled its Special Agent corps since passage of the Pollution Prosecution Act, and has achieved a presence in nearly all federal judicial districts, it is unlikely that OCE will ever be large enough in size to fully defeat’ the ever-expanding universe of environmental crime. Rather, OCE must maximize its presence and impact through discerning case-selection; and then proceed with investigations that advance EPA’s overall goal of regulatoiy compliance and punishing criminal wrong 1oing. ifi. Case Selection Process 3 The case selection process is designed to identify misconduct worthy of criminal investigation. The case selection process is not an effort to establish legal sufficiency for prosecution. Rather, the process by which potential cases are analyzed under the case selection criteria will serve as an affirthitive indication that OCE has purposefully directed its investigative resources toward deserving - cases. This is not to suggest that all cases meeting the case selection criteria will proceed to prosecution. Indeed, the exercise of investigative discretion must be clearly distinguished from the exercise of prosecutorial discretion. The employment of OCE’s investigative discretion to dedicate its investigative authority is, however, a critical precursor to the prosecutorial discretion later exercised by the Department of Justice. 4 - - At the conclusion of the case selection process, OCE should be able to articulate the basis of its decision to pursue a criminal investigation, based on the case selection criteria. Conversely, cases that do not ultimately meet the criteria to proceed criminally, should be systematically referred back to the Agency’s civil enforcement office for appropriate administrative or civil judicial action, or to a state or local prosecutor. - N. Case Selection Criteria The criminal case selection process will be guided by two general measures - significant environmental harm and culpable conduct. The case selection process must not be confused with the Regional Case Screening Process. The ‘ relationship between the Regional Case Screening Process and case selection are discussed further at VL , below. - Exercise of this prosecutorial discretion in all criminal cases is governed by the prmcipies set forth in the Department of Justice’s Principles of Federal Prosecution . 3 ------- A. Significant Environmental Harm The measure of significant environmental harm should be broadly’ • construed to include the presence of actual harm, as well as the threat of significant harm, to the environment or human health. The following factors serve as indicators that a potential case will meet the measure of significant environmental harm. Factor 1. Actual harm will be demonstrated by an illegal thscharge, release or. emission that has an identifiable and significant harmful impact on human health or the environment. This measure will generally be self-evident at the time of case selection. 5 Factor 2. The threat of significant harm to the environment or human health may be demonstrated by an actual or threatened discharge, release or emission. This factor may not be as readily evident, and must be assessed iii light of all the facts available at the time of case selection. Factor 3. Failure to report an actual discharge, release or emission within the context of Factors 1 or 2 will serve as an additional factor favoring criminal investigation. While the failure to report, alone, may be a criminal violation, our investigative resources should generally be targeted toward those cases in which the failure to report is coupled with actual or threatened environmental harm. Factor 4. When certain illegal conduct appears to represent a trend or common attitude within the regulated community, criminal investigation may provide a significant deterrent effect incommensurate with its singular environmental impact. While the single violation being considered m y have a relatively insignificant impact on human health or the environment, such violations, if multiplied by the numbers in a cross-section of the regulated community, would result in significant environmental harm. B. Culpable Conduct The measure of culpable c’nduct is not necessarily an assessment of criminal intent, particularly since criminal intent will not always be readily evident at the time of case selection. Culpable conduct, however, may be indicated at the time of case selection by several factors. When this factoi involves a fact situation in which the risk of harm is so great, so immediate and/or irremediable, OCE will always cooperate and coordinate with EPA’s civil enforcement authorities to seek appropriate injunctive or remedial action. 4 ------- Factor 1. History of repeated violations. -While a history of repeated vio1ations is not a prerequisite to a criminal investigation, a potential target’s compliance record should always be carefully examined. When repeated enforcement activities or actions, whether by EPA, or other federal, state and local enforcement authorities, have failed to brine’ a violator into compliance, criminal investigation may be warranted. Clearly, a history of repeated’violatjons will enhance the government’s capacity to prove that a violator was aware of envircfrimental regulatory requirements, had actual. notice of violations and then acted in deliberate disregard of those requirements. Factor 2. Deliberate misconduct resulting in violation. Although the environmental statutes do not require propf.of specific intent, evidence, either direct or circumstantial, that a violation was deliberate will be a major factor indicating that criminal investigation is warranted. Factor 3. Concealment of misconduct or falsffication of required records. In the arena of self-reporting, EPA must be able to rely on data received from the regulated community. If submitted data are false, EPA is prevented from effectively carrying Out its mandate. Accordingly, conduct indicating the falsification of data will always serve ‘as the basis for serious consideration to proceed with a criminal investigation. Factor 4. - Tampering with monitoring or control equipment The overt act of tampering with monitoring or control equipment leads to the certain production of false data that appears to be otherwise accurate. The -. consequent submission of false data threatens the basic integrity of EPA’s data and, in turn, the scientific validity of EPA’s regulatory decisions. Such an assault on the regulatory infrastructure calls for the enforcement leverage of criminal - investigation. - - - Factor 5. Business operation of pollution-related activities without a permit, license, manifest or other required documentation. Many of the laws and regulations within EPA ’s jurisdiction focus on inherently dangerous and strictly regulated business -operations. EPA’s criminal enforcement resources should clearly pursue those violators who choose to ignore environmental regulatory requirements altogether and operate completely outside of EPA’s regulatory scheme. 5 ------- V. Additional Considerations when Investigating Corporations While the factors under measures W. A and’B, above, apply equally to both individual and corporate targets, several additional considerations should be taken into account when the potential target is a corporation. In a criminal ,environmental investigation, OCE should always investigate individual employees and their corporate& employers whà may be culpable. A corporation is, by law, responsible for the criminal act of its officers and employees who act within .the scope of their employment and in furtherance of the purposes of the corporation. Whether the corporate officer or employee• personally commits the- act, or directs, aids, or counsels other employees to do so is inconsequential to the issue of corporate culpability. Corporate culpability may also be indicated when a company performs an environmental compliance or management audit, and then knowingly fails to promptly remedy the noncompliance and correct any harm done. 7 On the other hand, EPA policy strongly encourages self-monitoring, self-disclosure, and self- correction. 8 When self-auditing has been conducted (followed up by prompt remediation of the noncompliance and any resulting harm) and full, tomplete disclosure has occurred, the company’s constructive activities should be considered as mitigating factors in EPA’s exercise of investigative discretion. Therefore, a violation that is voluntarily revealed and fully and promptly remedied as part of a corporation’s systematic and comprehensive self-evaluation program generally will not be a candidate for the expenditure of scarce criminal investigative resources. YL Other Case Selection Considerations EPA has a full range of enforcement tools available -‘administrative, civil- judicial, and criminal. There is universal consensus. that less flagrant.violations with lesser environmental consequences should be addressed through administrative or civil monetary penalties and remedial orders, while the most serious environmental violations ought to be investigated criminally. The challenge in practice is to correctly distinguish the latter cases from the former. 6 The term “corporate” or “corporation”, as used in this guidance, describes any business entity, whether legally incorporated or not. 7 1n cases of self-auditing and/or voluntaiy disclosure, the exercise of prosecutorial discretion is addressed in the Department of Justice policy document entitled “Factors in Decisions on Criminal Prosecutions for Environmental Violations in the Context of Significant Voluntary Compliance or Disclosure Efforts by the Violator” (July 1, 1991). 8 See EPA’s policy on environmental audits, published at 51 Fed. Req . 25004 (July 9, j986) 6 ------- The case-selection factors described in this guidance should provide the foundation for the communication process that necessarily follows in the Regional Case Screening Process. This guidance envisions application of the case-selection factors frst, to be followed by the recurring scrutiny of cases during the Regional Case Screening process. The fundamei tal purpose of Regional Case Screening is to consider criminal enforcement in the greater contdt of all available EPA enforcement and environmental response options, to do so early (at,the time of each case opening) before extensive resources have been expended, and to identify, prioritize, and target the most egregious cases. Regional Case Screening is designed to be an ongoing process in which enforcement cases are periodically reviewed to assess not only the evidentiary developments, but should also evaluate, the clarity of the legal and regulatory authorities upon which a given case is beixig..developed. 9 In order to achieve the objectives of case screening, all cases originating within the OCE must be presented fully and fairly to the appropriate Regional program managers. Thorough analysis of a case using the case-selection factors will prepare OCE for a well-reasoned presentation in the Regional Case Screening process. Faithful adherence to the OCE case-selection process and active participation in the Regional Case Screening Process will serve to eliminate potential disparities between Agency program goals and priorities and OCE’s undertaking of criminal investigations. Full and effective implementation of these processes will achieve two important results: it will ensure that OCE’s investigative resources are being directed properly and expended efficiently, and it will foreclose assertions that EPA’s criminal program is imposing its powerful sanctions indiscriminately. V I I. Conclusion The manner in which we govern ourselves in the use of EPA’s most powerful enforcement tool is critical to the effective and reliable performance of our responsibilities, and will shape the reputation of this program for years to come. We must conduct ourselves in keeping with these principles which ensure the prudent and proper execution of the powerful law enforcement authorities entrusted to us. The legal structure upon which a criminal case is built - e.g., statutory, regulatory, case law, preamble language and interpretative letters - must also be analyzed in terms of Agency enforcement practice under these authorities. Thorough discussion of this issue is beyond the scope of this document, but generally, when the clarity of the underlying ‘egal authority is in dispute, the more appropriate vehicle fofresolution lies, most often, in a civil or administrative setting. 7 ------- SECTION A DOCUMENT 12 Parallel Proceedings Policy 06/22/94 12 ------- /1/’ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460 ‘ a4, 4 1 u U,. OFFICE OF ENFORCEMENT MEMORANDUM SUBJECT: Parallel Proceedings Policy FROM: Steven A. Herman 4 f Assistant Admini or TO: All Assistant Administrators All Regional Administrators All Regional Counsels General Counsel This is the Environmental Protection Agency’s revised policy on initiating and maintaining parallel enforcement proceedings.’ Most statutes administeredby EPA include both criminal and civil enforcement authorities, as well as information gathering and inspection provisions. The United States has multiple duties and goals in carrying out the mandates of federal environmental laws, which often can be achieved most effectively through use of several investigative and enforcement options. Thus, it is in the public interest that EPA retain maximum flexibility in the use of its options, consistent with all legal requirements. ‘The following policies are hereby superseded: Memo, Revised EPA Guidance for Parallel Proceedings, from Edward E. Reich, Acting Assistant Administrator, June 21, 1989; Guidelines on Investigative Procedures for Parallel Proceedings (attachment to 6/21/89 Memo), prepared by Paul R. Thomson, Jr., Deputy Assistant Administrator for Criminal Enforcement; Memo, Procedures for Requesting and Obtaining Approval of Parallel Proceedings, from Edward E. Reich, Acting Assistant Administrator for Enforcement, June 15, 1989; and Memo, Supplement to Parallel Proceedings Guidance and Procedures for Requesting and Obtaining Approval of Parallel Proceedings, from James M. Strock, Assistant Administrator for Enforcement, July 18, 1990. Thjs policy applies in conjunction with other Agency guidances, where applicable, such as those on case screening, participation in grand jury investigations, and referrals. Q r Recycled/Recyclable Printed wtth Soy/Canola Ink on paper that ntalni at taut 50% recycled fiDer ------- —2— As used in this policy, the term “proceedings” includes enforcement actions (both investigation and litigation stages) as well as use of information gathering and entry authorities. “Parallel” means simultaneous or successive civil, administrative and criminal proceedings, against the same or related parties,- dealing with the same or related course of conduct. Principles 1. It sometimes is necessary, appropriate, and a reasonable use of resources to bring a civil (administrative or judicial) enforcement action at the same time as an existing or potential criminal investigation or prosecution concerning the same or a related matter. When, in the course of considering appropriate enforcement options, EPA determines that injunctive relief is necessary to obtain compliance with the law or to impose remedial measures, the pendency of a criminal proceeding is not necessarily a sufficient reason to fail to seek appropriate relief. 2 2. The government legitimately may seek civil penalties which are punitive (i.e., effect retribution or deterrence). On the - other hand, punitive civil penalties may have implications under the Double Jeopardy Clause if they are assessed prior, or subsequent, to a criminal prosecution of the same person for the same violations. Although case law has established that civil penalties which are significant in amount can be assessed without implicating Double Jeopardy concerns, it is preferable to avoid the assessment of federal civil penalties against persons who are likely to be subject to subsequent federal criminal prosecution for the same violations. 3. When an environmental criminal matter is investigated by a grand jury, and EPA personnel obtain access to grand jury information, EPA personnel must take care not to violate the secrecy obligation imposed by law, or to use grand jury information for improper purposes. Although the issue of grand jury secrecy can arise in any criminal case, extra care should be taken in the parallel proceedings context. 2 1n some cases, it may be appropriate to delay initiation of a civil enforcement action, and/or to seek a remedial order as a condition of probation, or as a condition of the plea agreement, in the criminal action. These decisions must be made on a case by case basis, taking into account the complications which inevitably arise in parallel proceedings (such as defense attempts to use civil discovery to gain information about a criminal investigation), as well as other case—specific considerations (such as the need to prevent persons from learning that they are targets of criminal investigation) and weighing them against the need for the civil action. ------- —3— 4. EPA’s regulatory inspections (administrative searches) must te objectively reasonable, and properly limited within the scope of the authorizing statute and warrant. As in every situation, the government has a duty to act in good faith, and must ensure that its use of administrative entry authorities is properly -. within the mandates of the Fourth Amendment. 5. EPA’s information-gathering authorities must be used in accordance with the authorizing statutory provisions. There is no general legal bar to using administrative mechanisms for purposes of investigating suspected criminal matters, unless otherwise specified in the authorizing statute. However, the government must not intentionally mislead a person as to the possibility of use in the criminal enforcement context of information provided in response to such requests, in such a way as to violate the Fifth Amendment Due Process Clause or the Self- Incrimination Privilege. Procedures 1. The Regional Counsel and the Special Agent in Charge of the Criminal Investigation Division must concur in the initiation (or continuance) of a civil enforcement proceeding (administrative or judicial), when a criminal proceeding is pending or contemplated as to the same or a related matter. 3 During the pendency of any such civil action, the Regional Counsel and the SAC should consult on a continuing basis, in order to avoid undue duplication of effort and interference by one action with the other.’ As with other aspects of the case screening process, the regions (and HQ offices, where applicable) have flexibility in designing specific procedures to implement these requirements, and issues may be brought to the attention of the Assistant Adininist rator where agreement cannot be reached. 3 1f the civil enforcement action contemplated is a judicial (rather than an administrative) one, Agency referral policy continues to require that the request for referral of a parallel proceeding to the Department of Justice be routed through EPA-HQ, for Assistant Administrator approval. In other words, the “direct referral” policy does not apply to parallel proceedings. Note also that DOJ policy affects the Agency’s ability to pursue a civil judicial action that is related to a pending criminal investigation. ‘When an EPA Headquarters office has the lead in an enforcement iñatter, both the Enforcement Counsel who has the civil case, and the Director of the Office of Criminal Enforcement (or delegate), must concur in the civil action. These persons should consult on a continuing basis. ------- —4— 2. When a parallel civil action is brought, a claim for civil penalties may be filed, as necessary, to avoid claim—splitting or statute—of—limitation problems. Normally, however, a civil penalty claim should be stayed (not assessed or collected) as —to a person who is a target of criminal investigation, until the criminal proceeding is concluded as to that person. 3. In the parallel proceedings context, open communication should be maintained between EPA personnel assigned to the civil- enforcement or information-gathering matter and those assigned to the criminal case, in a manner consistent with the legitimate confidentiality and grand jury secrecy needs of the criminal enforcement program. 5 However, information relating to matters occurring before a grand jury should not be revealed without prior consultation with the attorney for the government (usually a Department of Justice attorney). 4. Prior to any use of EPA’s statutory information—gathering or entry authorities to gather evidence of suspected criminal activity, the Regional Counsel (or the OCE Assistant Director for Legal Affairs, for HQ cases) should be consulted, to ensure that constitutional requirements are• met. Reservation of Rights This policy provides internal Environmental Protection Agency guidance. It is not intended to, and does not, create any rights or privileges, substantive or procedural, which are enforceable by any party. No limitations are hereby placed on otherwise lawful prerogatives of the Environmental Protection Agency. cc: All Office of Enforcement and Compliance Assurance Personnel 5 Note that it is good professional practice for enforcement personnel to carefully document the sources of information received and the persons with whom information is shared, whether there is a parallel proceeding or not. ------- SECTION A DOCUMENT 13 RedelegatiOn of Authority and Guidance on Headquarters Involvement in Regulatory Cases NOTE: Includes the actual redelegatiOn, dated 07/08/94 07/11/94 13 ------- •,tO S 4 ) UNITED STATES ENVIRONMENTAL PROTECTiON AGENCY WASHINGTON, D.C. 20460 JUL 111994 OFFICE OF ENFORCEMENT MEMORANDUM SUBJECT: Redelegation of Authority and Guidance on Headquarters Involvement in Re ul tory Enforcement Cases FROM: Steven A. Henna Assistant Admjnjst a or TO: Assistant Administrators Regional Administrators Deputy Assistant Administrators Regional Counsels OECA Office Directc..:s and Division Directors On May 31, 1994, the Administrator Commissioned an effort to follow up on the issues raised by the Regional Impacts Task Force (RITF) regarding the division of roles and responsibility between the Regions and Headquarters n the enforcement and compliance assurance program. The principal area which needed further djscussion regarded the management of civil judicial and administrative cases. The specific question to be addressed concerned the nature and extent of Headquarters involvement in case development and litigation. A small work group, which included personnel from OECA , the Regions, and OGC, was formed to undertake this follow-up effort. The work group approached its assignment in two phases. Phase 2. has focussed on the roles issue in the regulatory enforcement context; Phase 2 will examine the issue in the Superfund context. Phase 1, on which the work group has completed its work, is the subject of this memorandum; Phase 2 will be brought to closure in the near term. The RITF provided a basic framework for the Headquarters/Regional relationship in the case management arena, concluding that Headquarters involvement was appropriate in a number of contexts: a) cases or issues that rise to a level of national attention; b) multi-regional cases against the same company; C) national initiative cases. The RITF Report encouraged redelegation of authority for matters that are not of national import. The relevant portions of the RITF Report are attached to this memorandum as Attachment A. Also attached to Printed or ’ Re ycIed Paper ------- 2 this memorandum are supplemental guidance developed by the follow-up work group (Attachment B), giving further definition to the concept of “national significance,” and a new redelegation of authority to the Regions that builds on the work of the RITF and reflects the views of the work group (Attachment C). This memorandum and its attachments, taken together, establish the general framework and guidance that the Agency will hereafter follow in the processing and management of civil regulatory enforcement cases. The effective date for implementation of this new approach will be October 1, 1994. In the meantime, we will be developing further the auditing concept outlined below and visiting the Regions to discuss expectations regarding implementation. A NEW APPROACH TO OVERSIGHT As articulated by the RITF, the fundamental role of OECA is to provide overall leadership in the enforcement and compliance assurance arena. This leadership role .Aas a number of different facets, including devising the national strategy for the program-, addressing matters of national policy and concern, ensuring national consistency, ensuring the development of regulations and laws that are clear and enforceable, representing the Agency before the Congress and with other agencies, and ensuring effective implementation of the Agency’-- enforcement and compliance assurance program. Although, as discussed further below, there are significant benefits associated with Headquarters involvement in cases, case involvement has been historically used by Headquarters at least in part as a means of overseeing Regional implementation of EPA’s enforcement program. The principal vehicle for effecting this oversight has been the requirement that Headquarters formally concur on all Regional settlements of civil judicial matters, whether or not those matters raise issues of national concern. This concurrence process has been criticized for increasing transaction costs, causing processing delays, and diverting Headquarters and Regional staff attention from other, more compelling work. With this memorandum, and in keeping with the principles of empowerment, reinvention, and accountability, we are fundamentally reorienting our approach to Regional oversight. The new approach has the following features: o Value-added approach to case involvement -- Headquarters involvement in cases will operate according to the “value added” principle. Under this principle, Headquarters staff will be involved in cases when the case or the program at large will benefit from such involvement (see below for ------- 3 further discussion). o Focus on “nationally significant” matters and issues —— The concurrence process will no longer be used for purposes of routine oversight. .Instead, it will be reserved for - cases or issues which call for Headquarters sign-off because of their national significance — — i.e. , because they are national in terms of their impact or attention, are sensitive in nature, raise unresolved policy issues, establish an important precedent, arise in an area where national consistency is of paramount importance ( e.g., Shell where an adverse legal decision raised major programmatic concerns under RCRA), or otherwise affect the overall program. The new approach eliminates the distinctions between administrative and judicial cases, as cases in either forum can be nationally significant and can raise issues of national consequence. Attachment B provides specific examples of nationally significant matters. Because of its unique national perspective and its role as policy-maker and national “voice” for the enforcement and compliance assurance program, Headquarters Dtaff involvement during the pendency of the litigation and ultimately the AA/OECA’s review and sign—off in these circumstances adds value to program implementation and is essential to effective program implementation and public accountability. o Redelegation of authority —— Regional civ .1 judicial and administrative cases which seek a bottom line penalty 1 of less than $500,000 will be presumed to not be nationally significant. Accordingly, consistent with the attached delegation, I am redelegating to the Regional Counsel the AA’s authority to concur on settlements undertaken by the Regional Administrator (or Regional Division Director, where the RA’s authority has been redelegated), provided such settlements adhere to national policy and guidance and do not raise issues of national significance. The Regional Counsel will, in the first instance and in keeping with this guidance, make and document the determination whether such a matter raises an issue of national significance. Judicial and administrative cases involving a bottom line penalty of $500,000 or more assume,a sufficient national profile so as to be presumptively nationally significant and will be ‘Under the Agency’s penalty policies, this generally means recovery of the economic benefit of noncompliance plus a gravity component. Where the Region has not prepared a bottom line penalty before filing an administrative case, cases will be presumed to be nationally significant if the proposed penalty sought in the complaint to be filed is greater than or equal to $500,000. ------- 4 reserved for the AA/OECA’s concurrence. 2 o Flexible involvement —- Flexibility is built into the redelegation. If a nationally significant issue arises in a case with a bottom line penalty under the $500,000. threshold, the delegation wi].]. require the Region to consult with the appropriate division in the Office of Regulatory Enforcement (ORE) in OECA; OECA would, at the Division Director level, then have the authority to opt in for purposes of concurrence if appropriate. 3 For the $500,000 and over cases, the redelegation would give OECA, at the Office Director level, the authority to opt out for purposes of concurrence if, for example, there are no issues of national significance and the case is not likely to assume a national profile. o Differential oversight —— The case-by-case approach to oversight will be replaced with a systematic approach to accountability which will include, at a minimum, periodic auditing of regional compliance with the requiremer s of the redelegation, regular docket reviews, and after-the--fact review of regional decision documents. Regional Counsel 2 The delegations that are currently in place for nistrative penalty actions under, e.g. , the Clean Water Act - . 2-A), the Clean Air Act (7—6-A), RCRA Subtitle 3 (8--..3), and TSCA (12-2—A), reserve the CECA Assistant Administrator’s authority in “multi—Regional cases, cases of national significance or nationally managed programs.” Consequently, the approach outlined in this memorandum for administrative cases is consistent with delegations relating to these authorities. Because the delegations that are currently in place for RCRA Subtitle C and the Safe Drinking Water Act do not include this explicit reservation, we will need to make conforming amendments to the dministrator’s delegation under these authorities. This will be done as part of the third phase of delegations adjustments associated with the reorganization. In the meantime, as a function of their reporting relationship with the OECA AA, the Regional Counsels will be expected to consult with OECA, consistent with this memorandum, on nationally significant administrative matters arising under these authorities. 3 Where OECA opts in, the concurrence requirement will be fashioned to reflect the character of the matter at hand. In some circumstances, OECA’s concurrence will be required only for resolution of the nationally significant issue (as opposed to requiring concurrence on the settlement); in others, such as where the nationally significant issue is so fundamental to the case that the resolution of the case inevitably speaks to the i in an important way, the Assistant Administrator’s d rrence will be required for the settlement. ------- 6 forth below: 0 “National Program” cases —- These are cases that arise in programs that are not implemented at the Regional level, such as the Mobile Source program and enforcement of the adverse effects reporting requirements under -FIFRA, and cases which are Headquarters-driven because the data systems necessary to identify noncompliance are maintained at Headquarters ( e.g. , CFC import and export cases, certain acid rain cases, etc.). In these cases, Headquarters has the lead role, with little or no regional involvement. 4 o “National Violator” cases -- These are cases against a single entity involving violations at facilities in more than one Region ( e.g. , the Louisiana Pacific multi—facility case). In these cases, Headquarters will have the EPA lead for overall case direction and coordination. Generally, Regional personnel will be responsible for developing and supporting those components of the case that arise in their Region. In national violator cases in which a disproportionate number of violating facilities are located in a single region, OECA may determine that it is more appropriate for personnel from that Region to play the lead role, essentially reporting to OECA in this capacity. o “National Initiatives” —— These are clusters of cases involving more than one Region centered around a sector of the regulated community ( e.g. , the pulp and paper initiative), a geographic area ( e.g , the Mexican border), a pollutant ( e.g. , the lead initiative), or a particular kind of regulatory requirement ( e.g. , the RCRA non-notifier initiative). In these circumstances, OECA personnel will have a lead role in coordinating the overall project, including developing initiative guidance, screening cases for inclusion in the initiative, and giving direction in terms of timing of activities, communication strategy, etc. Generally, Regional personnel will serve as the Agency lead for the individual cases that are included in the initiative. o Single Region cases -- This category includes cases which arise in the ordinary course of events within a Region as well as self-contained regional initiatives. Regional personnel will serve as the Agency lead for cases in this category. Headquarters involvement will be determined largely by the redelegation of authority. Thus, in redelegated cases, Headquarters personnel will ordinarily 4 1n the near term, I will be doing an additional delegation of authority within OECA for settlements in cases falling into this category. ------- 7 not be involved; in non-redelegated cases, Headquarters personnel will be involved for the purpose of providing national perspective and expertise, keeping the AA/OECA and other critical Headquarters decision-makers advised, and informing AA/OECA concurrence. Whether or not Headquarters is involved, the Regional Counsels will, by providing copies to ORE of referrals to the Department of Justice and through regular reports and periodic consultation, be responsible for keeping the A.A/OECA and ORE informed regarding program activities. This guidance regarding Headquarters involvement should not be viewed rigidly. Rather, it should be viewed flexibly, with an eye towards using the overall resources available to the program to get the job done. Thus, where, for example, a national initiative calls for work that is beyond a Region’s resources, OECA personnel may be deployed to the Region to work with Regional management in leading case developing efforts. Similarly, apart from the redelegation, the need to provide training opportunities that will leave Headquarters personnel better able to perform their policy and regulatory role may suggest involvement in circumstances not expressly contemplated above. Additionally, OECA retains the authority to take action, after consultation with the Regional Administrator, in the place of a Region in the rare situation where the Region is unprepared to respond to a problem of national concern or to assume the lead in a case which is of such paramount national interest as to require daily involvement by the AA/OECA ( e.g. , Love Canal). CONCLUSION In sum, this guidance and redelegation should help the Agency turn a corner in the Headquarters/Regional relationship in the enforcement and compliance assurance arena. Our new approach not only will preserve, but reinforce OECA’s leadership role for the enforcement and compliance assurance program, particularly as it relates to nationally significant cases and issues. At the same time, it will empower managers in the Regions to implement the Regional enforcement program in a more efficient manner. Moreover, the accountability mechanism contemplated here —— systematic audits, after—the—fact review of pertinent decision documents, and differential oversight -- should leave OECA better able to identify problems and respond to them holistically than is possible under the current system. Frequent and regular contacts between Headquarters and Regional managers will be essential to the success of the new system. At the one-year anniversary of the effective date of this memorandum we will review this guidance and redelegation to determine whether any adjustments are needed. Attachments ------- REPORT OF THE EPA REGIONAL ENFORCEMENT IMPACTS TASK FORCE \ O S7 47 . 1 >; z Ui (D MAY 1994 ATTACHt1 T A RcIed/Recyc abI. fl Pflm.d ------- V. Roles and Responsibilities should have the lead, with participation from the other, depending on the nature of the matter. 6. Case Development and Management a. Genera) Background The area of case development and management presents the largest challenge for setting out appropriate roles and responsibilities because there are so many functions, so much work, and legitimate disagreements over dividing responsibilities between the Regions and Headquarters. The Task Force spent a great deal of its time and effort dealing with roles and responsibilities in this area. The Task Force believes that a number of principles should guide the Headquarters/Regions relationship in case development and managerrent including: Use resources efficiently and effectively; avoid duplication of effort and second guessing; maximize delegations; use a team approach to problem solving based on trust, cooperation, and respect; determine roles based on need for unique perspectives and knowledge; provide clear and timely Headquarters guidance that allows Regions a specified degree of flexibility and sets out a process for greater flexibility based on the facts of a specific case. The Task Force’s recommended roles and responsibilities between Regions and Headquarters reflect the general and normal delineation of roles and responsibilities that would take place for case development and management and should not be viewed as an absolute. Overall, there needs to be a balance between empowerment and consistency. Specific case facts relating to precedential concerns, the need to deviate from established policies, or other matters may warrant the need for greater Headquarters involvement. However, with the exception of nationally run enforcement programs, the presumption is that Regions manage their cases. Currently, responsibility for administrative cases is largely delegated to the Regions with minimal Headquarters involvement. Headquarters involvement is usually limited to administrative cases resulting from national programs that are managed entirely out of Headquarters mobile sources) and administrative actions brought under new statutory or regulatory authority, for which the Regions typically have submitted their first three such actions for Headquarters approval. However, there are also occasional circumstances when, because of the 14 ------- V. Roles and Responsibilities ecedential nature of issues involved in administrative cases, Headquarters becomes involved. Under the reorganized enforcement program, the Task Force generally believes that development, management, and settlement of the significant majorit j of administrative cases should continue to be handled by the Regions. However, for regional cases that (a) rise to a level of national attention, (b) are multi-regional cases against a company, economic sector, or ecosystem, or (C) are part of national enforcement initiatives, the Task Force generally believes that some degree of Headquarters involvement (which can range from consultation to concurrence) would be advisable and that in some cases a Headquarters lead would be appropriate. The Task Force believes these three types of cases are likely to be a relatively small percentage of all regional administrative cases. Whether a Region or Headquarters should have the lead” and the extent of the other office’s participation and/or concurrence in these cases would depend on the nature and facts of the case. There should be criteria and guidance to help guide these decisions. The most important consideration, however, is that the decision on the ead responsibility for such administrative cases must be made as early in the process as possible. Currently, Regions have been delegated less authority for initiating, )nducting, and settling judicial cases than for administrative cases. Headquarters involve ient is significant. Under the reorganized enforcement program, the Task Force generally believes that development, management, and settlement of the majority of judicial cases should be delegated to Regions. However, the Task Force believes that cases that (a) rise to a level of national attention, (b) are multi- regional cases against the same company, or (C) are part of national enforcement initiatives, could be either Regional lead with Headquarters concurrence/participation or Headquarters lead with Regional concurrence/participation. depending on the nature and facts of each case. As with administrative cases, there should be criteria and guidance to help guide these decisions. The most important consideration, however, is that the decision on the lead responsibility for such judicial cases must be made as early in the process as possible. b. Delegations Proposal In light of these considerations, the Task Force recpmmends that the Assistant Administrator for OECA consider a number of delegations in the context of overall environmental enforcement case management. These delegations are 15 ------- V. Roles and Responsibilities appropriate in light of the Administrator’s commitment to streamlining, ensuring national consistency, and implementing the recommendations of the National Performance Review. These delegation principles are not intended to Substitute for the principle that good communication between Headquarters and the Regions is essential for consistent and efficient Agency enforcement. The Task Force suggests consideration of the following principles: (i) It is appropriate to further delegate Civil judicial case initiation, management, and settlement authorities to Regional Administrators/Regional Counsels. The Task Force expects that authority for initiation, management, and settlement of the majority of cases will be delegated to the Regions, and Regions will be held accountable for appropriate exercise of that authority. These include all cases not falling within the exceptions to be set forth in guidelines, as noted in (ii) below. Adr .nistrative enforcement authorities have largely been delegated to regional offices. The Task Force expects that the authorities for initiation, management, and settlement of these cases will be maintained in the Regions, with exceptions limited to those set forth in guidelines, as noted in (ii) below. (ii) Consistent with the Administrator’s desire that EPA speak with one enforceme, 1 t voice, the Assistant Administrator for OECA should be included in the decision-making process at any time that it becomes apparent that a civil judicial or administrative case will raise issues of national precedence or national significance. Depending upon the level of national precedence or significance, inclusion and participation of the Assistant Administrator for OECA will vary from consultation to concurrence in regionally-managed cases to actual Headquarters lead in case development and management. The Task Force believes that a number of factors should be considered in ascertaining whether a case is of national significance or nationally-precedential, and what level of delegation is therefore appropriate. These factors include the dollar value of assessed penalties, the precedential character of the case or specific• issues involved, the degree of national importance and public interest in the case, whether a case covers facilities or environmental contamination problems in multiple Regions, whether a proposed settlement is within national norms, whether a case is initiated within the context of a national initiative, and whether a case is consistent with legislative proposals under consideration. 16 ------- V. Roles and Responsibilities (iii) Assuring that the Administrator’s goals of national consistency and streamlining are met will require that the Assistant Administrator for OECA introduce and implement a system of accountability. In accordance with the delegations outlined in (b) above, the system must include some contemporaneous review of the case initiation, management, and settlement in nationally significant cases, as well as in cases in which national settlement criteria have not been met ( LQL , recovery of economic benefit of non-compliance). In addition, the Task Force recommends institution of systematic Dost reviews of regional enforcement program performance, and consistency with national enforcement policies. The Task Force recommends that this review yield sanctions for non conformance with hationat policy, a recognition of superior performance, and consideration of differential delegations if appropriate. c. Recommended Roles and Responsibilities Based on the above discussion, a number of functions should fall into the category of Headquarters in the lead with Regional participation. These include national priority setting anc targeting, technical and legal support on national issues, clearinghouse/coordination, development of information systems, Headquarters providing technical and legal support on Regional cases, providing technical experts on key cases, DOJ interface, policy and guidance on case nanagement, coordination with OGC, communication and coordination among Regions, criminal case devel pment, and citizen Suit matters. Regions should have the lead on regional targeting and screening, and communicating and coordinating with Headquarters and States. The Regions and Headquarters should share the responsibility for ensuring consistency with national policy guidance, but the Task Force recognizes that Headquarters should have an audit function with respect to the Regions. On administrative appeals, the Regions should have the lead with Headquarters concurrence on both the decision to appeal and the conduct of the case. For judicial appeals, Headquarters should have the lead with Regional concurrence. The same is true for contractor listing. In defensive litigation, in both pre- enforcement review and counterclaims, Headquarters or the Regions should have the lead, with the other participating, depending on the case. On most administrative cases, the Regions should have the lead in developing, managing, litigating, and resolving the matters. In several categories of administrative cases, Headquarters should be involved, and on rare occasions 17 ------- ATACHM T B Guidelines for Identification of Nationally Significant Cases or Issues The following guidelines and examples set forth indicators of national significance for purposes of determining the involvement of the Office of Enforcement and Compliance Assurance in Regional enforcement cases, and the exercise of any case settlement authorities delegated to Regional Counsels. These guidelines should not, however, be the sole basis for any determination regarding the presence of nationally significant issues in an enforcement action; indeed, what is “nationally significant” will necessarily reflect the current climate in which the Agency carries out its mission. For example, matters which would not ordinarily be nationally significant may become such when they relate to statutory reauthorization or other legislative developments. Regional Counsels are expected to consult with the appropriate Office of Regulatory Enforcement Division Director on any iss s of national significance which have been identified, yet do not otherwise fall within any of the guidelines set forth below. These guidelines may be periodically supplemented or revised to reflect additional indicia of national significance, or to remove any indicia listed below for which Headquarters attention is no longer required. Examples of case or issues which raise indicia of national significance: 1) Cases or issues that have precedentja l character o Initial use of new authorities o New use of existing authority o Issue of first impression o Unresolved policy, legal or technical issue o Change in national policy or legal interpretation o Applications of new technology 2) Cases or issues that rise to a level of national attention or significant public interest o Significant citizen concern (especially significant environmental justice issues) o Significant political attention o Major state/local government relationship issues o Cases against municipalities o Major environmental or public health threat 0 Shut down of a facility ------- o International implications (e.g. trade, import violations, Basel Convention) o Major inter-agency implications, including federal facilities o Settlements involving cutting edge Supplemental Environmental Projects 3) Cases or issues that are potentially affected by legislative proposals under consideration, emerging regulatory proposals, or evolving policy changes (e.g. Clean Water Act reauthorization, municipal incineration) 4) Cases that are multi-Regional o Multi-Regional case against one company o Multi-Regional initiative (e.g. geographic, sector, pollutant, regulation) 5) Cases or issues that deviate frorn the national norm o Deviation from established policy o Deviation from established guidance o Deviation from previous legal positions ------- ATTACHMENT C ,ID S UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460 p 0 t JUL 8 94 - OFF)CE OF ENFORCEMENT MEMOR .NDUM SUBJECT: Redelegation of the Assistant Administrator for OECA’s Concurrence Authority in Settlement of Certain Civil Judicial and Administra •ve Enforcement Actions FROM: Steven A. Herman Assistant Adminis rato TO: Assistant Administrators Regional Administrators Deputy Regional Administrators Regional Counsel OECA Office Directors OECA Division Directors This memorandum constitutes the formal redelegation of certain settlement concurrence authorities cur- ently reserved for the Assistant dministrator for Enforcement ana Compliance Assurance, and serves as an attachment to the July 8, 1994 OECA memorandum entitled, “Redelegation of Authority and Guidance on Headq-uarters Involvement in Regulatory Enforcement Cases.” The authorities which are hereby redelegated are listed below, as well as the procedure, conditions, and limitations that apply when such redelegated authorities are exercised by either the Regional Counsels or the Director of the Office of Regulatory Enforcement of OECA. The July 8, 1994 memorandum mentioned above should be consulted for additional clarification on the procedures to be used to implement these redelegations, as ell as the expectations and responsibilities that follow these settlement authorities. Authorities To settle or exercise the Assistant Administrator’s concurrence in the settlement of civil judicial and administrative enforcement actions which involve a bottom-line penalty of less than $500,000 under the Clean Water Act, the Safe Drinking Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Toxic Substances Control Act. Printed on Recycled Paper ------- 2 To settle or exercise the Assistant Administrator’s concurrence in the settlement of civil judicial and administrative enforcement actions which involve a bottom-line penalty of $500,000 or above, in actions under the above- mentioned statutes for which the Director for the Office of - Regulatory Enforcement of OECA determines that, in light of the issues presented, the concurrence of the Assistant Administrator is not necessary. To Whom Redelegated The Regional Counsels. This authority may not be redelegated. Process and Limitations The Regional Counsels must consult with the Assistant Administrator for Enforcement and Compliance Assurance or his designee prior to exercising this redelegated authority under the following circumstances: (1) a proposed settlement wo d not comport with applicable penalty policies or recover th . full amount of economic benefit of noncompliance from a violator not in bankruptcy; or (2) the case raises issues of national significance or otherwise rises to a level of national attention. The Regional Counsels are responsible in the first instance for identifying such cases and/or issues as they arise, and are expected to inform the Director of the Office of Regulatory Enforcement of the Office of Enforcement and Compliance Assurance as soon as they are identified. Criteria for determining whether a case or issue are nationally significant, or have risen to a level of national attention, are set forth in the July 8, 1994 OECA memorandum entitled “Redelegation of Authority and Guidance on Neadguarters Involvement in Regulatory Enforcement Cases.” Particular issues of national interest or concern may also be identified by the Division Directors in the Office of Regulatory Enforcement. Regional Counsels should use discretion in identifying other issues which are nationally significant, yet do not otherwise fall within the guidelines or examples contained therein. Following the appropriate consultation between the Regional Counsel and the Director of the Office of Regulatory Enforcement of OECA, or the appropriate ORE Division Director, regarding the above-referenced issues, OECA may, at the Division Director level, determine that concurrence of the Assistant Administrator is appropriate for the matter at hand, in which case concurrence will be required. This redelegation does not extend to Headquarters-initiated cases. ------- SECTION A DOCIJIIENT 14 Restatement of Policies Related to Enviromnental Auditing NOTE: Contained in a Federal Register notice, 59 Fed. Reg. 38455 (7/28/94). 07/28/94 14 ------- FOR FVRTHER INFORMATI CONTACT: Contact the following persons for more information about a permit listed in this notice: - or plants in New York. Gerry aetarto. (212) 264—6685. EPA Region ror plants in Florida and Kentucky. Scott Davis. (404) 347—5014. EPA Region 4 (address above). For plants in M’SSOUIi. Jon Knodel. (913) 551—7622. EPA Region 7. SUPPLENENTA flY INFORUATlo l: Title IV of the Clean Air Act directs EPA to establish a program to reduce the adverse effects of acadic deposition by promulgating rules and issuing pemuts to emission sources subject to the program. .On Januaiy 11. 1993. EPA promulgated final rules implementing the program. Subsequently, several parties filed petitions for review of the rules with the U.S. Court of Appeals for the District of Columbia Circuit. On November 18, 1993. EPA published a notice of proposed revisions to rules regarding Phase I substitution and reduced utilization plans (sections 404 (b) and (c) and 408(dllt)(B) of the Actt. On May 4. 1994. EPA and other parties signed a settlement agreement addressing the substitution and reduced utilization issues. In todays action, EPA is issuing permits that are consistent with the May 94 settlement. Except as noted w EPA approves for 1995—1999 all pliance options for which EPA deferred action for 1996—1999 in the draft permits. In addition, except as noted below, the numbers of substitut ion and compensating unit allowances allocated to each unit for 1995—1999 are identical to the numbers of allowances allocated to each unit for 1995 in the draft permits. The additional allowances discussed below are a one-time only allocation pursuant to the settlement. Upon activation of conditionally-approved plans. substitution or compensating unit allowances are allocated for the remaining years the plan is in effect. EPA issues the following permits: Northport in New York. Port efferson in New York. Big Bend in Florida. F J Cannon in Florida: No change for unit GBO1: 4.581 substitution allowances for each year and 9 additional allowances to unit CBO2 upon activation of substitution plan; 7.003 substitution allowances for each sear and 437 additjonat llowan to unit G803 upon activation of substitution plan: 7.570 substitution allowances for each year and 450 . tional allowances to unit C804 upcn activation of substituuon plan: 1O, 9s substitution allowances for each year and 520 additional allowances to unit GBO5 uoon activation of substinition plan: 16.107 substitution allowances for each year and 377 additional allowances to unit GBO6 upon activation of substitution plan. Hookers Point in Florida: 0 substitution allowances for each year and 27 additional allowances to unit HBO 1 upon activation of substjtutio plan: 31 substitution allowances for each year and 3 addItional allowances to unit HBOz upon activation of substitution plan; 92 substitution allowances for each year and 9 additional allowances to unit HBO3 upon activation of substitution plan; 145 substitution allowances for each year and 15 addItional allowances to unit HBO4 upon activation of substitution plan: 124 substitution allowances for each year and 13 additional allowances to unit HBO5 upon activation of substitution plan: 207 substitution allowant ç for each year and 13 additional allowances to unit HBO6 upon activation of substitution plan. Big Sandy in Kentucky. Coleman an Kentucky. Cooper in Kentucky. Dale in Kentucky 2.115 substitution allowances for each year and 226 additional allowances to unit 3 upon activation of substitution plan, and 226 additional allowances if the unit becomes affected for NO; 1.729 substitution allowances for each year and 166 additional allowances to unit 4 upon activation of substitution plan. and 166 additional allowances if the unit becomes affected for NO. East Bend in Kentucky. H L Spuriock in Kentucky: 14.206 substitution allowances for each year and 1.5 93 additional allowances to unit 2 upon activation of substitution plan. and 1.593 additional allowances if the unit becomes affected for NO,. R D Green in Kentucky: No change for Unit Gl; ’.827 substitution allowances for each year and 492 additional allowances to unit G2. Sibley in Missouri: 2.782 substitution allowances for each year and 28 additional allowances to unit 1; 3.332 substitution allowances for each year and 130 additional allowances to unIt 2. Dated- July 14. 1994. BnJ.Mr La an. Director. Acid Rain Oiv,s:cn, C2fficecf Atmospheric Programs. Office of Air and Radiation. (FR Doc. 94—*8323 Filed 7—27—94.8.45 ainl Bfl.uNG COOS qo- o- . 2I . 1994 / Notices 38455 (FRL-6Q21.. , Restatement of Policies Related to Environmentaj Auditing AGENCY: Envirofirnentel Protection Agency (EPA). ACTION: Notice. SUMMA V: The EPA Environmental Auditing Policy Statement (“1986 Policy”) Was originally published In the Federal Register on July 9. 1986 (51 FR 25004). The 1986 Policy states that “(c)larification of EPAs position regarding auditing may help encourage regulated entities to establish audit programs or upgrade systems already in place.” The goal of this notice is to clarify EPA ’S aanmnt polides on and approach lb audiftng. This notlce siLmmari salient points from the 1988 Policy, which zomains in effOct. In addition. this notice updates the Agency’sactivjtj withrespectto- auditing and auditing policy and references pertinent language from other relevant policp documents, in anticipation of the public meeting on ) auditing scheduled for July 27-28. l 4 This notion does not represent a ne c’ EPA policy or position on enviroumentej auditing; all existing policies remain in effect. I. Auditing Public M eting; Change of Location The response to EPAs announcement (59 FR 31914. June 20, 19944 to hold a public meeting on auditing en ruly 2r- 28, 1994 has b overwhelming, Due to the expected sa of the audience, therefore, the Agency has changed the location of this event. The locatjon is the Stouff& Mayflower Hotel in Washington. DC. at 1127 Connecticut Avenue, NW. Phone (202) 347—3008. II. The Auditing Policy Rea s 1 g In response to a reque by Administrator Carol M. Browner, the Office of Enforcement and Compliance Assurance (OECA) is reassessing the Agency’s current policy regarding environmental auditing and sell- evaluation by the regulated community. EPA has committed to investigating the perceived problems relating to auditing. self-evaluation, and disclosure through an empirical. infonnation.gathanng effort. The Agency must develop an adequate information base to give serious consideration teeny policy options and to ensure that any decision to either reinforce, r.hing , supplement existing policy is informed by fact. sucia relevant data through the implementation of four actions this summer. First, the Agency Federal Register / Vol 59 No. 144 / Thttr iày. Jul ------- 38456 t :1) c.on ene a publ:r meeting cn 19 4. as an opportunity to obt3in a ide variety of tews and to sha;pen the focus on these issues. The range of uss ies ..ipproprlale for discussion at the lJLbl mee!l: i. clude: the implementation of the 1986 Policy; spec.;tic suggestions for auditing poliry cptlons: State audit privilege legislation. audituig in the context oi’uiminal enforcement; and advances in the field of auditing since 198 . Interested part ies are encouraged to read the Federal Register notice dated June 20, 1994 (59 FR 31914) for more details on the public mee i r.q. Secci d. EPA published in the (une . 1, 1994 Federal Register (59 FR 32062) a notice requesting proposals for Environmental Leadership Program (EL?) pilot protects. EPA expects that these pilot projects will generate useful data on .iuditing methodology and measures, and may also serve as i ’ hicles for expenmenung with poliiy. driven incentives. Third. EPA will encourage the private sector to collect data and survey auditing practices in order to gauge the effect of enforcement policies on self. evaluation and disclosure in the regulated commuluty. The Agency will also seek input on auditing and related issues front States, environmental arid public imerest groups, and trade and professional associations. Finally, in this Federal Register nouc.e. EPA is restating aJient points from the 1986 Policy and reviewing its ac.tivit, , s and other policies relating to environmental auditing. The goal of this :luiIu..e :s to darify EPA’s current poliucs on and approach to auditing, in order ‘o ensure a ell-in1ormed policy dt ’ba:e, Ill. Review of General EPA Policy on Fni.ironmental Auditing • t EP E:’rr’umg s the Us of E’r. ‘r.ln:;;— .:u.! EPA h ict . .civ encouraged and pull’ :put-.J ‘i the de elopment of * n’. auditing and improved -‘ ‘J management prautces the r :d- tq 0s. In fact, the iqg Poli is . , .r’.ed s the basis for defining t e IaI t:c:e and profession of eu uron e.-.tal a’:dittng The 1988 Pulit ( k ’arR states EPA cuipport for .iuih i r.q Ci ’ ‘ut• e”.t it nrntrntal ut diiia; tan lt’dll 1.1 l.4n ; ie -k of uteralt tompliant.. .ind ru dm..’d ntk in human health and the i n ir ’n’rn,’rt EP. endorses the practice air t or.mni’ntal auditing and SupportS its ‘i ’,” j:.’d u e b r gulate J entI:, s tu hu’Ip toe goals of i ed ral. .Lute and laia...l .ra ’rrnrn:.d rawjiu.ru—rr,u.nt. . ‘tilting u’rves as a 110.u1:P’. .l’ a ,r.,n to heip improve the r ” tivrr’, . .. ‘ I h.’s,c i’nvimonmentaI man.ig menr by .. r.tvurig that manuigement pmai iii N .sr” in ptdre. Iur.ctiur.ing and adequate Em. ironmental audits evdlt.ate. .iiiil are not a .ub uiute for, direct compliance a tivitip uih as obtaining permits. installing controls. rnonutnnng compliance, reporting violations. anal keeping records. Environmental auditing ma. verify but does not include activitaes r’qtiired by Law, regulation, or permit leg. Continuous emissions monitonng. composite urrection plans at Waslewater ueatment plants. etc.) Audits do not in any way replace regulatory agency inspections, However. en iroamen,aJ audits can impiove a ra’npliatice by complementing conventional Fanh ’r.il, state and local rwersight. . S • • • Environmental auditing has developed for suund business reasons. particularly as a mealls of helping regulated entities manage pollution control affirmatively over time in .tead of reacting to aises. Auditing can rtsuli in improved facility environmental performance, help communicate effea live solutions to common environmental problems, focus facdit 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’untegrated management of environmental hazards, since auditors Irequently identify environmental liabilities wnich go beyond regulatory tompliance. The Agency clearly supports auditing to help ensure the adequacy of internal systems to achieve, maintain, and monitor compliance. By Voluntarily implementing environmental management and auditing programs, regulated entities can identify, resolve. and avoid environmental problems. EPA aloes not intend to dii,tate or interfere with the environmental management practices of private or public organizations. t .cir does EPA intend to mandate auditing Ithough in certain instances EPA ma seek to mi lode provisions for environmemn,il auditing as part of settlement agreern.nts, ‘as noted below) Because environnwntal auditing systems have been wtuJ ly .ialopted nfl a samlunta, ’y basis in the past. and bet ause .iudii quality depends to a large dr ee upon g .tnuine management commitment to the proa rorn and its objectives, auditing ‘.hciuld ru’mepn a voluntary activity BeLause senior managers of regulated entities are ultimately responsible for taking all necessary steps to ensure c.omnpl:ance with environmental requirements. EPA believes they have a strong incentite to use reasonable means, such as environmental auditing. to secure reliable information about 1j i.i) it omplianu.e status. B Definition o(E ’:rcnrn n:aJ Aii ,tms;g, Elements of Effec:we Ent uron,ne:I:t, Auditing Programs The 1986 Policy also defines environmental auditing, and outlines what EPA considers to be the elements of an effective environmental auditing program. The 1986 Policy presents the following definition: - Esivironmental auditing is a systematic, documented penodic and ob ecnve review by regulated entities of facility operanans and practices related to meeting environmental raquuernent,. Audits can be designed to accomplish any or all of the Following: venfy compliance with environmental requiresneat evaluate the effectiveness of environmened management systems already in place-i or assess risks Isom regulated and unregulated maie,aals and practices. An organization’s auditing program tsill evolve according to its unique structures and C urostances, The 1986 Policy acknowledges this fact, and also states EPA’s belief that effective environznetflal auditing programs appear to have certain discernible elements in common with other kinds of audit programs. EPA generally considers these elements important to ensure program effectiveness. This general description of effective, mature audit programs can help those starting audit programs, especially Federal agencies and smaller businesses. Regulatory agencies may also use these elements in negotiating environmental auditing provisions for consent decrees. Finally, these elements can help guide states and localities considering auditing initiatives. As stated in the 1986 Policy 11 an effective eovironjnen auditing system will likely include the following general elements: I. £rpIicirtop management suppo r t for env,gonmen,oI auditing and COmm.:nTeSI: 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 ‘r impliance with all pertinent requirement... ina.luding corporate policies and permit reqtiiremerus as well as Federal slate .inul law al statutes and regulations. Management Support for the auditing program also should be denionsuated by an explicit written commitinem to follow. .ip on audit rindings to correct identified pmblu’.ni. and prevent their recurrence. II. An environmental auditing ftjnct,o,, independent of audited ocfiv:z:es. The”ci.itu’ . ororganizanonal locus of env,ronmental auditors should be sufficient to ensure objective and unobsmicted inquiry. observation and testing. Auditor ub,ea lit tv ‘,hould not be impaired by personal relacionshi . financial or other cwufli. t . . m 1 antere t. interference with free ir.quary or iudgment, or fear of pOtentidl n’!rihiitiiin. Federal Rt t.uter ‘ u 144 •‘ .. .:...‘ .b i l’)04 I \ . :ic ------- Federal Register / Vol. 59 . No 144 I Thursday, July 28, 1994 / Njottces 4dequate team staffing and auditor • Environmental auditors should ar have ready access to the jedge. skills, and disciplines needed to • push audit objectives. Each individual -, should comply with the comoany’s nal standards of conduct. Auditors, uU’tune or part•timo. should their technical and analytical franc. through continuing education audit program objectives. iesources and frequency. At a um. audit objective, should include jg g compliance with applicable onmental laws and evaluating the of inteanal compliance policies, dwes. and personnel training progrein, sre continued compliance. j 1LI should be basedon a process which Idee auditors all corporate policies, fta. and Federal. state. and local lstlons pertinent to the faclllty and Idllsts or protocols addreuing specific jes that should be evaluated by auditor ,. nlldt written audit procedures generally dbeusedforpnn lngaudlt J4.hlng audit scope. establishing audit eiamining and evaluating audit s . communicating audit results, and sing -up. I proccu that collects analyzes prets and documents anfonnotion oent to achieve oudit objective,. ation should be collected beibre and en on-site visit regarding - 1xonmental compliance (1) environmental agement effectIveness (2) and other tma (3) related to audit objective, and b This information should be sufftciant levant and useful to provide a i for audit 6nds and latlons. . J ic enttnforinatfon is factual. jquate and convincing so that a prudent, krmed poison would be likely to reach the conclusjoij as the auditor. b. Reliable Mformatlon is the best inable through use of appropnate audit niquea. c. Relomni lnformatioa supports audit edings and recommendatioe, and is jasistent with the objectives for the audit. 4 Useful information help, the anizatton meet its goals. The audit process should include a modic review of the reliability and xegrnv of this information and the means .,.ied to identify, measure, classify and report ,.Audit procedure,, including the testing sampling techniques employed, should selected in ad%anca, to the extent ical. and expanded or altered if mstances warrant. The process of mllecting , analyzing. Interpreting and 4ocumenting inforrnatton should provide essnnable assurance that audit objectivity is iaintained and audit goals are met, ts Li A process that includes specific prccedures to promptly prepare candid clear ,Ond approprwte wn:ten reports on audit finds corrective actions and schedules for implemen tonon Procedure, should be in place to ensure that such informanon is cammunicated to managers, including cilit ,.. f corporate management, who can • e aluate the .nforma(ton ar.d ensure correction of identified problem . Procedures also flould be in place for determining what interna: findings are reportable to state or Federal agencies. VII. A process that includes qua/sty assurance procedures to assure the accuracy and thoroughness of envsronmentoj audits. Quality assurance may be accomplished through supervision. independent internal reviews, external reviews, or a combination of these approaches, C. EPA Activities Related to Auditing Standards EPA Is currently participating in two major non-regulatory efforts to develop voluntary standards for auditing and environnienta] management systems. First, the nternationnJ C gazuzatiorj of Standards (ISO), based In Geneva, Switzerland, established In 1993 a Technical Committee for Envfronm Management Standards (ISO—TC..207), Subcommittee Two of TC-207 Is in the process of developing environmental auditing standards. The standards fall into three groups: Auditing Principles, Auditing Procedures, and Auditor Qualifications, second , in the U.S., the National Sanitation Foundation (NSF) In Ann Arbor, Michigan, isdeveloping environme j auditing standards that are intended to be compatible with and augment the ISO standards. Work is proceeding rapidly within ISO and NSF, with draft standards expected by the end of the year. The proposed NSF and ISO auditing standards are being developed within the framework of overall environmental management systems standards. Neither ISO nor NSF intends to establish specific environmental standards instead both are seeking to provide management tools that include auditing schemes and standards. The EPA 1986 Policy has been a central reference document for both the ISO and NSF work. As these new documents develop. issues of auditor qualificatio and explicit management commitinem to audit follow-up will be ofparticular interest to EPA. IV. Review of EPA Policy on Specific Environmental Auditing Issues A Agency Requests for Audit Reports EPA’s 1986 Policy clearly states that: 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, The 1986 policy also acknowledges regulated entities’ need to self-evaluate environmental performance with some measure of pnvacy. However, audit 38457 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. Thus, the 1988 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 the 1986 Policy alter EPA’s authority to request and receive any relevant lnforsnatlon—_ including that contained in audit reports—under various environmen statutes or in other adinjnistiatj,e or judicial proceedings. EPA’, authority to request in audit iepdrt. or relevant portions thereof, will hi axircised . on a case-by-ca,, hula where the Agency determine, it is needed to accomplish & statutory mission, or where the Gàyernrnent deems it to be material to a aiinin*J invesrigssion EPA such tequesta to be limited, most likely focused on particular information needs rather than the entire repost and usuilly mad* wher, the information needed nnot be obtained from monitortog. reporting. orother dat i otheiwise available to the Agency. Esumples would likely tncJ situ n when: audits are conducted under consent decree, or other settlement agreemen1 a company has placed its rnAn gnient pzs ’4cs , at Issu, by raising them as a defen ,e or stats of mmd or intent are a relevant elesnem of Inquiry. such as during. orimi nil invesdgetiosi, This list is illustrative rather than wthsusd,e ,,,j there doubtles, will be other .ut.atfons, not subject to prediction, In which audit repem rather than information may b required’. . - B. EPA Response to Environmental. Auditing I. Generalpolicy - The 1986 Policy 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 environmental management practices EPA is required by law to independently assess compliance status of facilities, and cannot eliminate inspections for particular firms or classes of firms. Certain statutes (e.g. RCRA) and Agency policies establish minimum facility inspection frequencies to which EPA will adhere. Environmental audits are in no way a substitute for regulatory oversight. As explained in the 1986 Policy. however, EPA will take into account a facility’s effcfrts to audit in setting inspection priorities and in fashioning enforcement responses to violations: EPA will continue to address environmental problems on a pçiority basis ------- 38458 ‘ i wdl coo qen I Insprci I.m with p,,&’r rQ%IlOflnlC 5fl ,4 re.nrtls and pra 11ci s mote trnquefttiy Sisice I1ecu vis • ,‘ .iroom inial auditing helps man.agemen* ,it , ’aiify and promptly c4 rruct actudi (it p A ”nT1ul prcblems, audited t3Qlitit , env ’,nm’ ’il per ermance should impm Thus. whije KPA inspections of &f-audstoJ (.(mlitics will continua. to the ezteo that cor.phano, performance is coasidered in ttIIng inspection pnorilies. facilities with a nail riimptiance hisuwv may be sub 1 oct to (river InspectionS. In fashioning enforcement responses to iiildtinns. EPA pohcy.Is to take Into account, an a can ’-by.cnae basis, the honest and genuine effo of re latedentitie, toavofd dod promptly cenoct violgjo%3 and underi rnSeavtronmernaI p nJ)4.1T s . OJ regulated entitles take nable ptecautioas so avoid noncomplIance, expeditiously correct undortying envlnmmental problems *kscovered through audits or other meen , dad implement messuras to prevent their recurrence. EPA may e cise Its dlsaetion to a3nsul. r such cdoas as honest end genuine offozta to aenire compliance. Such consideratson applies particularly when a regulated esithy prasn ty repor violatlous or compliance data that otherwtse were not required to be recsnded or reported to EPA. These principles have been incorporated Into the Agency’s enforcement response and civil penalty pdlic e s. 2. Audit Prcvjsio s as Remedies in Enforcement Settlements The 1988 PolIcy includes the following language on audit provisions as remedies In enforcement settlemants EPA may propore environmental auditing provsaions in nt deorees and in other ‘cettlement negotiations where auditing could provide a remedy for Identified problem. and mduie the likelihood of similar probieme necurTuig in the hsture. EnvuonmenmJ .iud:ting provisions are most likely to be prnpucud in seulemneni aegodadone when • A patton of violanona can be attributed, .4 1 least in pail, to the absence or poor tuncdonsng of en envuonmantaI.nc n ,.,,i ,it ‘vciem. or • Thet eofaatueofvl . indlortas a likelihood that similar isoncomnpllance problems may esist or oonirelsewbera In the Sa l il;’y Or ut other facilities operated by the r” ulated cnsir . EP, i’ enforcement office Issued lunh.’r gwdance on this Issue in 1986 in a document entitled ‘E pA Policy on the Inclusion of Environmental Auditing Provisions in Enforcement Settlements.” This gwdance has been consistently applied in enforcement actions as appropriate, and has formed the basis for the inclusion of audit agreements or provisions In numerotan .or,sent det,ees. Selected text from this document, also s* ,lII In effect. is included borer In recant years. Agency negotiators have - hirved numerous nli’ w. ,q that require ‘ 3 ’Jl41t’d ontit es n cdii their Op1tinri The’c,, innova tive ‘etttI ,mne t, have twv highly successful in enabling the Agency to accomplish mote effectively its pr.mary mistion, namely, to secure environmental compliance. Indeed, auditing provisions in enfoscasnent settlements have provided several Important benefit.s to the Agency by enhancing its ability to Addrms compliance at an entire facility or at all facilities owned or operated by a party, ’lather than just the vIotation discovered during Inspections: and identify and correct violations that may have gone undl?tijcled (and uncorrected) othei’wi • Pocus the aflennan of a zeg i id party’s top-level m 4gemant en compllance produce corporate policies and procedures that enable a party to achieve and maintain compliance: and help a party to impage pollutlea cannel efflremilvely over - time instead of reacting tO alses:’ • Provide a quality 1 i _ nm themk b L mgthataids eavimem mana ent psIlIf 4 f s ai in piece. foncg amid adeqea It I, th. policy of EPA to said. its judicial pdmtnitj y ea men es cnly where ViOlatOr, can assure the Agency that their noncompliance will be (or has benn conected, EPA... consider, auditing en appropriate port of. sett t where hetgbimed mInae m , attesioo roijhj lower the pemedal for n w” Akiitce to • S • • • In moat sither er both) of d. following two types of audits should be considered lbs enforcement settlemnentsb 1. Compliance AudIt An indepaidan_t assessment of the cement status of a pasty’s compllanm with epplkvLle s*aflslix-y and regulatosy roqu n Thia approedi always entails a ruquliemeat that fftiv measures be taken to memedy unco .d compliance pinkl is end is t e c5t,s when coupled with a requirement that the root muses of noncompliance also be remedlet 2. Afane meat4adft An Independent evaluation of a pertys envuemsiental compliance policies, praulen, and ce.&ubs Such evvhi.I4i y en mpem the need for. lilA maIcorpcrateenvtgonme j compliance policy, and procedures Ica ’ Iniiilementation of that pol Icy; (2) educational and training programs for employees: (3) equipment purchase, operation and maintenance prc rems: (I) environmental compliance officer programs tot other omganiastional structures relevant to comphnce). (5) budgeting and planning systems for environmental compliance; (61 monitorIng. record keeping and reporting ryst.ms (7) in-plant and community ememgency plans, (8) internal communlcatjon and control systems; and (9) hazard tdesitlflcarton and risk assessmenL Whether to seek a compliance audit, a management audit, or both will depend upon the unique droumsiances of each ores: A compliance audit usually will be appropriate where the violations u erad by Agency in pectlons sena the likelihood that •“.ir mr al rioncnmpliarice ozi ts elsewh. within a party i opera,:nn.s. A management audit should be sought where it appear, that a ma wr coninbunr 1 g factor so noncomphance is Inadequate (or nonezistenfl managerial attention to enviroruisen j policies, procedures or staffinq, Both types of audits should be sought where bath current noncompliance and shostoorninge in a party’s envIroum : management practices need to be addj-e ud, C. Environmneg j Anditiag mid Cnm,naj &iforcemenr Policy Following EPA’S 1986 Policy, Ibiot sugni8caw developments mark t evolution and iauplementafloa of airninal en cemauL poLicy govesning. the use olsslf ’endjts and the voluntary d lscloeeauiifeevfronmentai violati ens:. First, on July 1. 1991, the of Justloniesued • guidance umftIedi “Factors In I cfslons On Criminal Prosecutions For Envfrnnmen ai Violations In Th Cmsno Of Sigeificata Vohwtary Cnmpliøn ’ , () Q1 l - Efforts By The VkiiIatai ’,” Th, gut’l ” , rots the iJ It Is the olicv of the DepartmeeEof Justice to encourage self-auditing. self-p ng , aed vohuntazy di n g of envtzvozr -- - Violatithsregu l ate cjenn Iy y that these orilvthesai. mewed as instigating &c as In the Depertmneig. enbonment discedon, The g Iln’w and the e phe Contained pmvfi a framework for the di mtna j ofwb era particularcase presetsta the typsof arcwnstances in which lenience would” be op ops’te. The factors to be - considered In exercising the Department’s pmeactstorial diacesticu. in cases wher, the law and ev ideac.’aze otherwise suthdent for pr rmtloa, indudee voluntary dlsdosu cooperatl mevead ,. msemues aid compliance pm ama porvashienese of’ noncoinplbuw Infernal disciplinary action; dnd suteequent compLIance efforts. Second, on November 11. 1993, ihe Final Draft Environmental Sentencing Cwclalinas provided for the mitigation of sentan where a court finds that the following tora for envlmnaenlai corn pliancu are satIsfied. 11mw management attention to compliance; integratIon of environmental policies,, stazrdards, and procadures auditing monitoring, reporting and tracking systems, regulatory expertise, training and evaluation; incentives for compliance; disciplinary procedures; continuing evaluation and Irnorovemant. inaJty. on January i2. 1994. EPAs Director of Olniloal Enforcement Issued a guidance entitled: ‘The Exercise of.. Investigative DIsc et1on,”tlret sets forth’ Federal_Reqister / V .L q, No. )‘ 4 / •:‘hI :r (:,4v jLy i. ! ‘,‘34 I irfl’rcs ------- rt•der.il R , - spe( ’ fiC fac. N t ai StR Li ’. i .l’-s meriting crimi’al Investigition. W th respect to corporations conducting environmental audits, the guidance iateS: Corporate cuipat . i :tv rr.av be ina!ci ted n a company performs an enviror.mcnral - compliance ur management audit, and then nowlngly (ails to promptly remedy the non- compliance and correct any harm anne On the other hand. EPA policy strongly gncourages selI-rnoniroring, self-disclosure, wd self-correction When self-auditing has been conducted (followed up by prompt teinedialion of the non-compliance and any resulting harm) and full, complete disclosure ias occurred, the companys consu’ucnye activities should be considered as mitigating bctors in EPA’s exercise of investigative discretion, Therefore, a violation voluntarily revealed and folly and promptly • teniedlated as part of a corporation’s systematIc and comprehensive self- evaluation program generally will not be a randidàte for the expenditure of scarce auninal resources, D. Audit Privilege Legislation Four States (Colorado, Indiana, Kentucky, and Oregon) have recently enacted Legislation which, with some variations, creates a “sell-evaluative” privilege for audit reports. EPA has consistently opposed this approach, principally because of the risk of wshkening State enforcement programs, the imposition of unnecessary - nsaction costs and delays in forcement actions, and the potential . ease in the number of si%uations requinng the expenditure of scarce Agency resources, including the “overfihing” of State enforcement actions. EPA urges States that are considering a privilege-oriented approach to actively participate in the comprehensive process described in the June 20, 1994 Federal Register notice (59 FR 31914) before pursuing any legislative action. The Agency also encourages States that have passed such legislation to present documentary lustification for this approach either at the public meeting on July 27—28. 1994. or in written comments, E Environmental Auditing at Federal Facilities The 1986 Policy also encourages all Federal agen ies subject to • environmental laws and regulations to institute environmental auditing, to help ensure the adequacy of internal systems to achieve, maintain and monitor compliance. Such Federal (acilit’v environmental audit programs Should be structured to promptly identify environmental problems and expeditiously develop schedules for ‘ ‘Tiedial action. ‘ . h:’r CP A ‘.‘ Ill iato i en ent th other agencies to ci. ’f’, the respecti rcles. responsibilities and cornn itments of each agency !rt conducting and responding to Federal facility environmental audits. Also, to the extent feasible, EPA will provide technical assistance to help Federal agencies design and initiate audit programs. Currently, the EPA Federal Facility Enforcement Office (FFEO) is co-chairing an inter-Agency work group to revise auditing guidelines and protocols for Federal agencies. In addition, FFEO is developing the Federal Government Environmental Challenge Program required by Executive Order 12858, which calls for’ the establishment of a Code of Environmental Principles and a Model Installation Program for Federal facilities. This program is likely to include environmental auditing components, The 1986 Policy states that: With respect to inspections of self’audited facilities and requests (or audit reports. EPA generally will tespond,to envuoemental audits by Federal facilities an the same manner as it does for other regulated entities. U * * * S Federal agencies should, however, be aware that the Freedom o(lnforinatjoU Act will govern any disclosure of audit reports or audit-generajed lnfonnadan requested from Federatagencies by the public. When Federal agencies discover significant violations through an audit, EPA encourages them to voluntarily submit the related findings and corrective action plans to the appropriate EPA Regional office and State agencies, even when not specifically required to do so. EPA will review the audit findings and action plans, and negotiate either a consent agreement or a Federal Facilities Compliance Agreement, pursuant to its eaforcernent authorities under the various environmental statutes. In any event, Federal agencies are expected to report to EPA pollution abatement and prevention projects involving costs necessary to correct compliance problems discovered through the audit, in accordance with 0MB Circular A- 106. IJpon request, and in appropriate circumstances, EPA may assist affected Federal agencies through coordination of any public release of voluntarily submitted audit findings with approved action plans once agreement has been reached and/or appropriate enforcement actions have been taken. 8459 V. Review of Relationship to State or Local Regulatory Agencies effective Federal/state partnerships are critical to accomplishing the mutual goal of achieving and maintaining high levels of compliance with environmental laws and regulations, The greater the consistency between state and local policies and the Federal response to environmental audifing, the greater the degree to which sound auditing practices might be adopted and compliance levels improved. State and local regulatory agencies, of course. have independent jurisdiction over regulated entities. EPA encourages them to adopt these or similar policies on environmental auditing, in order to advance the use of effective environmentaj auditing in a consistent manner. The 1988 Policy emphnrizes this point flirtheri EPA recognizes that some states have already undertaken environmental auditing Initiatives that differ somewhat from this policy. Other states also may want to develop auditing policies that * omt!Intiate thefr pastlas1 r needs or cirri’misi,,ir* . NothIng In this policy stsrameet Is intended to preempt or preclude states front developing other’ approaches toenviienme auditing. EPA encourages state end local authorities to - consider the basic pdnclpth that ginded the Agencyle developing this policy • Regulated entitles must ciTht4n . to report or re nid compliance £n rrnatJon required under existing stanites or regulations. reg a rdles. of whether such Information is generated by an environmental audit or contained In an audit report. Required inforrnitIq cannot be wfthb-1 merely because It Is generated by an audit rather than by some other rnans , • Regulatory age dss math, promises to forge or lintit enfentesn.nt action against. plrtioucili of facilities In emh*rig* for the use of environman,aJ auditing systems. Ho ve,, such agu ’nd.p ’may use their disoretlon to adjust en caaaflt 1nni on a case-by-case basis In response to honest and genuine efforts by regulated entities to assure envtronmentaj complI nrs • When setting Inspection prIorities, regulatory sg* des should focus to the extent possible on compliance performance and environmental resuits. • Regulatory gani ’ies must continue to meet i iinim program requirements (e.g.. minimum inspection requirements. etch. • Regulatory should not attempt to presoribe the precise form and snuctuse of regulated ndtles ’ environmental management or auditing programs. a. ‘VL Conclusion All of the policies referenced in this notice remain in effect. The Agency intends, however, to re-examine these policies comprehensively and remains open to suggestions for changes and - .3 :‘L4 \,, - . ------- 38460 Federal Rt t istrr /\“,l i’J. Nu.1- .; / 1 , i I 11 ,4 I ‘ir . s improvements r*i ardinq nil .)c i is ‘if uihtuni o, lu.y Tlu iliGrnldtiJn pr ’ 1 i i:ted here is iTh .iikd - - he .:cnv ,ent of interested es, in pn pz ri:’on fc r the fuly . :.. 1)94 pubhi.. mc tiflg. The Agency -nope that this iaforrnation will Jarify EPA current activities and poliues n iated to environmental audit:ng The Oiii e of Compliance will respond to written requests for copies of ‘n c documents referenced in this notice. S od all niique ts to: U.S. EPA, Office of Compliance. Attn: Ira R. Feldman. Speual Ccunsel. 401 M Street. NW ( 55O3). “ashi gton. DC 20460. Steven A. tieruiaa. 4s v tanf . .dm,msiyaf or. Ofl of E.iforc ment and Ciunponw.4 sunwce (FR Dtic. 94—18327 Filed 7—27—04 :8:45 aml 5 G cOCa “ ftr (FRL-6021 ’-2J Effluent Guld inee Task Fovcs Open Meethg AGENCY: Environmental Protection Agency (EPAI. ACTION: Notice of meeting. SUt ARY: The Effluent Guidelines Task Force, an EPA advisory committee, will h&d a meeting to discuss improvements the Agency’s Effluent Guidelines gmm. The meeting is open to the ilic. u*TES The meeting will be held an Tuesday, August 16. from &30 am to 5.00 pin, and Wednesday. August 17. 1994. from 8:30 am to 3:00 pm. ADDRESSES: The meeting will take place at the Dupont Plaza Hotel. 1500 New flampablie Avenue NW, Washington. D.C. Comments may be sent to Eric Stra,sler, Emueni Guidelines Task F’ rce. Office of Waler (4303), EPA. 401 -t S’ re it. S.W.. Washington. D.C. 20460. CR FURTHER fP FORMA’flOfI C0NTACT Eric Si :csh-r at fl2—260—7t50, lax 202—260— S. D M 5gnARY IPIFORSIATION: PUNUOIII ‘h’ ittderal Advisory Cnmmi tpe Act 1P 1 b L 9Z—t J). the Environmental ‘i .tuq A ’.y g:ves notice ofa .-.-ting of the Emuent Guidelines Tack The ECTF is a •. I .i oni ’i. of ;heNational /idvisory f .our . ’l for Eir.’rjnmemal ?n!Ic’j and 1 nii_ .: (NALrJ’l], the e irrnal il: d.t’e ry hoard to thu .\.:3rli: ;( ci EP. . i’le ë ,... FT isic established in Jul’ of . o advise EPA on the Effluent (.u idli .r. Pragram, which develops rii !ations for dischargers of indu anal istewatir pursuant to Title Ill of the ‘an W.ni’r Act (33 U.S.C 1Z51 et ‘q.). T,sk Forte u.ons’sts cf 0’fs Inted by EPA frr ,n : uhtclry. ut.v n Qroi ps. slate and touni )v rn!n.nt. the at : iemic and suuinnflc .ommual’ ,es, ar.tf EPA regional offices. The Fask Foue was created to offer advice to the Adrriinisirator on the long-term strategy for the effluent guidelines program, and particularly to provide recommendations on a process for expediting the promulgation of etiluent guidelines. The Task Force generally does not discuss specific effluent guideline regulations currently under development. The meeting agenda will include discussions on draft recommendations for improving the project minagemeet and data collection processes. for effluent guidelines. There will also be discussions on the methodology icr conducting preliminary Industry studies, and a planning session for future task force activities. The meeting Is open to the public. Limited seating far the public is available on a firat-aime, flrst - ,ud basis. The public may submit written comments to the Task Force regarding improvements to the Effluent Guidelines program. Cont te Kt,uJd be sent to EPA ax the above address. Comments submitted by August 8 will be considered by the Task Force at or subsequent to the meeting. Dated July 14. 1994. Etc Ste Im Designated Fedesui (mnis i, mz• £wdeilnes Task Force. (FR Drc. 94-11330 F’tled 7-27-94 8t ami ones hnprovkig EPA’s ln ai Program - OperatIons AGENCYt U.S. Environmental protection Agency. ACTiON: Sollating public a3snments on the agency’s efforts to enhance Indian program operations. SUMMARY: The Environmental Protection Agency (EPA) is soliciting comments From the public on the following potential approaches for improving the Agency’s Tribal operations, including the establishment of a new national Indian Program Office. To obtain Tribal input into this process, as well as input on future Tribal matters, the EPA Administrator convened the Thbal Operations Committee (TOC) corn pnsed of Tnbal representatives and EPA Senior Managers. EPA is now seeking broader Input on these approaches. and will consider comments received during i t pt.b! ’ . i ‘ cment per’.od lot’nsi ‘l at tlic’ ‘.rnaqest options ha .e !:e ’iin i ‘ fl Pt2UC COMMENT PEmOO: Comments mist he ret.eived by September :2, 1$ 4. AC0RE : Comments should be sent to Carirn Rorhstein, Tribal Opemnons Team, US EPA. Mail Code 1198,401 M Street SW.. Washington, DC 204QL. FOR FURThER F TION CONTACT C ren Rothstein at 202-260-7519. SUPPLEMEItrARY wt *norn ‘The Environmental Protection Agency h made continual ptcgx in biil1dh Its Tribal program since icmi wn of the. Agency’s 1984 ln&an Policy. In F al ’ Year 1993. approxImately $35 m1thom and 165 work y ee ithkvedte- implement EI A indI pw rum5. through di greats toTri or through Federal Implomentetlon and technial assistance to Tribes. Regulations and guida,w e specific to Tribes have Mon , Ju ed uad n . of EPA’s programs establi hlng the. process for Tribes to apply fez gr and program euthathention. Over Treatment in the Same Mannor as . State eE*4• to as Treatment as.. State, have bead made u dervarlon . water pzegmms. Numerous tribes have ei.hmiated water quality stindards for authod oo by EPA, and three bevealiondy been approved. Many more Tribal applications ore exp acted In the future for a broad azThy of EPA progrome. The growth of EPA’ . Indian program has led to an ina ed uadetstanImg of the seriousness of envfronmentetlhsesI to human health and the envlron*neats within In an Country by EPA ai the Tribes. To promote Improved carmnunlcatlons and pormnerabips with Tribes to addteat these can the EPA Ad uiulstratur convened a Tribal Operations Committee (TOG) to meet with her and other EPA Senior Management as co-regulators, on a regular basis. and to provIt e Triba’ input into Agency decision making that may affect Tribes. The TOC is comprised of 18 Tribal representatives, who are either Tnbul Leaders or Tribal environmental offiaals selected by Tribes within EPA regions, .There are Tribal representatives from each of EPA’s regions except Region II I. which has no Federally recognized Tribes. On February 17, 1994, at the first official TOG meeting , the Adroimsi razor committed to strirngthenlng the Agency’s Tribal operations and reaffirmed the Agency’s 1984 IndIan Policy. As one of the fist actions for the Tribal representatives to the TOC and In ------- SECTION A DOCUMENT 15 OECA’s Operating Principles for the Common Sense Initiative 10/31/94 15 ------- UNITED STATES ENVIRONMENTAL PROTECTiON AGENCY WASHiNGTON, D.C. 20460 OCT 31 l 94 OFF1CEOF MEMORANDUM ENFORCE .E?4T AND COM?UANCEASSU ANCE SUBJECT: OECA’.s Operating Principles for the Common-Sense Initiative —. n I FROM: Steven A. Herman ’ 7./ Assistant Administtator TO: Administrator Deputy Assistant Administrator Assistant Administrators General Counsel Regional Administrators Deputy Regional Administrators Regional Counsel The purpose of this memorandum is to establish overall operating principles for handling enforcement and compliance issues for the Common Sense Initiative (UCSIU). The CSI is a unique opportunity to work with our CSI stakeholder partners (i.e., the regulated community, state and local governments, environmental justice, labor, and environmental groups) to develop innovative ways to promote compliance—oriented behavior. These general operating principles are intended to foster the spirit of cooperation that underlies the CSI, and at the same time address key enforcement and compliance related concerns at the outset. These principles provide a general framework for handling enforcement and compliance concerns during the course of CSI. anticipate that the CSI sector teams, through pilots, demonstration projects and -the -like, will generate creative ideas on enforcement and compliance policy for the Agency to consider within the general framework of these operating principles. In addition, OECA expects to consult with the CSI sector teams in the course of several policy reviews currently underway. Under the CSI, enforcement and compliance assurance concerns are likely to arise in two discrete contexts: 1. as part of the Agency’s deliberations regarding whether a CSI project is appropriate at a given facility, and 2. in determining an appropriate response to violations by companies involved in CSI that are identified during the course of CSI. -This memorandum ets forth an enforcement response framework that I believe is R.cydsd/ .cydabI. Q ‘9 P, .d -. So Cvi s a $i 50% SC) .d ------- practical and fair. Simply stated, our policy will be that no one will be singled out for enforcement as a result of articipation in CSI, and no one will be immunized from ‘enforcement as a result of participation in CSI. It is our belief that these principles are consistent with the Administrator’s goals of fostering a new generation of environmental protection while at the same time maintaining the integrity and effectiveness of the enforcement and compliance assurance program. I. APPROVAL OF PROJECTS In reviewing proposed CSI demonstration projects, the Agency should be aware of and consider whether a particular facility is currently scheduled for a planned inspection, under investigation, or involved in an enforcement action with the Agency, the State, local government, or citizens. Information about planned or pending EPA enforcement actions will be shared by OECA on a confidential basis within EPA, and with applicable states as appropriate, and must, for obvious reasons, be taken into account in considering whether or not to undertake a particular demonstration project. The terms of a given proposed project and whether or not it is ultimately approved should depend in part on the nature of the project under consideration and the gravity of any compliance pro .blem under review.. II. COMPLLANCE PROBLEMS AT FACILITIES WITH CSI PROJECTS CSI participation should not insulate sectors or companies from enforcement when, apart from CSI, information cømes to light that calls for enforcement. However, as a general rule, the mere fact that a sector (or facility) is participating in CSI, will not by itself subject that sector (or facility) to greater scrutiny from, an enforcement perspective. Our enforcement response policy under CSI should reflect a line of demarcation between those circumstances in which information comes to our attention solely by virtue of a company’s participation in the CSI ( i.e. 1 but for CSI the violation either would not have occurred 1 or we would not have discovered it 2 ) and circumstances in which information is ‘Some facilities that are working with us on a CSI demonstration project, such as the development of a consolidated reporting form or the demonstration of an innovative environmental technology may, -simply -by -undertaking -the project, - run an anticipated risk of violating existing legal requirements. 2 We can envision a number of scenarios in which noncompliance information that would not have otherwise been discovered by EPA may come to light as a result of CSI. For 2 ------- generated as a result of compliance monitoring activities separate and apart from CSI. With this general framework in mind, we offer the following guidelines. 1. “No surprises” policy-- OECA will endeavor to ensure that those within the Agency who are responsible for managing the CSI effort are aware of impending enforcement strategies and actions involving facilities that are clearly affiliated with companies that are participating in the CSI Council, subcommittees or workgroups. Additionally, in keeping with the spirit of openness that CSI is intended to engender, OECA will ensure that advance notice is provided to facilities that are clearly affiliated with companies participating in the CSI Council, subcommittees or workgroups before a civil or administrative action to assess penalties is brought against them . 2. The Agency must be free to respond to circumstances which may present an imminent and substantial endangerment or other threat to human health or the environment or are criminal in nature, even when discovery of such circumstances is through CSI. With respect to civil violations that do not rise to the level of an endangerment, the Agency’s enforcement response policy will necessarily depend on the nature of the project and facility at issue. As appropriate, and subject to such conditions as the circumstances require, the Agency may consider giving facilities performing CSI projects a time—limited opportunity to self-correct violations that are discovered as a result of the project (see, e.g. , “Enforcement Response Policy f or Treatment of Information Obtained Through Clean Air Act Section 507 Small Business Assistance Programs,” August 12, example, for some sectors-— particularly those comprised of small businesses-- compliance assistance may be an important part of the overall CSI strategy. During the course of administering compliance assistance, whether through “hot lines,” where small - businesses could -call for basic £nformation about compliance requirements and pollution prevention methods, or through site visits, not for purposes of conducting a compliance inspection, but rather for purposes of offering assistance, actionable noncompliance may be revealed. Similarly, noncompliance information may be discovered when EPA visits a facility to explore innovative technology opportunities or improve understanding of regulatory burdens and streamlining opportunities. - In addition, the Agency is - likely - inavariety of contexts to encourage voluntary submissions of information that may contain information on noncompliance. 3 This is consistent with current practice regarding the fil!rg of civil complaints in federal court under the Civil justice Reform Executive Order (12778) 3 ------- 1994). 3. There may be instances where CSI projects (or specific c ponents of them) by their very design ( , the testing of undemonstrated innovative technologies) may raise the risk that existing regulations will be violated during implementation of these projects. In these circumstances, if violations do occur, the fact of the respondent’s participation in the CSI project will be taken into account in fashioning an appropriate enforcement response. In particular, such participation may serve to mitigate penalties, if such mitigation is deemed appropriate under the circumstances of the particular project. Further, the interests of the CSI participants and the Agency will be best served if the participants prior to engaging in these projects enter into a written agreement which specifies the terms, conditions, and obligations of the project. The agreement should also speak to the enforcement consequences of project success and failure, as well as how unanticipated results or violations will be addressed. 4. Since the CSI effort is not intended to supplant the Agency’s existing enforcement activities, planned and regularly scheduled inspections, on-going investigations, arid enforcement actions should continue. 4 Similarly, the deployment of enforcement resources based on current Agency priorities and based on information not secured through CSI will continue.’ However, as part of its participation on the sector teams, O CA will work closely with the teams to determine how to address any sector—wide compliance concerns. 5. If, consistent with the foregoing, a CSI facility becomes subject to an enforcement action, the facility’s performance of a particular CSI project may, consistent with Agency policy, be considered an indicator of good faith efforts to comply for’ penalty assessment purposes, assuming that the CSI project is related in some way to the violation of concern in the enforcement case. cc: OECA Office Directors and Division Directors Regional CSI Enforcement Contacts CSI Sector Team Leads - Vivian Daub - Steve Harper ‘Regulated facilities are subject to inspection by state and federal authorities at regular intervals; indeed, in some instances, inspection frequency is fixed by law ( e.g. , RCRA). Moreover, a great deal of compliance information is, by law, self-reported to EPA and the states. Thus, CSI participating• facilities will be subject to compliance review as a matter of course. ‘4 ------- SECTION A DOCUMENT 16 OECA/Regional Procedures for Civil Judicial and Administrative Enforcement Case Redelgation NOTE: Confidential list of nationally signi- ficant CAA issues is included in Sect. I below 11/08/94 16 ------- 1 ) UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460 Nov 3 OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE PRIVILEGED/CONFIDENTIAL/DO NOT RELEASE UNDER FOIA MEMORANDUM SUBJECT: OECA Regional Procedures for Civil Judicial and A 2. istrativ Enforcement Case Redelegation FROM: Ro . n, Director Office of Regulatory Enforcement TO: Deputy Regional Administrators, Regions I — Regional Counsel, Regions I —-X Regional Program Division Directors, Regions I— X I .’ INTRODUCTION Attached for your reference and use are the procedures for implementing Steven Herman’s July 1]., 1994 memorandum on “Redelegation of Authority and Guidance on Headquarters Involvement in Regulatory Enforcement Cases” (“Redelegations Memorandum”). The attached materials also include media—specific examples of nationally significant enforcement issues, a key concept in the redelegations. We expect that the redelegations will result in a substantial net reduction of single Region cases in which OECA’s Office of Regulatory Enforcement (ORE) will be significantly involved, including a substantial decrease in the number of settlements requiring OECA/ORE concurrence. As a result, we will be able to focus our involvement on a far smaller number of truly nationally significant cases. The attached materials result from extensive discussions among the various ORE Divisions and regional program divisions and counsel offices. We would like to take this opportunity to thank all of the regional personnel who worked so cooperatively with us over the last two months to develop both the general cross—program procedures and the media—specific lists and criteria for defining nationally significant issues and cases. We expect these procedures to evolve based on our mutual experience with them, and plan to regularly re—examine and revise them as necessary. Our intent through these procedures is to lay out a consistent process for identifying to OECA those regionally-initiated judicial and administrative cases that RecycIed/Recyclablø SoyICw . * i ------- —2— present issues of national significance. Specifically, the procedures require regional staff to work with the ORE Divisions and reach agreement on the appropriate level and extent of ORE/OECA’s formal role in enforcement case management. In developing these procedures, we have been guided by the following principles set out in the Redelegations Memorandum: (1) that OECA will focus its efforts and resources on those cases where OECA can add value, (2) that OECA’s involvement will be reserved for cases and issues of national significance; (3) that for judicial and administrative cases that seek a bottom line penalty of less than $500,000, the Regional Counsel will be delegated the Assistant Administrator’s authority to concur on settlements undertaken by the Regional Administrator (or the Regional Division Director, where the Regional Administrator’s authority has been redelegated), provided that the settlements adhere to national policy and do not otherwise raise issues of national significance; - - (4) that OECA will be flexible in determining the appropriate level of involvement (e.g., ORE has the flexibility to opt out of a case with a bottom line penalty greater than or equal to $500,000 where there are no issues of national significance and the case is not likely to assume a national profile); and (5) that OECA will be conducting systematic oversight of the Regions through Regional evaluations rather than focusing exclusively on a case—by—case “real time” review approach to determine the extent to which Regions are complying with national policy and the requirements of the redelegations. Finally, in keeping with the spirit of the redelegations, we want to ensure that ORE’s involvement in specific cases makes sense, and that we facilitate effective and efficient resolution of any issues. Regional comments have greatly assisted in designing a cross—program process which provides an opportunity for ORE involvement where appropriate. We appreciate the significant input received from-you and your staff, and hope that this constructive dialogue will continue. II. SUMMARY CMART The first attachment (“Attachment A”) is a chart that summarizes the general ORE/Regional procedures for determining ORE’s formal involvement in individual Region cases. The chart provides a quick overview of the general cross-program ------- —3-. procedures, but necessarily leaves out many important details. Accordingly, Attachment B (below) must be consulted to ensure satisfaction of all requirements. III. GENERAL PROCEDURES - The next attachment (“Attachment Bit), entitled “Outline of General Procedures for Regional Enforcement Case Delegation,t contains a full description of the general ORE/Regional procedures for determining ORE’s formal involvement in Regional civil judicial and administrative enforcement cases. These procedures were thoroughly vetted in an ORE/Regional workgroup that included representatives from all ten Regions, from both the Office of Regional Counsel and from various program divisions. 1 In accordance with Steve Herman’s Redelegations Memorandum, the procedures emphasize trust, common sense and streamlining, while at the same time ensuring that decisions regarding ORE’s case involvement are adequately documented. For example, in judicial cases Regions will use an already— existing section in the referral’s litigation report to both document and notify ORE of nationally significant issues in the cases. For administrative cases, a simple one—page form will serve as documentation and notice. (For federal facilities cases, Regions should forward the one-page form to the Director of OECA’s Federal Facilities Enforcement Office.) Moreover, for judicial and administrative cases with bottom line penalties below $500,000, ORE will require notice only if the cases present nationally significant issues. Of course, because ORE will not otherwise receive formal notice regarding these cases, the Office of Regional Counsel (ORC) must provide adequate advance notice of subsequent significant developments in the litigation (e.g., trial or settlement) and of significant press or other public attention. Regarding administrative cases with nationally significant issues, the procedures offer some flexibility regarding the timing of coordination with ORE by requiring Regions to notify ORE of such issues before filing the administrative complaint if at all possible, but no later than concurrent with filing. Again, this accords with the Redelegations Memorandum’s emphasis on early warning, trust and common sense: we expect that in most situations pre-filing notice will be achievable, but where not, 1 With regard to the procedures, I want to thank Tom Olivier of Region I, Wilkie Sawyer of Region II, John Ruggero and Mary Coe of Region III, Nancy Tominelleo and Truly Bracken of Region IV, Joe Boyle of Region V, Pam Phillips of Region VI, Chuck Figur from Region VIII, Ann Nutt of Region IX and Meg Silver of Region X. These Regional representatives were critical in developing a workable process for implementing the redelegations. ------- —4— concurrent notice will be sufficient. (There may be very rare occasions where even concurrent notice is not achievable; in such circumstances, notice as close as possible to concurrent with filing will be adequate.) In almost all circumstances, the five ORE Divisions will use these general cross—program procedures in order to simplify implementation as much as possible. In a few narrow circumstances, media—specific procedures have been established (see Attachment C below). These variations are noted in the attached media—specific guidandes, which also identify appropriate individuals to contact within each Division. Moreover, to further streamline these procedures, the Air Enforcement Division is experimenting with “categoric opt outs” for certain classes of long—established, familiar cases such as Clean Air Act Asbestos NESHAP demolition/renovation actions. These cases will be presumed not to be nationally significant even if their bottom line penalties are above $500,000. Accordingly, Regions will not be required to seek ORE concurrence unless the cases present some other, separate nationally significant issue. (This approach is described in detail in the cross—program procedures.) As with other cases for which OECA is receiving no formal notice, CRC must provide adequate advance notice through other avenues of communication, including the weekly Regional Counsel reports to the Assistant Administrator, of major litigation milestones (e.g., settlement, trial) and of significant press or other public attention. Based on our experience with these categoric opt outs, we may expand them to cover other selected categories of cases in Air or other media. IV. MEDIA-SPECIFIC GUIDM CE AND NATIONALLY SIGNIFICANT ISSUES LISTS Also attached are memoranda from each of ORE’S Divisions that outline media—specific contacts and procedures where appropriate, as well as media—specific examples of nationally significant issues (“Attachment C”). Please note that the Redelegations Memorandum itself contains an attachment with general guidelines for identifying nationally significant issues (“Attachment D”). The media—specific examples are intended to be used together with the general guidelines; some of the lists of examples include a listing of the general guidelines for convenience. The media-specific examples will be updated periodically to remove or add issues as appropriate. V. MULTI-MEDIA CASES In the interests of streamlining, OECA is seeking to establish a system whereby, absent extenuating circumstances, Regions would need to coordinate with a single office or division that would serve as the lead on a particular case. For cases ------- —5— brought under multiple statutes (except those brought against federal facilities), the Regions should contact ORE’s Multi-Media Enforcement Division, which will coordinate with other OECA off ices and divisions as appropriate. VI. FEDERAL FACILITIES CASES As listed in Attachment B to the Redelegations Memorandum, federal facilities matters raise indicia of national significance. OECA’s contact in federal facilities cases is through the Federal Facilities Enforcement Office (FFEO) rather than the Office of Regulatory Enforcement. Otherwise, procedures in federal facilities cases match those in other nationally significant cases. Thus, Regional Counsels should consult with FFEO regarding federal facilities enfofcement cases. Where the Region is assessing a bottom line penalty of less than $500,000 the Director of FFEO or a Division Director level designee may opt in for purposes of concurrence. Where the bottom line penalty is $500,000 or more, the Director of FFEO, at the Office Director level, may opt out of the case for purposes of concurrence. In federal facility cases that present issues of national significance in other program areas, FFEO will take the lead and will work with other OECA offices and divisions, as appropriate, to address the issues. • The above—described process does not alter the procedures in the “Guidance on Coordination of Federal Facility Enforcement Actions with the Office of Enforcement” dated October 20, 1992, which continue as before, and provide for notice to the Director of FFEO as early a possible before certain actions are taken or announced against either federal agencies or their contractor- operators. VII • CURRENT ENFORCEMENT DOCKETS Because the Redelegations Memorandum applies to all enforcement cases, the attached procedures and guidance apply to both pending and new cases as of November 1, 1994. Accordingly, for newly-initiated cases, we ask that you implement the procedures immediately. For all existing judicial and administrative cases, Regions should focus their initial efforts on evaluating cases with near—term, action-forcing events, such as hearings, trials, filing of dispositive pleadings or settlements, that will occur within the next 60 days. For other existing judicial cases, the ORE Divisions will be working with ------- —6-- the Regions to review the judicial dockets and identify those cases in which ORE will continue to be involved; this should be completed no later than January 3, 1995.2 With regard to all existing administrative cases that do riot have near—term, action—forcing events, we ask that by January 3, 1995, the Regions evaluate each case., complete the “Standard Form to Specify Office of Regulatory Enforcement Involvement in Cases” 3 , and submit the completed form to the appropriate ORE Division if required by the cross—media procedures. Because ORE may receive a very large number of forms all at once, each of which will require discussions between ORE and Regional staff, we will process these forms within 30 days rather than 10 days (sooner if possible). Future administrative case forms will be processed within 10 days in accordance with the cross—program procedures. In closing, we want to emphasize that each ORE Division will work closely with their colleagues in the Regions to help ensure that implementation of the attached procedures is as smooth as possible. We want to facilitate issuance of strong enforcement cases within each Region -- that’s our bottom line. We intend to approach the implementation of the procedures in that spirit. Again, thank you for your assistance and we look forward to working with you on this. Attachments cc: Steven Herman - Scott Fulton Michael Stahl OECA Office Directors John Cruden, DOJ Bruce Gelber, DOJ Joel Cross, DOJ 2 In some programs (e.g., Air- and Water), much of the work to evaluate the existing judicial docket has already been done. For such programs, we anticipate that the reviews will be completed well before January 3, 1995. See the cross—program procedures (Attachment C) at page 8. ------- Summary of EPA Enforcement Case Redelegation Procedures Types Cases Judicial Referral or Adrninis rative Complaint Stage Post-Filing Stages Nationally lgn flcant Issues (N$Is) No Nadonally Significant Issues Newly Emerging Issues Judicial Ca $500,000 and over 0 When referral is made, Region will notify OECA of 1451a in referral’s litigation report 0 Separate sectio n in lii report will identify, descnbe NSTs o 30 days for ORE review 0 Appropriate. ORE Division and Region will discuss, agree on ORE involvement O Memo from ORE Division Director (DD) to Regional Counsel (RC) will memorialize agreement o ORE Dl ) can opt out of case entirely where appropriate 0 When referrat i made, Region will notify OECA of no NSIS in referraPs litigation report 0 Separate section in lit report will state that theic arc no NSIs, and recommend that OECA opt out 0 30 days for ORE review 0 11 ORE agrees that there are no NSIs, ORE will opt out; if NSls, ORE end Region will discuss, agree on ORE involvement 0 Memo from ORE DO to RC will memorialize agreement 0 Region will notify OECA of new NSIs ai soon as Region identifies them 0 Informal notice (e.g., phone call ) 0 Expedited ORE review, with first prionty on respOnse to 14Sf rather than on memonahzing agreement 0 ORE and Region will discuss, agree on ORE involvement 0 Memo from ORE DD to RC will memorialize agreement, generally within 30 days 0 ORE DO can decide where appropriate that ORB will have no involvement Admin ___ $500,000 and over o Preferably before filing administrative complaint, but no later than concurrent with filing, Region will notify OECA of NSI 0 One page form signed by RC or designee, identifying NSI and proposing level of ORE Involvement in case 0 10 days for ORE review o ORE and Region will discuss agree on ORE involvement o ORE ODor designee will countersign and return form with any agreed-upon amendments; form will be kept in Regional files o ORE D l) can opt out of case entirely where appropriate 0 Preferably before filing administrative complaint, but no later than concurrent with filing, Region will notify OECA that there are no NSIs 0 One page form signed by RC, staling that there are no NSIS in case and recommending that ORB opt out 0 tOdays for ORE review 0 If ORE agrees that there arc no NSIa, ORE will opt out; If NS [ a, ORE and Region will discuss, agree on ORE involvement 0 ORE DO will countersign and return form with any agreed-upon amendments; form will be kept in Regional files 0 Region will notify OECA of new NSIe as soon as Rcgion identifies them 0 One page form aigneil by RC or designee, identifying NSI and proposing level of ORE involvement In case 0 tOdays for ORE review 0 ORE and Region will discuss, agree on ORE involvement 0 ORB DO or designee will countersign and return form with any agreed-upon amendments; form will be kept in Regional files 0 ORE DO can decide where appropriate that ORE will have no involvement Judicial Cases under 0O,000 o When referral is made, Region will notify OECA of NSh in referral’s litigation report; Region will send OECA the lit report only if the case contains NSTa 0 Separate section in lit report will identify, describe NSIs 0 30 days for ORE review o ORE and Region will discuss, agree on ORE involvement o Memo from ORE DD to RC will memorialize agreement o ORE DD can opt out of case entirely where appropriate 0 When referral ii made, Region will make and documcnl its determination that there arc no NSIa in the case, but no requirement to inform OECA by providing lit report 0 Separate section in lit report will state that there are no liSts in earn 0 Because OECA is receiving no formal notice of ibese cases, Regions must provide adequate advance notice through other avenues of communication, such as weekly RC reports, if cases arc likely to attract significant press or other public attention 0 ORE Divisions will review determinations during Regional audits 0 Region will notify OECA of new NSIs as soon as Region identifies them 0 Informal notice (e.g., phone cells) 0 Expedited ORE review, with first priority on response to NSI rather than on memorializing agreement 0 ORE and Region will discuss, agree on ORE involvement 0 Memo from ORE Dl) or designee to RC will memorialize agreement, generally within 30 days C) ORB D l) can decide where appropriate that ORE will have no Involvement C) Same procedures as for administrative cases of $500,000 or 0 Preferably before filing admin complaint, but no latcr 0 Same as for administrative cases of $500,000 or over, Mnsin over than concurrent with filing, Region will make/document except that ORE DD or designee can decide where Cases under determination of no NSXs, but no requirement to notify appropriate that ORE will have no involvement $500,000 OECA by providing one page form o One page form signed by RC or designee, staling no P 15 Is in case; form will be kept in Regional files o ORE Divisii review detem,Jnstiona during Regional a ------- OUTLINE OF GENERAL PROCEDURES FOR REGIONAL ENFORCEMENT CASE REDELEGATION November 1, 1994 I. JUDICIAL CASES WI BOTTOM LINE PENALTY OP $500,000 OR OVER A. Referral Stage 1. Region identifies case with nationally significant issues.’ - Timing: At same time Region sends referral (i.e., a direct/indirect referral, pre—referral negotiation package, or consent decree enforcement package) to Department of Justice (DOJ), Region will send referral to Office of Enforcement and Compliance Assurance (OECA) as notification of nationally significant issues in case. Method: Office of Regional Counsel (ORC) will describe and discuss nationally significant issues in referral’s litigation report, in a separate section that already exists for this purpose. Region will provide OECA will full referral package, including attachments. Decision on Extent of Involvement: Appropriate Office of Regulatory Enforcement (ORE) Division within OECA will have 30 days after receipt of notice for ORE review. Within this timeframe, ORE staff or branch chiefs, as appropriate, will discuss case with Regional coupterparts and seek agreement on the extent and duration of OECA involvement, e.g., concurrence or consultation, to be followed by letter from ORE Division Director to Regional Counsel (RC) memorializing agreement. 2 ORE Division Director can also opt out of case entirely where appropriate. If Division Director and RC cannot agree, elevation to ORE Office Director. 1 “Case with nationally significant issues” includes all nationally significant cases or issues as defined in the guidelines attached to Steve Herman’s July 11, 1994 Redelegations Memorandum and in the various media—specific issues lists prepared by the Office of Regulatory Enforcement. 2 “OECA involvement” refers only to OECA’s formal role in enforcement case management, not to informal ORE/Regional communications or activities of other OECA offices (e.g., Office of Compliance). ------- —2— 2. No nationally significant issues. Timing: At same time Region sends referral to DOJ, Region sends referral to CECA as notification that there are no nationally significant issues in case. Method: In already—existing section of litigation report, ORC will state that there are no nationally significant issues in case, and recommend that OECA opt out. Regions will provide OECA with data sheet and litigation report, but no referral attachments. OECA will request attachments as necessary. Review of determination: Appropriate ORE Division will have 30 days after receipt of notice to review the ORC recommendation and decide whether OECA will opt out. If ORE agrees, the ORE Division Director will inform the RC via a form letter and opt out of the case. 3 If ORE identifies nationally significant issues, the ORE staff or branch chiefs, as appropriate, will discuss them with Regional counterparts and seek agreement on the extent and duration of OECA involvement, to be followed by letter from the ORE Division Director to RC memorializing agreement. If Division Director and RC cannot agree, elevation to ORE Office Director. 3. No nationally significant issue, and a categoric opt out case (for example, Clean Air Act Asbestos NESHAP demolition/renovation cases). Timing: At same time Region sends referral to DOJ, Region will make and document determination that the case contains nonationa l].y significant issues and that it falls within a pre-approved category of opt outs, but no requirement to send referral to OECA as notification. Method: In already-existing section of litigation report, ORC will make and document determination that the case contains no nationally significant issues and that it falls within a pre-approved category of opt outs. Regions not required to provide litigation report or other portions of referral. Because CECA is receiving no formal notice of these cases, ORC must provide adequate advance notice Since after this point ORE will no longer be formally involved in the case unless a nationally significant issue arises later in the proceedings, CRC will need to provide OECA with as early notice as possible regarding subsequent significant developments in the litigation (e.g., trial or settlement) and significant press or other public attention. This applies to all instances where ORE opts out of a case. ------- —3— through other avenues of communication, including the weekly RC reports to the Assistant Administrator, of major litigation milestones (e.g., settlement, trial) and significant press or other public attention., Review of Determination: ORE will review categoric opt out determinations during Regional audits. B. Post-Referral Stages (in cases where OECA originally opted out) Note: The redelegation itself states that the Regional Counsel are responsible for identifying nationally significant issues “as they arise”, and for informing OECA “as soon as they are identified.” Accordingly, even where OECA has originally opted out of a case, there is a continuing obligation for the RCs to inform OECA of any nationally significant issues that emerge during the course of litigation. This approach accords with the Redelegations Memorandum’s overall insistence on flexibility and common sense. Timing: As soon as issues identified. Method: As informally as possible, with emphasis on trust, common sense, and providing the earliest possible warning of new issues, rather than on written notice. For example, a phonecall from ORC to ORE branch chief could serve as notice. Decision on Extent of Involvement: ORE staff or branch chiefs, as appropriate, will discuss case with Regional counterparts and seek agreement on the extent and duration of OECA involvement, e.g., concurrence or consultation. Agreement win be memorialized by letter from ORE Division Director to RC as soon as possible, generally within 30 days after notice; however, first priority will be quick response to new substantive issue. ORE Division Director can also decide where appropriate that ORE will have no involvement. If Division Director and RC cannot agree on approach, elevation to ORE Office Director. ------- —4— II. ADMINISTR %TIVE CASES WITH PROPOSED OR BOTTOM LINE PENALTY OF $500,000 OR OVER 4 Note: Only T.oxics and RCRA cases presently fall into this category. A. Filing Stage 1. Region identifies nationally significant issues. Timing: As soon as Region becomes aware of issue. The preference is that the issue be raised prior to filing the complaint, but no later than concurrent with filing. 5 Method: One page form signed by the Regional Counsel or designee identifying issues and proposing level of ORE involvement, sent to appropriate ORE Division. Region will also provide proposed or filed complaint, decision memo and/or other existing information to parallel information provided in judicial referral. Decision on Extent of Involvement: Within 10 days of receipt of notice, ORE staff or branch chiefs, as appropriate, will discuss case with Regional counterparts and seek agreement on the extent and duration of OECA involvement, e.g., concurrence or consultation, to be followed by ORE Division Director or designee, as appropriate, countersigning and returning one page f9rm rather than sending separate letter. (If after discussions ORE decides to opt out, the ORE Division Director must countersign.) Note that the administrative complaint can be filed before ORE countersigns form. Countersigned form will be kept in Regional files. Disputes would be elevated to ORE Office Director. 2. No Nationally Significant Issues Timing: Same timing as above. Region will notify ORE that no such issues appear in case. If the Region has proposed a penalty in the administrative complaint without calculating a separate bottom line penalty, the proposed penalty should be used. If a separate bottom line penalty has been calculated, it should be used instead. See Redelegations Memorandum, p.3. For a few small classes of RCRA cases specified in the RCRA redelegations approach, ORE involvement must occur before filing to comport with existing RCRA delegations or guidance. ------- —5— Method: Same form as above, but will state that there are no nationally significant issues and recommend that ORE opt out of the case. Regional Counsel, not designee, mustsign form because ORC is recommending that ORE opt out. Decision on Extent of Involvement: Same as -above, except that ORE Division Director, not designee, must countersign form if ORE opts out. This parallels the procedure for optingout in judicial cases over $500,000 (I.A.2. above).) B. Post-Filing Stages (in cases where OECA originally opted out Timing: As soon as issues identified. Method: One page form signed by the Regional Counsel or designee, sent to appropriate ORE Division. (Note that using this form, the same as for other stages of the administrative program, will eliminate the need for a separate return letter from ORE to ORC.) Decision on Extent of Involvement: Within 10 days of receipt of notice, ORE staff or branch chiefs, as appropriate, will discuss case with Regional counterparts and seek agreement on the extent and duration of OECA involvement, e.g., concurrence or consultation, to be followed by ORE Division Director or designee, as appropriate, countersignj.ng and returning one page form. (If ORE decides to have no involvement, the ORE Division Director must countersign.) Countersigned form will be kept in Regional files. Disputes would be elevated to ORE Office Director. III, JUDICIAL CASES WITH BOTTOM LINE PENALTY UNDER $500,000 Note: Both the Redelegations Memorandum and the redelegation itself make clear that it is the Regional Counsel’s responsibility to identify nationally significant issues in all single Region judicial and administrative enforcement cases below $500,000. “The Regional Counsel will, in the first instance and in keeping with this guidance, make and document the determination whether such a matter raises an issue of national significance.” - Redelegations Memorandum, p.3. “The Regional Counsel are responsible in the first instance for identifying such cases and/or issues as they arise ....“ Redelegation, p.2. The proposed implementation plan for these cases (described in detail below) would require ORC to formally notify ORE only if the case contained a nationally significant issue. For a case with no such issues, RC would still need to make, ------- —6— document and file its determination, but would not have to notify ORE of the case. ORE and the Regions would continue to develop informal avenues of communication. A. Referral Stage 1. Region identifies nationally significant issues. Timing: At same time Region sends referral to DOJ, Region will send referral to OECA as notification, but only if there are nationally significant issues in the case. Method: Office of Regional Counsel (ORC) will describe and discuss nationally significant issues in referral’s litigation report, in a separate section that already exists for this purpose. Region will provide OECA will full referral package, including attachments. Decision on Extent of Involvement: Same as for judicial cases over $500,000. Within 30 days of receipt of notice, ORE staff or branch chiefs, as appropriate, will discuss case with Regional counterparts and seek agreement on the extent and duration of OECA involvement, e.g., concurrence or consultation, to be followed by letter from ORE Division Director to RC memorializing agreement. ORE Division Director can also opt out of case entirely where appropriate. If Division Director and RC cannot agree, elevation to ORE Office Director. 2. No nationally significant issues. Timing: At same time Region sends referral to DOJ, Region will make and document determination that the case contains no nationally significant issues, but no requirement to send referral to OECA as notification. Method: In already-existing section of litigation report, ORC will make and document determination that the case contains no nationally significant issues. Region not required to provide litigation report or other portions of referral. Because OECA is receiving no formal notice of these cases, ORC must provide adequate advance notice through other avenues of communication, including the weekly RC reports to the Assistant Administrator, of major litigation milestones (e.g., settlement, trial) and significant press or other public attention. Review of determination: ORE Divisions will review determinations during Regional audits. ------- —7— B. Post-Filing Stages (cases WI no prior OECA involvement ) Timing, method Sand decision on extent of involvement will be same as for judicial cases above $500,000 (I.B. above), except that letters memorializing agreements could be from ORE to ORC Branch Chief rather than from ORE Division Director to RC. ORE DD must still sign letter if ORE decides to have no involvement in case. V. ADMINISTRATIVE CASES WITR PROPOSED OR BOTTOM LINE PENALTY OF UNDER $500,000 A. Piling Stage 1. Region identifies nationally significant issues. Timing, method and decision on extent of involvement same as for administrative cases over $500,000 (II.A.l. above). 2. No nationally significant issues. Timing: In same timefraine as for administrative cases over $500,000, ORC will use one page form to make and document determination that there are no such issues in case, but no requirement to provide OECA with form as notification. Method: Same one page form as above, but will state that there are no nationally significant issues. Regional Counsel or designee will sign form, which will be kept in Regional files. Because OECA is receiving no formal notice of these cases, ORC must provide adequate aavance notice through other avenues of communication, including the weekly RC reports to the Assistant Administrator, of major litigation milestones (e.g., settlement, trial) and significant press or other public attention. Review of Determination. ORE Divisions will review determinations during Regional audits. B. Post-Filing Stages (cases WI no prior OECA involvement ) Timing, method, and decision on extent’ of involvement could be same as for administrative cases over $500,000 (II.B. above), except that ORE DD or designee can countersign form if ORE decides to have no involvement. ------- —8— * * * PRJVILEGEDICONflDENTIALIDO NOT RELEASE IJNDER FOIA * * * Standard Form to Specify Office of Regulatory Enforcement Involvement in Cases - Case name: Location of facility: City _______________, State _____, Region Forum (check one): ALT (or other presiding officer) — EAB — District or Circuit Court — (specify District/Circuit: ______________ Status of case (check all that apply): Prefiling, in development — Dispositive pleadings imminent — Filed and pending — Trial or hearing imminent — Filed and stayed Settlement negotiations ongoing — Filed and active Primary Violations (narrative or listing of sections): Nationally significant issue(s): Regional legal and program staff contacts (names, phone numbers, FAX numbers): Nature of Office of Regulatory Enforcement involvement/assistance proposed by Region: Signature: __________________________________ __________________________ Appropriate Regional Manager Date Signed Concur: ________________________________ _________________________ Appropriate ORE Manager Date Signed ------- SECTION A DOCUMENT 17 BEN, ABEL and CASHOIJT Models on National LAN Platform 12/13/94 17 ------- O 374% UNITED STATES ENVIRONMENTAL PROTECTiON AGENCY (3, ‘ ‘ WASHINGTON, D.C. 20460 \ 4( pq 0 ltc DEC ! 3 I9 ’ 4 OFFCE OF — ENFORCaEP4TAND M(ORANDUM COMPUANC ASSURANCE SU3JECT: BEN9ABEL a CASHOUT Modelè on National LAN Platform PROM: RoI i f ’n, Director Office of Regulatory Enforcement TO: Addressees EPA’s Office of Enforcement and Compliance Assurance (OECA) is making available on the Agency LAN platform three financial analysis/penalty assessment computer models. OECA developed these three computer !nodels to assist the enforcement program in its penalty assessment and cost recovery responsibilities. The three models deal with three different financial issues that frequently arise in enforcement cases; 1) calculation of the economic’benef it from delayed and avoided compliance; 2) assessment of ability to pay for clean—ups, compliance and civil penalties; and 3) determining the appropriate share of a Superfund clean-up for small contributors. These models, when used in conjunction with their respective user manuals, allow our enforcement professionals to deal effectively in settlement negotiations with the above mentioned financial issues. They can achieve this effectiveness regardless of their expertise in finance or accounting. But these models are only tools; they are not rules. If a litigation team believes it has a superior alternative for evaluating any of the above three financial issues, it should discuss that alternative with the appropriate people in the Multimedia Enforcement Division. I To access the models, select the Agency LAN Services or ALSMenu option on your local LAN menu. Next, select INFORMATION SERVICES. ABEL, BEN AND CASHOUT are’ located under LEGAL/REGULATORY category. For those Regional personnel who already have the models on your local LAN’s, you should request your respective LAN administrators to remove those versions of the models. From now on you should just use the models on the Agency LAN Services or ALSMenu option as only the National LAN platform will be periodically updated. In fact, the first update is scheduled for mid-December. yc d/Rscyc ibIe _ 7 (\ P .Vui Ut SoyCmrOs 1* I . — ------- 2 There are user manuals for all three models. They explain how to use the models and how to understand their outputs. Copies can be obtained from Jonathan Libber of the Multimedia Enforcement Division at (202) 564—6011, although they should be available through a lan or bulletin board in the near future. All the models and their respective user manuals are available to the public through the National Technical Information Service (NTIS). The BEN Model The economic benefit or “BEN” model, developed in 1984, calculates how much violators save when they delay or avoid compliance with environmental requirements. Agency personnel should only use BEN in settlement negotiations. Should a case appear headed for a trial or hearing, the litigation team should obtain an expert to calculate the economic benefit. The expert will conduct his or her own evaluation based upon his or her own expertise, not upon the model’s. The ABEL Model The’ ability to pay or “ABEL” model, developed in 1986, evaluates for—profit violators’ claims of inability to afford penalties, clean-up costs or compliance costs. Violators raise the issue of inability to pay in most of our enforcement actions regardless of whether there is any hard evidence supporting the claims. ABEL was designed to permit our enforcement professionals to quickly determine if there is any validity to those claims, In order to simplify the analysis for our enforcement professionals, the ABEL model focuses only on cash flow. Because it ignores such sources of funds as assets, inflated/unnecessary expenses, and corporate manipulation, it is biased heavily in favor of defendants. Thus if the litigation team finds a negative or indefinite ABEL analysis, the team must look at these other sources. For that effort, the litigation team may need expert assistance. Should a case appear headed for trial or hearing, the litigation team should obtain an expert to perform this evaluation. The expert will conduct his or her own evaluation based upon his or her own expertise, not ‘upon the model’s. The CASHOUT Model The CASHOUT model, developed in 1992, determines in current year dollars what all the future costs of a Superfund site will ------- 3 be. Since those costs could be as much as 50 years in the future, this allows the enforcement professionals in the Superfund program to quickly determine what the total current cost of a clean—up would be. Then they dan use that number to “cash out” of the case the small contributors. They just pay an appropriate portion of the CASHOT .JT number, and then they are oqt of the case. The major contributors have to stay-in the case. But this allows the enforcement staff to focus their efforts on a more manageable number of potentially responsible parties. As with the BEN model, CASHOUT prompts the user for costs, dates and certain interest and tax rates. Arid as with the other two models, if the case appears headed for trial, the litigation team should obtain an expert to perform this evaluation. The expert will conduct his or her own evaluation based upon his or her own expertise, not upon the model’s. Expected User Coinniunity The projected users of these three models are the environmental enforcement professionals in EPA, the Department of Justice, State and local government environmental enforcement professi9nals and State Attorneys General. There are currently about 600 users of the models who access them through the EPA’s mainframe computer. This includes users from EPA Headquarters, the Department of Justice, the 10 regional offices and over 40 States. Eaiiipinent Needed No special equipment is needed to operate the models. Any IBM compatible mainframe computer will work as long as it is connected to a LAN containing the computer model. Training All three models are very user friendly, and users need not know anything about corporate finance, accounting or computers to be effective at using the models. OECA will be making available video tape courses on the BEN and ABEL models to all governmental personnel. Users are encouraged to contact Jonathan Libber should they have any questions or concerns about the models’ operation, or effective use in enforcement actions. Updating OECA updates the models annually, usually some time in the late summer. The Agency LAN’s will be updated shortly after the ------- 4 updates are completed. For further information about the models, contact Jonathan Libber of the Multimedia Enforcement Division at (202) 564—6011. - Addressees Director, Office of Compliance Director, Office of Site Remediatjon Enforcement ORE Division Directors Regional Counsels - Water Division Directors Hazardous Waste Division Directors Air and Toxics Division Directors IRM Branch Chiefs ------- SECTION A DOCUMENT 18 Processing Requests for Use of Enforcement Discre t1o 03/03 / 95 18 ------- Q: .•ccu S 47 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY (ASHINGTON, D.C. 20460 1 pç 0 1t MAR 031995 OFFICE OF HEMOR.ANDUM ENFCE1 IENflND - COMPL LANCE ASSURANCE SUBJECT: Processing Re 3 ep for Use of Enforcement Discretion FROM: Steven A. He nj Assistant Administrator TO: Assistant Administrators Regional Administrators c-erieral Counsel Inspector General In light of the reorganization and consolidation of the Agency’s enforcement and compliance assurance resources activities at Headouarters, I believe that it is useful to recirculate the attached memorandum regarding “no action” assurances’ as a reminder of both this policy and the procedure for handling such requests. The Agency has long adhered to a policy against giving definitive assurances outside the context of a formal enforcement proceeding that the government will not proceed with an enforcement response for a specific individual violation of an environmental protection statue, regulation, or legal requirement. This policy, a necessary and critically important element of the wise exercise of the Agency’s enforcement discretion, and which has been a consistent feature of the enforcement program, was formalized in 1984 following Agency-wide review and comment. Please note that OECA is reviewing the applicability of this policy to the CERCLA enforcement program, and will issue additional guidance on this subject. A “no action” assurance includes, but is not limited to: specific or general requests for the Agency to exercise its enforcement discretion in a particular manner or in a given set of circumstances (i.e., that it will or will not take an enforcement action); the development of policies or other statements purporting to bind the Agency and which relate to or wculd affect the A ency’s enforcement of the Federal environmental laws and regulations; and other similar requests Courtney N. Price, Assistant Administrator for Enforcement and Compliance Monitoring, Policy Against “No Action” Assurances (Nov. 16, 1984) (copy attached) r. c ’ ca . ------- 2 for forbearance or action involving enforcement_related activities. The procedure established by this Policy requires that any such Written or oral assurances have the advance written concurrence of the Assistant Administrator for Enforcement and Compliance Assurance. The 1984 reaffirmation of this policy articulated well the dangers of providing “no action” assurances. Such assurances erode the credibility of the enforcement program b r creating real or perceived inequities in the Agency’s treatment of the regulated community. Given limited Agency resources, this credibility is a vital incentive for the regulated community to comply with existing requirements. In addition, a commitment not to enforce a legal req-uireiuent may severely hamper later, necessary enforcement efforts to protect public health and the environment, regardless of whether the action is against the recipient of the assurances or against others who claim to be similarly situated. Moreover, these principles are their most compelling in the context of rulemakings: good public policy counsels that blanket statements of enforcement discretion are not always a particularly appropriate alternative to the public notice-and- comment rulemaking process. Where the Agency determines that it is appropriate to alter or modify its approach in specific, well— defined circumstances, in my view we must consider carefully whether the objective is best achieved through an open and public process (especially where the underlying requirement was established by rule under the Administrative Procedures Act), or ‘through piecemeal expressions of our enforcement discretion. We have recognized two general situations in which a no action assurance may be appropriate: where it is expressly provided for by an applicable statute, and in extremely unusual circumstances where an assurance is clearly necessary to serve the public interest and which no other mechanism can address adecuately. In light of the prof ound policy implications of granting no action assurances, the 1984 Policy requires the advance concurrence of the Assistant Administrator for this office. Over the years, this approach has resulted in the reasonably consistent arid appropriate exercise of EPA’s enforcement discretion, and in a manner which both preserves the integrity of the A en y and meets the legitimate needs served by a mitigated enforcement response. There may be situations where the general prohibition on rio action assurances should not apply under CERCLA (or the Underground Storage Tanks or RCRA corrective action programs). For example, at many Superfund sites there is no violation of law. OECA is evaluating the applicability of no action assurances under CERCLA and RCRA and will issue additional guidance on the subject. ------- 3 Lastly, an element of the 1984 Policy which I want to highlight is that it does not and should not preclude the Agency from discussing fully and completely the merits of a particular action, policy, or other request to exercise the Agency’s enforcement discretion in a particular manner. I welcome a free and frank exchange of ideas on how best to respond to violations, mindful of the Agency’s overarching goals, statutory directives, and enforcement and compliance priorities. I do, however, want to ensure that all such requests are handled in a -consistent and coordinated manner. Attachment cc: OECA Office Directors Regional Counsels Regional Program Directors ------- I UNiTED STATES ENVIRONMENTAL PROTECTION AGENCY 2 if ‘ I WASHINGTON. D.C. 20460 ( pclO ’ MJV 6I 4 OFFICE OF ENFOPCEMENT A. O COMPLIANCE MONITORING MEMORANDUM SUBJECT: Policy Against No ction” Assura ces FROM: Courtney H. Price Assistant Administrator for Enforcement and Compliance Monitoring TO: Assistant Administrators Regional Administrators General Counsel Inspector General This memorandum reaffirms EPA policy against giving definitive assurances (‘Jritten or oral) outside the context of a formal enforcement proceeding that EPA will not proceed with an enforcement response for a specific individual violation of an environmental protection statute, regulation, or other legal requirement. No action” promises may erode the credibility of EPA’S enforcement program by creating real or perceived inequities in the Agency’s treatment of the regulated community. This credibility is vital as a continuing incentive for regulated parties to comply with environmental protection requirements. In addition, any commitment not to enforce a legal requirement against a particular regulated party may severely hamper later enforcement efforts against that party, who may claim good—faith reliance on that assurance, or against otne: parties who claim to be similarly situated. This policy against definitive no action promises to parties outside th Agency applies in all contexts, including assurances requested: O both prior to and after a violation has been committed; o on the basis that a State or local government is responding to the violation; ------- 2 on the basis that revisions to the underlying legal requirement are being considered; on the basis that the Agency has determined that the party is not liable or has a valid defense; on the basis that the violation already has been corrected (or that a party has promised that it will correct the violation); or on the basis that the violation i not of sufficient priority to merit Agency action. The Agency particularly must avoid no action promises relating either to violations of judicial orders, for which a court has independent enforcement authority, or to potential criminal violations, for which prosecutorial discretion rests with the tJnited States Attorney General. As a general rule, exceptions to this policy are warranted only ° where expressly provided by applicable statute or regulation (e.g., certain upset or bypass situations) o in extremely unusual cases in which a no action assurance is clearly neccessary to serve the public interest (e.g., to allow action to avoid extreme risks to public health or safety, or tc obtain important information for research purposes) and which no orher mechanism can address adequately. Of course,. any exceotions which EPA grants must be in an area in which EPA has discretion not to act under applicable law. This policy -in no way is intended to constrain the way in which EPA discusses and coordinates enforcement plans with state or local enforcement authorities consistent with normal working relationships. To the extent that a statement o EPA’S enforcement intent’is necessary to help sup ort or conclude an effective state enforcement effort, EPA can eznoloy language such as the following: EPA encouraces State action to resolve v olatiCflS of the _____________ Act and supports the actions which ( State ) s taking to address the violations at issue. To the extent :hat the State action does not satisCactorily resolve the viola: cns, EPA may pursue its own enforcer e act n. ------- SECTION A DOCIJNENT 19 Voluntary Environmental Self—Policing and Self—Disclosure Interim Policy Statement NOTE: SUPERSEDED by final policy No. 26 below The interim policy is contained in a Federal Register notice, 60. Fed. Reg. 16875 (4/3/ 95) 03/30/95 ------- Notices ( 1 i Federal Register I Vol. 60, No. 63 I Monday, April 3, 1995 I Notices Page 16875 This section of the FEDERAL REGISTER contains documents other than rules or proposed rules that are applicable to the public Notices of heanngs and investigations. committee meetings, agency decisions and rulings, delegations of authority, filing of petitions arid applications and agency statements of organization and functions are examples of documents appeanng in this secton. ENVIRONMENTAL PROTECTION AGENCY [ FRL—5184—4] - I Voluntary Environmental Self-Policing u Self-Disclosure Entenm Policy Statement AGENCY: Environmental Protection Agency (EPA) ACTION: Intenm policy statement and request for comment. SUMMARY: The Environmental Protection Agency (EPA) announces and requests comment on an interim policy to provide incentives for regulated entities that conduct ioluntary compliance evaluations and also sclose and correct violations. These ,icentives include eliminating or substantially . educmg the gravity component of civil penalties and not referring cases for Ci,minal prosecution where specified conditions are met. The policy also states that EPA will not request voluntary audit reports to trigger enforcement inveseganons. This interim policy was developed in close consultatioii with EPA’s regional offices and the Department of Justice, and will be applied uniformly by the Agency’s enfore m iit programs. DATES: This interim policy statement is effective as interim gwdance 15 days after publication, in order to give the Agency time- to coordinate implementation of the policy throughout EPA Headquarters and the Regions. EPA urges interested parties to comment on this interim policy in wiiting Comments must be received by EPA at the address below by June 2, 1995. ADDRESSES: Submit three copies of comments to the U S. EPA Air Docket, Mail Code 6102, 401 M Street, SW, Washington. D.C. 204 0, attention: bocket #C—94-01. FOR FURTHER INFORMAtiON CONTACT Additional documentation relating to the development of this interim policy is contained in the environmental auditing public docket. Documents from the docket uay be requested by calling (202) 260—7548, cequesnng an index to docket #C—94-0l, and faxing document requests to (202) 260-44.00. Hours of operation are 8 s.m. to 5:30 p Monday through Friday, except legal holidays Additional contacts are Geoff Garver or Brian Riedel, at (202) 564-4187. SUPPLEMENTARY INFORMATION: L Background A. introduction One of the Environmental Protection Agency’s most Important responsibilities is ‘obtaining compliance with federal laws that protect public health and safeguard the environment. That goal can be achieved only with the voluntary cooperation of thous’--’s of businesses and other regulated enu sqbject to these requirements. Today.. announcing incentives for those who ml responsibility for voluntarily evaluating, disclosing and correcting violations These incentives, developed after rune months of public meetings and empirical analysis, are set forth in detail below and take effect in 15 days. At the same time, EPA expects to continue a dialogue with stakehotders and consider further refinements to this interim policy. The incentives that EPA is offering fall into three distinct categories. First, the Agency will completely eliminaip gravity-based (or “punitive”) penalties for companies or public agencies that voluntarily identify, disclose and correct violations according to the conditions outlined in this policy. EPA will also reduce punitive penalties by up to 75% for companies that meet most, but not all, of these conditions. Second, EPA will not recommend to the Department of Justice that criminal charges be brought against a company acting in good faith to identify, disclose, and correct. violations, so long as no serious actual harm has occurred. Finally, the Agency will not request voluntary environmental audits to trigger enforcement investigations. The incentives offered in this policy have been structured above all to protect human health and the environment. For example, even where the conditions for mitigated enforcement are met, EPA will reserve the right to collect full civil penalties for ciiminal conduct, violations that present an imminent and substantial endangerment or result in - serious actual harm, or repeat violations. Sources will not be allowed to gain an economic advantage over their competitors by delaying their invr -ctnwit in compliance. Nor will EPA hesitate to bring a criminal action against individuals responsible for criminal conduct EPA is considering additional incentives for voluntary compliance beyond the benefits offered in the policy today. On April 7.1995, the Agency will amiounce 12 Environmental Leadership Program (ELP) pilot projects with companies and public agencies to test criteria for auditing and certification of voluntary cornphance programs. If successful, standards developed through Environmental Leadership could lead to reduced inspections and public recognition for companies or agencies with staxe-of.the-art compliance programs. In keeping with the President’s announcement on March 16,1995, EPA also will shortly be announcing additional compliance incentives for small businesses. The Agency is especially interested in comments relating to whether this interim policy appropriately defines the criteria for deter ining whether a self-audit, self- e ’valuation or disclosure is voluntary; whether the interim policy adequately preserves the Agency’s authority to assess a gravity penalty component in appropriate cases, and whether, and according to what criteria, the Agency should consider giving credit against the economic benefit component of a penalty for state-of-the-art environmental management systems. B. Public Process In May 1994, the Administrator asked the Office of Enforcement and Compliance Assurance to determine whether additional incentives are needed to encourage voluntary disclosure and correction of violations uncovered during environmental audits and self-evaluations. In developing this interim policy, the Agency held a major two-day public meeting in July 1994 announced in the Federal Register on June 20, 1994(59 FR. 31914); published a Restatement of Policies Related to Eziviron tal Auditing in the Federal Register on July 28, 1994 (59 FR 38455); considered over 80 wiitzen comments submitted to the environmental auditing policy docket; held a focus group meeting in San Francisco on January 19, 1995 with key stakeholders from industry, trade groups, State environmental commissions, State attorneys general offices, district attorneys’ offices, environmental and public interest groups, and professional envtronm ita1 auditing groups; and held a public comment session in San Francisco on January 20, 1995. In addition to considering opinion from stakeholders, EPA conducted its own analysis of relevant facts. For example, the Agency considered EPA and other Federal policies relating to environmental auditing, self- disclosure, and correction, as well as incentives suggested by Stare and local policies anti legislation, and by applications submitted for the EL.P pilot program. The Agency also considered relevant surveys on auditing practices and incentives. ------- C Purpose This interim policy is intended to promote environmental compliance by providing eater certainty as to EPA’s enforcement sponse to voluntary self-evaluations, and “voluntary disclosure and prompt correction of violations. The policy further provides guidance for States and local authorities in encouraging this behavior among regulated entities. Federal laws and regulations set rninnnum standards for protecting human health and achieving environmental protection goals such as clean air and clean water. EPA will continue to uphold these laws through vigorous enforcement actions that appropriately penalize violators. Penalties help ensure a level playing field by ensuring that violators do not obtain an unfair economic advantage over their competitors who made the necessary investment in compliance. Penalties also promote protection of the environment and public health by encouraging adoption of pollution prevention and recycling practices that limit exposure to liability for pollutant discharges and deterring future violations by the violator and others. At the same time, the Agency recognizes that we cannot achieve maximum compliance without the cooperation of a regulated community willing to act responsibly by detecting, disclosing, and correcting violations. Already, regulated entities have tinny compelling incentives to implement vironmental management/auditing systems. s noted in EPA’s 1986 auditing policy. Indeed, recent surveys show that the vast majority of large companies engage in environmental auditing andlor have environmental management systems in place. Nonetheless, EPA has concluded that the additional incentives in this interim policy will further promote the regulated community’s cOxumitinent to adopting systems for maximizing compliance. D. Principles for Volwzsarj Compliance The interim policy that EPA is announcing today is based on seven principles: 1. Self-policing by regulated entities can play a crucial role in finding, fixing and preventing violations. 2. VioLations discovered through self- policing should be disclosed and promptly corrected. 3. Regulated entities that self-police and that voluntarily disclose and self-correct violations in accordance with this policy should be assessed penalties that are consistently and predictably lower than penalties for those who do not. 4. Regulated entities that self-police and voluntarily disclose and self-correct violations in accordance with this policy should also not be recommended for criminal prosecution. 5. Providing predictable incentives for voluntary disclosure and correction of violations identified through self-policing offers a positive alternative to across-the- board privileges and immunities that could be used to shield criminal misconduct, drive up litigation costs and create an atmosphere of distrust between regulators, industry and local communities. 6. EPA should not seek voluntary environmental audit information to trigger an Investigation of a civil or criminal violation of environmental laws. 7. To preserve a level playing field, EPA should recover any economic benefit realized from violations of environmental law. E. Relationship to Emerging Standards EPA also recognizes the development of and growing reliance on international voluntary environmental management standards in the U.S. and other countries. - These standards, if properly crafted anti implemered, can provide a powerful tool for orgaluz ’ ins to improve their overall complianie with environmental requirements -and move beyond compliance through innovative approaches to pollution prevention. In addition to issuing this interim policy. EPA will continue to pursue a dialogue with interested patties and to pilot policy approaches through programs such as the ELP to determine how EPA can make use of and encourage these standards. U. Interim Policy A. Deflnitio,ts For purposes of this interim policy, the- following definitions apply “Environmental auditing” has the definition given to it in EPA’s 1986 policy on environmental auditing. Le. “a systematic, dooimenr d . periodic and objective review by regulated entities of facility operations and practices related to u nng e viiviuu uIgl ‘Environmenad audit report ’ m n all docunientation of information rclaling to an environmental audit, but not including the factual information underlying or testimonial evidence relating to such information. “Regulated entity” means any entity. including a federal, state, and municipal facility, regulated under the federal environmental laws that EPA adnnnisters. “Self-evaluation” means an assessment, not necessanly meeting allthecntenaofa full environmental audit, by a regulated entity of its compliance with one or more environmental requirements. “Voluntary” means not required by statute, regulation, permit, order, or agreemenL B Conditions The conditions for rerincing civil penalties and not making ciiininnl referrals in accordance with Sections ILC. and lii). of this interim policy are as follows: 1 Volwuwy self-policing. The regulated entity discovers a violation through a voluntary environmental audit or voluntary self-evaluation appropriate to the size and nature of the regulated entity: and 2. Voluntary dasclosure. The regulated entity fully and voluntarily discloses the violation in writing to all appropriate federal. state and local agencies as soon as it is discovered (including a reasonable time to determine that a violation exists), and prior to (1) the commencement of a federal, state or local agency inspection, investigation or information request; (2) notice of a citizen suit; (3) legal complaint by a third party; or (4) the regulated entity’s knowledge that the discovery of the violation by a regulatory agency or third party was iniminent and 3 &ompe correction. The regulated entity corrects the violation either within 60 days of discovering the violation or, if more time is needed, as expeditiously as practicable; and 4 Remediazzon of imminent and substanrzo.I endange.. . .. The regulated entity expeth4 ., .emedies any condition that has’ created ,. create an imminent and substantial eudangerment to human health or the environment; and 5 Remedtanon of harm and prevention of repent violations. The regulated entity implements appropriate measures to remedy any environmental harm due to the violation and to prevent a recurrence of the vi9lation; and 6. No lack of appropriate preventive measures. The violation does not indicate that the regulated entity has failed to take appropriate steps to avoid repeat or recurring violations; and 7. Cooperation. The regulated entity cooperates as required by EPA and provides such information as is reasonably necessary and required by EPA to determine applicability of this policy. Cooperation may include providing all requested documents and access to employees and assistance in any further investigations into the violation. Where appropriate, EPA may require that to satisfy any of these conditions,, a regulated entity must enter into a written agreement. administrative consent order or judicial consent decree, particularly where compliance or remedial measures are complex or a lengthy schedule for anaimng and maintaining compliance or remediating harm is required. C Reduce Civil Penalties for Voiwuanly Disclosed and Promptly Corrected Violations 1. Incentive Regulated entities will be eligible for the following reductions in civil penalties: a. EPA will eliminare all of the gravity component of the penalty for violations by regulated entities that’ meet conditions 1 through 7 outlined in Section ILB., except for violations involving (i) criminal conduct by the regulated entity or any of its employees. or (ü) an imminent and substantial endangerment, or serious actual harm, to human health or the environment. ------- 3 b EPA may nucigate up to 75% of the unadjusted gravity component of the penalty. taking into account any of conditions 1—7 in ;ection ll.B that are met, in the following ases (i) cases in which most but not all of the conditions in Section 11.8 are met: or (ii) cases involving an imminent and substantial endangerment, but not serious actual harm, in which all the conditions in Section ll.B. are met, or (iii) cases involving the disclosure of criminal conduct in which all the conditions in Section 11 B. are met c. EPA will retain its full discretion to recover any economic benefit gained as a result of noncompliance to preserve a “level playing field” in which violators do not gain a competitive advantage through noncompliance . However, EPA may forgive the entire penalty for violations which meet conditions 1 through 7 outlined in Section 11.B and, in EPA’s discretion, do not merit any penalty due to the insignificant amount of any economic benefit 2. Discussion a. Providing a clear and significant reduction in civil penalties for companies that assume responsibility for finding, disclosing and correcting violations will cmate a sarong incentive for regulated entities to prevent or fix violations before EPA expends enforcement resources. The policy stares learly the conditions under which EPA will forgive all or part of the gravity component of a penalty for voluntary disclosure and correctiorc b. The policy appropriately preserves the concept of recovering economic benefit. except where it is insignificant, as recommended by a broad spectrum of commenters. including industry commenters; c. Retaining EPA’s disaenon to collect the gravity component of the penalty in appropriate cases, such as where a violatioü involves criminal conduct. imminent and substantial endangerment, will help to deter the most egregious environmental violations. At the same thne, by preserving flexibility to reduce the gravity element by up to 75% for good faith efforts to disclose and promptly comply even in those cases, the policy will retain an appropriate compliance incentive. D. Linuc Crinwiat ReferraLs for Volwuaiy Disclosure and Correction of Violatzorj ’ 1. Incentive - EPA will not recommend to the Department of Justice that criminal charges be brought against a regulated entity where EPA determines that conditions 1-7 in Section ILB. above for reduction of civil penalties are met, and the violation does not demonstrate or involve (1) a prevalent corporate management philosophy or practice that concealed or condoned environmental violauons;(2) high-level corporate officials’ or managers’ conscious involvement in or willful blindness to the violation: or (3) serious actual harm to human health or the environment. This policy does not apply to cnminal acts of individual managers or employees. Where EPA det’ermines pursuant to this Section that a criminal referral t’o the Department of Justice is unwarranted. EPA may nonetheless proceed with civil enforcement in accordance with Section IC. of this pohcy or other applicable enforcement response and penalty policies. 2. Discussion The policy will promote candid and thorough self .policing by providing greater certainty as to how EPA will exercise its criminal investigative discretion to encourage voluntary disclosure and prompt correction by regulated entities. E. Elinunate Rouwze Requests for Audu Reports in Pre-E,zforca at Proceedings 1. Incentive EPA will not request a voluntary environmental audit report to tugger a civil or criminal investigation. For example, EPA will not request an audit in routine inspections. Once the Agency has reason to believe a violation has been committed, EPA may seek through an investigation or enforcement action any information relevant to identifying vroladons or determining liability or extent of harm. 2. Discussion a. This policy makes clear that EPA will not routinely request audit reports . At the same time, the policy in no way limits the right of regulated entities to claim common law privileges (e.g , attorney-client and work product) as appropriate. EPA believes that this clarificatio along with the other incentives in this interim policy, should — reduce any perception that environmental audits may be used unfairly in environmental enforcement b. With respect to federal facilities, although federal facility environmental audit reports may be accessible to the public under the Freedom of Information Act (FOIA) in certain circumstances, EPA cannot utilize FOLA to request information from other federal agencies. Thus, EPA will apply this policy on requests for audit reports to federal (and state and municipal) facilities the same as it does for other regulated entities. F. Applicability This interim policy applies to violations under all of the federal environmental statutes that EPA nthmni te 3 and supersedes (unless otherwise noted) any conflicting or inconsistent provisions in the media-specific penalty or enforcement response policies and EPA’s 1986 Environmental Auditing Policy Statement. Existing enforcement policies will continue to apply in conjunction with this interim policy, except where inconsistent with this policy In addition, where appropriate, EPA’s Supplemental Environmental Project Policy may at EPA’s discretion be applied in conjunction with this policy. I lL Favor These Incentives Over Broad Privileges arid Immunities This interim policy offers a positive alternative to across-the-board privileges and immunities that could be used to shield criminal misconduct, drive up litigation costs and create an atmosphere of distrust between regulators, industry and local communities. A. Discussion 1. Penalty immunity provisions for voluntary disclosures of violations can give lawbreakers an economic advantage over their law-abiding competitors. It makes sense to give substantial penalty reductions for those who come forward with their violations and promptly correct . . ‘, but to maintain a ie l’playmg field, t t ‘eral and state governments must be . e to recoup the economic benefit of violations 2. A principal rationale for environmental audit privileges and penalty immunities for voluntary disclosures is to reduce the exposure of regulated entities that conduct self-evaluations and act on the finduigs by immediately correcdng violations. EPA has addressed this concern with the incentives for disclosure and correction outlined above. 3. Privilege nuns counter to efforts to open up environmental decisionmnking and encourage public participation in matters that affect people’s homes., workplaces and communities. 4. An environmental audit privilege could be misused to shield bad actors or to frustrate access to crucial factual information. 5. Environmental audit privileges and penalty immunities could encourage increased litigation as opposing lawyers battle over what is privileged or immune from penalties and what is not. Litigation over the scope of the privileges and immunities could burden our already taxed judicial system, drain government and private resources, and in some cases prevent quick action to address environmental emergencies. 6. The Supreme Court has noted. ‘privileges are not lightly created nor expansively construed for they are in derogation of the search for the truth.” United States v. Nixon, 418 U.S. 683, 710 (1974). Moreover, the self-evaluation privilege has regularly and uniformly been re)ccted by the courts in cases where documents were sought by a governmental agency. N. Consequences for States EPA recognizes that stares are important partners in federal enforcement, and that itis desirable to create a climate in which stares can be innovative. At the same time, EPA is required to establish a certain minimum consistency in federal enforcement, so that ------- 4 the sanctions a business faces for violating federai law do not depend on where the business is located. Accordingly, to maintain national nsister’cy: - A. EPA will scrutinize enforcement more closely in states with audit privilege and/or penalty immunity laws and may find it neces azy to increase federal enforcement where environmental self-evaluation privileges or penalty immunities prevent a state from obtaining: 1 information needed to establish criminal liability; 2. facts needed to establish the nature and extent of a violanon 3. appropriate penalties for imminent and substantial endangerment or serious harm to human health or the environment, or from recovering economic benefit, 4. appropriate sanctions or penalties for criminai conduct and repeat violations; or 5 prompt correction of violations, and expeditious remediation of those that involve imminent and substantial endangerment to human health or the environment B EPA will bring to the scale’s attention any provisions of state audit privilege and/or penally immunity statutes that raise any of the concerns outlined above, and will work with the state to address those concerns and ensure that federal requirements are satisfied. V. Limitations on Applicability o(Thls Policy This interim policy sets forth internal guidelines which amend EPA’s penalty policies in siwalions involving voluntary self- policing, disclosure and correction. In conjunction with the applicable penalty policy, these guidelines will aid EPA personnel in proposing a 1 mopiiaXe penalties or negotiating settlements in ndministzative and judicial enforcement actions. The interim policy also serves to structure the Agency’s, enforcement authonty and states the Agency’s view as to the proper allocat’ its enforcement resources. Deviations from these guidelines, where merited, are authorized so long as the reasons for the deviations are documented. This interim policy is not final agency action, but is intended solely as guidance. It is not intended, nor can it be relied upon. to create any rights enforceable by any party in litigation with the United States EPA officials may decide to follow the guidance provided in this interim policy or to act at variance with the guidance based on analysis of case-specific facts and circumstances. Application of this policy to the facts of any individual case is at the sole discretion of EPA and is not subject to review by any court. In addition, the policy has no effect on the calculation of any cleanup costs, remedial costs, natural resources damages or emergency response costs associated with a violation. EPA reserves the right to change this interim policy at any time without public notice. Dazed. March 30, 1995 Steven A. Herman, 4i tWU A4mzmsrazorfor E4orcemens anc Compliance Assurance. [ FR Doc. 95—8218 Filed 3—31—95, 8 45 am] LL G cODE ------- SECTION A DOCUMENT 20 Interim Revised EPA Supplemental Environmental Projects Policy NOTE: Includes cover memorandnm, dated 5/3/95. Policy also published in a Federal Register notice, 60 Fed. Reg. 24856 (5/10/95) 05/08/95 20 ------- cl UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON D.C. 20460 4 LPRO1 ’ MAY -31995 OFAcEOF - FOfl AND 1 1EMORANDIJM SUBJECT: Issuance of In Re S lementai Environnienxal Projects Policy FROM: Steven A. H ‘Assistant Administrator TO: Regional Administrators Attached is EPA’s Interim Revised Supplemental Environmental Projects (SEP) Policy. SEPs are environmentally bezieficial projects which a violator agrees to undertake in settlement of an enforcement action, but which the vioJ ror is not otherwise lcgaJly required to perform. This interim revised Policy provides the A ency with additional flexibility to craft settlements which may secure significant environmental or public health protection. The Agency encourages the use of SEPs. While penalties play an mportanr role in environmejflaj protection by deterring violations and creating a level playing field, SEPs can play an add itionai role in securing significant environmental or’ public health protection and improvements. SEPs may be particularly appropriate to further the objectives in the stanices EPA administers and to achieve other policy goals, including promoting pollution prevention and environmental justice. - This revision provides numerous improvements to the current SEP Policy. The revised Policy clearly defines a SEP. It establishes guidelines to ensure that SEPs are within EPA’s legal authority. It defines seven categories of projects which may qualify as SEPs. It provides step-by-step procedures for calculating the cost of a SEP and the percentage of that cost, based on an evaluation of five f ctors; which may be applied as a mitigating factor in establishing an appropriate settlement penalty. This Policy is effective May 8, 1995 and supersedes the February 12, 1991. “Policy on the Use of Supplemental Environmental Projects in EPA Se#kments ” The Policy is to be used in all enforcement actions filed after the effective date and to all pending cases in which the government has not reached agreement in principle with the alleged violator on the specific terms of a SEP. RICR,yc ab . P i sd SoyCas ’a 1* ‘ &75% iuc d oir ------- - -2- We are issuing this Policy in an interim version because we may wish to revise it based on public comments and our experience in using it. We are issuing it as an interim policy, rather than as a draft, because we believe it is superior to thei99l Policy and thus should go into effect as soon as possible. We expect to-publish this interim version of the Policy in the Federal Reg ster within the next 30 days. Thank you for your comments on two prevous internal drafts of this Policy. We appreciate the support and efforts of the Department of Justice,. our Office of General Counsel, and the SEP workgroup in revsng this Policy.. We expect to conduct aining sessions on the new Pohc ineacfr Region during the next few months. In addition we expece issue gui -o n er-drafting of settlement agreements containing SEPs shortly. If you have any qu tJóns on the Policy, you may contact David A. HindiL Acting Branch Chief Mu1tin d en Djvjs ion in. the Office of Regulatory Enfoccemeflt at 202-564 .6(XJ& aIs imiy be directed to Peter Moore, at 202-564-6014. or Geratd Kraus at 202 r 564 - 6 047 ii the Muhüne4 Enforcement Division. Attachment cc: - (w/anachmjnt) - Assistant Administrators- OECA Office Director r ORE Division DIrectors- Regional Counsels - - -. Regional Enforcement Coordinators, Regional Program Division Directbni- -. DepacniofJustice -AAG ENRD Department of Justice EES Chief and Deputy Cbiefi Department of Juszice . EDSQiiet’and Deputy Chicf- SEP Workgroup Members- ------- INTERiM REWSED EPA SUPPLEMENTAL ENVIRONMENTAL PROJECTS POLICY EFFECTIVE MA Y 8, 79.95 A. INTRODUCTION 1. Background In settlements of environmental enforcement cases, the U.S. Environmental Protection Agency (EPA) will require the alleged violators to achieve and maintain compliance with Federal environmental laws and regulations and to pay a civil penalty. To further EPA’s goals to protect and enhance public health and the environment, in certain instances environmentally beneficial projects, or Supplemental Environmental Projects (SEPs), may be included in the settlement. This Policy sets forth the types of projects that are permissible as SEPs, the penalty mitigation appropriate for a particular SEP, and the terms and conditions under which they may become part of a settlement. The primary purpose of this Policy is to encourage and obtain environmentaJ and public health protection and improvements that may not otherwise have occurred without the settlement incentives provided by this Policy. In settling enforcement actions, EPA requires alleged violators to promptly cease the violations and, to the extent feasible, remediate any harm caused by the violations. EPA also seeks substantial monetary penalties in order to deter noncompliance. Without penalties, companies would have an incentive to delay compliance until they are caught and ordered to comply. Penalties promote environmental compliance and help protect public health by deterring future violations by the same violator and deterring violations by other members of the regulated community. Penaities help ensure a national level playing field by ensuring that violators do not obtain an unfair economic advantage over their competitors who made the necessary expenditures to comply on time. Penalties also encourage companies to adopt pollution prevention and recycling techniques, so that they minimize their pollutant discharges and reduce their potential liabilities. Statutes administered by EPA generally contain penalty assessment criteria that a court or administrative law judge must consider in determining an appropriate penalty at trial or a hearing. In the settlement context, EPA generally follows these criteria in exercising its - discretion to establish an appropriate settlement penalty. In establishing an appropriate penalty, EPA considers such factors as the economic benefit associated with the violations, the gravity or seriousness of the violations, and prior history of violations. Evidence of a violator’s commitment and ability to perform a SEP is also a relevant factor for EPA to consider in establishing an appropriate settlement penalty. All else being equal, the final settlement penalty will be lower for a violator who agrees to perform an acceptable SEP compared to the violator who does not agree to perform a SEP. ------- Revised SEP Policy * * * May 1995 * * * Page 2 The Agency encourages the use of SEPs. While penalties play an important role in environmental protection by deterring violations and creating a level playing field, SEPs can play an additional role in securing significant environmental or public health protection and improvements. 1 SEPs may not be appropriate in settlement of all cases, but they are an important part of EPA’s enforcement program. SEPs may be particularly appropriate to - further the objectives in the statutes EPA administers and to achieve other policy goals, including promoting pollution prevention and environmental justice. 2. Pollution Prevention and Environmental Justice The Pollution Prevention Act of 1990 (42 U.S.C. § 13101 et seq., November 5, 1990) identifies an environmental management hierarchy in which pollution “should be prevented or reduced whenever feasible; pollution that cannot be prevented should be recycled in an environmentally safe manner whenever feasible; pollution that cannot be prevented or recycled should be treated in an environmentally safe manner whenever feasible; and disposal or other release into the environment should be employed only as a last resort ...“ (42 U.S.C. §13 103). In short, preventing pollution before it is created is preferable to trying to manage, treat or dispose of it after it is created. Selection and evaluation of proposed SEPs should be conducted in accordance with this hierarchy of environmental management, i.e., SEPs involving pollution prevention techniques are preferred over other types of reduction or control strategies, and this can be reflected in the degree of consideration accorded to a defendant/respondent before calculation of the final monetary penalty. Further, there is an acknowledged concern, expressed in Executive Order 12898 on environmental justice, that certain segments of the nation’s population are disproportionately burdened by pollutant exposure. Emphasizing SEPs in communities where environmental justice issues are present helps ensure that persons who spend significant portions of their time in areas, or depend on food and water sources located near, where the violations occur would be protected. Because environmental justice is not a specific technique or process but an overarching goal, it is not listed as a category of SEP; but EPA encourages SEPs in communities where environmental justice may be an issue. 3. Using this Policy In evaluating a proposed project to determine if it qualifies as a SEP and then determining how much penalty mitigation is appropriate, Agency enforcement and compliance personnel should use the following five-step process: (1) Ensure that the project meets the basic definition of a SEP. (Section B) (2) Ensure that all legal guidelines, including nexus, are satisfied. (Section C) Depending on circumstances and cost, SEPs also may have a deterrent impact. ------- RevisedSEPPolicy ** * May1995 Page3 (3) Ensure that the project fits within one (or more) of the designated categories of SEPs. (Section D) (4) Calculate the net-present after-tax cost of the project and then determine the appropriate amount of penalty mitigation. (Section E) - (5) Ensure that the project satisfies all of the implementation and-other criteria. (Sections F, G, H and I) 4. Applicability This Policy revises and hereby supersedes the February 12, 1991 Policy on the Use of Supplemental Environmental Projects in EPA Settlements. This Policy applies to settlements of all civil judicial and administrative actions filed after the effective date of this Policy, and to all pending cases in which the government has not reached agreement in principle with the alleged violator on the specific terms of a SEP. This Policy applies to all civil judicial and administrative enforcement actions taken under the authority of the environmental statutes and regulations that EPA administers. It also may be used by EPA and the Department of Jusiice in reviewing proposed SEPs in settlement of citizen suits. This Policy also applies to federal agencies that are liable for the payment of civil penalties. This Policy does not apply to settlements of claims for stipulated penalties for violations of consent decrees or other settlement agreement requirements. 2 This is a settlement Policy and thus is not intended for use by EPA, defendants, respondents, courts or administrative law judges at a hearing or in a trial. Further, whether the Agency decides to accept a proposed SEP as part of a settlement is purely within EPA’s discretion. Even though a project appears to satisfy all of the provisions of this Policy, EPA may decide, for one or more reasons, that a SEP is not appropriate (e.g., the cost of reviewing a SEP proposal is excessive, the oversight costs of the SEP may be too high, or the defendant/respondent may not have the ability or reliability to complete the proposed SE?). This Policy establishes a framework for EPA to use in exercising its enforcement discretion in determining appropriate settlements. In some cases, application of this Policy may not be appropriate, in whole or part. In such cases, the litigation team may, with the advance approval of Headquarters, use an alternative or modified approach. B. DEFINiTION AND KEY CHARACTERISTICS OF A SEP Supplemental environmental projects are defined as environmentally beneficial projects which a defendant/respondent agrees to undertake in settlement of an enforcement The Agency is evaluating whether SEPs should be used, and if so, how, in evaluating claims for stipulated penalties. ------- Revised SEP Policy * * * May 1995 * * * Page 4 action, but which the defendant/respondent is not otherwise legally required to perform. The three bolded key parts of this definition are elaborated below. “Environmentally beneficial” means a SEP must improve, protect, or teduce risks to public health, or the environment at large. While in some cases a SEP may provide the alleged violator with certain benefits, there must be no doubt that the project primarily benefits the public health or the environment. “In settlement of an enforcement action” means: 1) EPA has the opportunity to help shape the scope of the project before it is implemented; and 2) the project is not commenced until after the Agency has identified a violation (e.g., issued a notice of violation, administrative order, or complaint). 3 “Not otherwise legally required to perform means” the SEP is not required by any federal, state or local law or regulation. Further, SEPs cannot include actions which the defendant/respondent may be required to perform: as injunctive relief in the instant case; as part of a settlement or order in another legal action; or by state or local requirements. SEPs may include activities which the defendant/respondent will become legally obligated to undertake two or more years in the future. Such “accelerated compliance” projects are not allowable, however, if the regulation or statute provides a benefit (e.g., a higher emission limit) to the defendant/respondent for early compliance. Also, the performance of a SEP reduces neither the stringency nor timeliness requirements of Federal environmental statutes and regulations. Of course, performance of a SEP does not alter the defendant/respondent’s obligation to remedy a violation expeditiously and return to compliance. C. LEGAL GUIDELINES EPA has broad discretion to settle cases, including the discretion to include SEPs as an appropriate part of the settlement. The legal evaluation of whether a proposed SEP is within EPA’s authority and consistent with all statutory and Constitutional requirements may be a complex task. Accordingly, this Policy uses five legal guidelines to ensure that our Since the primary purpose of this Policy is to obtain environmental or public health benefits that may not have occurred “but for” the settlement, projects which have been started before the Agency has identified a violation are not eligible as SEPs. Projects which have been committed to or started before the identification of a violation may mitigate the penalty in other ways. Depending on the specifics, if a company had initiated environmentally beneficial projects before the enforcement process commenced, the initial penalty calculation could be lower due to the absence of recalcitrance, no history of other violations, good faith efforts, less severity of the violations, or a shorter duration of the violations. ------- Revised SEPPolicy ** * May 1995 * * * Page5 SEPs are within the Agency’s and a federal court’s authority, and do not run afoul of any Constitutional or statutory requirements. 4 1. All projects must have adequate nexus. Nexus is the relationship between the violation and the proposed project. This relationship exists only if the project - remediates or reduces the probable overall environmental or public health impacts or risks to which the violation at issue contributes, or if the project is designed to reduce the likelihood that similar violations will occur in the future. SEPs are likely to have an adequate nexus if the primary impact of the project is at the site where the alleged violation occurred or at a different site in the same ecosystem or within the immediate geographic 5 area. Such SEPs may have sufficient nexus even if the SEP addresses a different pollutant in a different medium. In limited cases, nexus may exist even though a project will involve activities outside of the United States. 6 2. A project must advance at least one of the declared objectives of the environmental statutes that are the basis of the enforcement action. Further, a project cannot be inconsistent with any provision of the underlying statutes. 3. EPA or any other federal agency may not play any role in managing or controlling funds that may be set aside or escrowed for performance of a SEP. Nor may EPA retain authority to manage or administer the SEP. EPA may, of course, provide oversight to ensure that a project is implemented pursuant to the provisions of the settlement and have legal recourse if the SEP is not adequately performed. 4. The type and scope of each project are determined in the signed settlement agreement. This means the “what, where and when” of a project are determined by the settlement agreement. Settlements in which the defendantirespondent agrees to spend a certain sum of money on a project(s) to be determined later (after EPA or the Department of Justice signs the settlement agreement) are generally not allowed. 5. A project may not be something that EPA itself is required by its statutes to do. And a project may not provide EPA with additional resources to perform an activity for which Congress has specifically appropriated funds. In addition, a SEP should not appear to be an expansion of an existing EPA program. For example, if EPA has developed a brochure to help a segment of the regulated community comply with environmental requirements, a SEP may not directly, or indirectly, provide additional resources to revise, copy or distribute the brochure. These legal guidelines are based on federal: law as it applies to EPA; States may have more or less flexibility in the use of SEPs depending on their laws. The immediate geographic area will generally be the area within a 50 mile radius of the site on which the violations occurred. 6 All projects which would include activities outside the U.S. must be approved in advance by Headquarters and/or the Department of Justice. See section I. ------- Revised SEPPolicy * ** May 1995 * * * Page 6 D. CATEGORIES OF SUPPLEMENTAL ENVIRONMENTAL PROJECTS EPA has identified seven categories of projects which may qualify as SEPs. In order for a proposed project to be accepted as a SEP, it must satisfy the requirements of at least one category plus all the other requirements established in this Policy 1. fuiblic Health A public health project provides diagnostic, preventative and/or remedial components of human health care which is related to the actual or potential damage to human health caused by the violation. This may include epidemiological data collection and analysis, medical examinations of potentially affected persons, collection and analysis of bloodffluid/ tissue samples, medical treatment and rehabilitation therapy. Public health SEPs are acceptable only where the primary benefit of the project is the population that was harmed or put at risk by the violations. 2. Pollution Prevention A pollution prevention project is one which reduces the generation of pollution through “source reduction,” i.e., any practice which reduces the amount of any hazardous substance, pollutant or contaminant entering any waste stream or otherwise being released into the environment, prior to recycling, treatment or disposal. (After the pollutant or waste stream has been generated, pollution prevention is no longer possible and the waste must be handled by appropriate recycling, treatment, containment, or disposal methods.) Source reduction may include equipment or technology modifications, process or procedure modifications, reformulation or redesign of products, substitution of raw materials, and improvements in housekeeping, maintenance, training, inventory control, or other operation and maintenance procedures. Pollution prevention also includes any project which protects natural resources through conservation or increased efficiency in the use of energy, water or other materials. “In-process recycling,” wherein waste materials produced during a manufacturing process are returned directly to production as raw materials on site, is considered a pollution prevention project. In all cases, for a project to meet the definition of pollution prevention, there must be an overall decrease in the amount and/or toxicity of pollution released to the environment, not merely a transfer of pollution among media. This decrease may be achieved directly or through increased efficiency (conservation) in the use of energy, water or other materials. This is consistent with the Pollution Prevention Act of 1990 and the Administrator’s “Pollution Prevention Policy Statement: New Directions for Environmental Protection,” dated June 15, 1993. ------- Revised SEP Policy * * * May 1995 * * * Page 7 3. Pollution Reduction If the pollutant or waste stream already has been generated or released, a pollution reduction approach — which employs recycling, treatment, containment or disposal - techniques — may be appropriate. A pollution reduction project is one which results in a decrease in the amount and/or toxicity of any hazardous substance, pollutant or contaminant entering any waste stream or otherwise being released into the environment by an operating busmess or facility by a means which does not qualify as “pollution prevention.” This may include the installation of more effective end-of-process control or treatment technology. This also includes “out-of-process recycling,” wherein industrial waste collected after the manufacturing process and/or consumer waste materials are used as raw materials for production off-site, reducing the need for treatment, disposal, or consumption of energy or natural resources. 4. Environmental Restoration and Protection An environmental restoration and protection project is one which goes beyond repairing the damage caused by the violation to enhance the condition of the ecosystem or immediate geographic area adversely affected. 7 These projects may be used to restore or protect natural environments (such as ecosystems) and man-made environments, sucl!i as facilities and buildings. Also included is any project which protects the ecosystem from actual or potential damage resulting from the violation or improves the overall condition of the ecosystem. Examples of such projects include: reductions in discharges of pollutants which are not the subject of the violation to an affected air basin or watershed; restoration of a wetland along the same avian flyway in which the f cility is located; or purchase and management of a watershed area by the defendant/respondent to protect a drinking water supply where the violation, e.g., a reporting violation, did not directly damage the watershed but potentially could lead to damage due to unreported discharges. This category also includes projects which provide for the protection of endangered species (e.g., developing conservation programs or protecting habitat critical to the well-being of a species endangered by the violation). With regards to man-made environments, such projects may involve the remediation of facilities and buildings, provided such activities are not otherwise legally required. This includes the removal/mitiga jon of contaminated materials, such as soils, asbestos and leaded paint, which are a continuing source of releases and/or threat to individuals. 5. Assessments and udits Assessments and audits, if they are not otherwise available as injunctive relief, are potential SEPs under this category. There are four types of projects in this category: a. pollution prevention assessments; b. site assessments; c. environmental management system audits; and d. compliance audits. If EPA lacks authority to require repair, then repair itself may constitute a SEP. ------- RevisedSEPPolicy *** May1995 *** Page8 a. Pollution prevention assessments are systematic, internal reviews of specific processes and operations designed to identify and provide information about opportunities to reduce the use, production, and generation of toxic and hazardous materials and other wastes. To be eligible for SEPs, such assessments must be conducted using a recognized pollution prevention assessment or waste minimization procedure to reduce the likelihood bf future violations. b. Site assessments are investigations of the condition of the environment at a site or of the environment impacted by a site, and/or investigations of threats to human health or the environment relating to a site. These include but are not limited to: investigations of levels and/or sources of contamination in any environmental media at a site; investigations of discharges or emissions of pollutants at a site, whether from active operations or through passive transport mechanisms; ecological surveys relating to a site; natural resource damage assessments; and risk assessments. To be eligible for SEPs, such assessments must be conducted in accordance with recognized protocols, if available, applicable to the type of assessment to be undertaken. c. An environmental management system audit is an independent evaluation of a party’s environmental 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; (5) budgeting and planning systems for environmental compliance; (6) monitoring, record keeping and reporting systems; (7) in-plant and community emergency plans; (8) internal communications and control systems; and (9) hazard identification, risk assessment. d. An environmental compliance audit is an independent evaluation of a defendant/respondent’s compliance status with environmental requirements. Credit is only given for the costs associated with conducting the audit. While the SEP should require all violations discovered by the audit to be promptly corrected, no credit is given for remedying the violation since persons are required to achieve and maintain compliance with environmental requirements. In general, compliance audits are acceptable as SEPs only when the defendant/respondent is a small business 3 . These two types of assessments and environmental management system audits are allowable as SEPs without an implementation commitment by the defendant/respondent. 8 For purposes of this Policy, a small business is owned by a person or another entity that employs 100 or fewer individuals. Small businesses could be individuals, privately held corporations, f rmers, landowners, partnerships and others. Since most large companies routinely conduct compliance audits, to mitigate penalties for such audits would reward violators for performing an activity that most companies already do. In contrast, these audits are not commonly done by small businesses, perhaps because such audits may be too expensive. ------- Revised SEP Policy * * * May 1995 * * * Page 9 Implementation is not required because drafting implementation requirements before the results of the study are known is difficult. Further, for pollution prevention assessments and environmental management systems audits, many of the implementation recommendations from these studies may constitute activities that are in the defendant/respondent’s own economic interest. These assessments and audits are acceptable where the primary impact of the project is at the same facility, at another facility owned by the violator, or at a different facility in the same ecosystem or within the immediate geographic area (e.g., a publicly owned wastewater treatment works and its users). These assessments and audits are only acceptable as SEPs when the defendant/respondent agrees to provide EPA with a copy. 6. Environmental Compliance Promotion An envirorunentaj compliance promotion project provides training or technical support to other members of the regulated community to: 1) identify, achieve and maintain compliance with applicable statutory and regulatory requirements; 2) avoid committing a violation with respect to such statutory and regulatory requirements; or 3) go beyond compliance by reducing the generation, release or disposal of pollutants beyond legal requirements. For these types of projects, the defendant/respondent may lack the experience, knowledge or ability to implement the project itself, and, if so, the defendant/respondent should be required to contract with an appropriate expert to develop and implement the compliance promotion project. Acceptable projects may include, for example, producing or sponsoring a seminar directly related to correcting widespread or prevalent violations within the defendant! respondent’s economic sector. Environmental compliance promotion SEPs are acceptable only where the primary impact of the project is focused on the same regulatory program requirements which were violated and where EPA has reason to believe that compliance in the sector would be significantly advanced by the proposed project. For example, if the alleged violations involved Clean Water Act pretreatment violations, the compliance promotion SEP must be directed at ensuring compliance with pretreatment requirements. 7. Emergency Planning and Preparedness An emergency planning and preparedness project provides assistance — such as computers and software, communication systems, chemical emission detection and inactivation equipment, HAZMAT equipment, or training — to a responsible state or local emergency response or planning entity. This is to enable these organizations to fulfill their obligations under the Emergency Planning and Community Right-to-Know Act (EPCRA) to collect information to assess the dangers of hazardous chemicals present at facilities within their jurisdiction, to develop emergency response plans, to train emergency response personnel and to better respond to chemical spills. EPCR.A requires regulated sources to provide information on chemical production, storage and use to State Emergency Response Commissions (SERCs), Local Emergency ------- Revised SEP Policy * * * May 1995 * * * Page 10 Planning Committees (LEPCs) and Local Fire Departments (LFDs). This enables states and local communities to plan for and respond effectively to chemical accidents and inform potentially affected citizens of the risks posed by chemicals present in their communities, thereby enabling them to protect the environment or ecosystems which could be damaged by an accident. Failure to comply with EPCRA impairs the ability of states and local communities to meet their obligations and places emergency response personnel, the public and the environment at risk from a chemical release. Emergency planning and preparedness SEPs are acceptable where the primary impact of the project is within the same emergency planning district or state affected by the violations. Further, this type of SEP is allowable only when the SEP involves non-cash assistance and there are violations of EPCRA or reporting violations under CERCLA § 103 alleged in the complaint. 8. Projects Which Are Not Acceptable as SEPs Except for projects which meet the specific requirements of one of the categories enumerated in § D. above, the following are examples of the types of projects that are not’ allowable as SEPs: a. General educational or public environmental awareness projects, e.g., sponsoring public seminars, conducting tours of environmental controls at a facility, promoting recycling in a community; b. Contribution to environmental research at a college or university; c. Conducting a project, which, though beneficial to a community, is unrelated to environmental protection, e.g., making a contribution to charity, or donating playground equipment; d. Studies or assessments without a commitment to implement the results (except as provided for in § D.5 above); e. Projects which are being funded by low-interest federal loans, federal contracts, or federal grants. E. CALCULATION OF 1’llE FINAL PENALTY As a general rule, the costs to be incurred by a violator in performing a SEP may be considered in determining an appropriate settlement amount. Calculating the final penalty in a settlement which includes a SEP is a three-step process. First, the Agency’s penalty policies are used as applicable to calculate all of the other parts of the settlement penalty (including economic benefit and gravity components). Second, calculate the net-present after-tax cost of the SEP. Third, evaluate the benefits of the SEP. based on specific factors, ------- RevisedSEPPolicy May1995 Pagell to determine what percentage of the net-present after-tax cost will be considered in determining an appropriate final settlement penalty. 1. Penalty Penalties are an important part of any settlement. A substantial penalty is generally necessary for legal and policy reasons. Without penalties there would be no deterrence as regulated entities would have little incentive to comply. Penalties are necessary as a matter of fairness to those companies that make the necessary expenditures to comply on time: violators should not be allowed to obtain an economic advantage over their competitors who complied. Except in extraordinary circumstances, if a settlement includes a SEP, the penalty should recover, at a minimum,the economic benefit of noncompliance plus 10 percent of the gravity component, or 25 percent of the gravity component only, whichever is greater. In cases involving government agencies or entities, such as municipalities, or non- profit organizations, where the circumstances warrant, EPA may determine, based on the nature of the SEPs being proposed, that an appropriate settlement could contain a cash penalty less than the economic benefit of non-compliance. The precise amount of the cash penalty will be determined by the applicable penalty policy. 2. Calculation of the Cost of the SEP To ensure that a proposed SEP is consistent with this Policy, the net present after-tax cost of the SEP, hereinafter called the “SEP Cost,” is calculated. In order to facilitate evaluation of the SEP Cost of a proposed SEP, the Agency has developed a computer model called PROJECT. To use PROJECT, the Agency needs reliable estimates of the costs and savings associated with a defendant/respondent’s performance of a SEP. Often the costs will not be estimates but known amounts based on a defendant/respondent’s agreement to expend a fixed or otherwise known dollar amount on a project. There are three types of costs that may be associated with performance of a SEP (which are entered into the PROJECT model): capital costs (e.g., equipment, buildings); one-time nondepreciable costs (e.g., removing contaminated materials, purchasing land, developing a compliance promotion seminar); and annual operation costs or savings (e.g., labor, chemicals, water, power, raw materials).’ 0 In order to run the PROJECT model properly (i.e., to produce a reasonable estimate of the net present after-tax cost of the project), the number of years that annual operation costs or savings will be expended in performing the SEP must be specified. At a minimum, the defendant/respondent must be required to implement the project for the same number of 10 PROJECT does not evaluate the potential for market benefits which may accrue with the performance of a SEP (e.g., increased sales of a product, improved corporate public image, or improved employee morale). Nor does it consider costs imposed on the government, such as the cost to the Agency for oversight of the SEP, or the burden of a lengthy negotiation with a defendant/ respondent who does not propose a SEP until late in the settlement process. ------- Revised SEP Policy * * * May 1995 * * * Page 12 years used in the PROJECT model calculation. If certain costs or savings appear speculative, they should not be entered into the PROJECT model. The PROJECT model is the primary method to determine the SEP cost for purposes of negotiating settlemeins.” EPA does not offer tax advice on whether a company may deduct SEP expenditur s from its income taxes. If a defendant/respondent states that it will not deduct the cost of a SEP from its taxes and it is willing to commit to this in the settlement document, and provide the Agency with certification upon completion of the SEP that it has not deducted the SEP expenditures, the PROJECT model calculation should be adjusted to calculate the SEP Cost without reductions for taxes. This is a simple adjustment to the PROJECT model: just enter a zero for variable 7, the marginal tax rate. If a business is not willing to make this commitment, the marginal tax rate in variable 7 should not be set to zero; rather the default settings (or a more precise estimate of the business’ marginal tax rates) should be used in variable 7. If the PROJECT model reveals that a project has a negative cost, this means that it represents a positive cash flow to the defendant/respondent and as :a profitable project thus, generally, is not acceptable as a SEP. If a project generates a profit, a defendant/respondent should, and probably will, based on its own economic interests, implement the project. While EPA encourages companies to undertake environmentally beneficial projects that are economically profitable, EPA does not believe violators should receive a bonus in the form of penalty mitigation to undertake such projects as part of an enforcement action. EPA does not offer subsidies to complying companies to undertake profitable environmentally beneficial projects and it would thus be inequitable and perverse to provide such subsidies only to violators. In addition, the primary goal of SEPs is to secure a favorable environmental or public health outcome which would not have occurred but for the enforcement case settlement. To allow SEP penalty mitigation for profitable projects would thwart this goal.’ 2 3. Penalty Mitigation After the SEP Cost has been calculated, EPA should determine what percentage of that cost may be applied as mitigation against the preliminary total calculated gravity component before calculation of the final penalty. The SEP should be examined as to whether and how effectively it achieves each of the following five factors listed below. “ See PROJECT User’s Manual, January 1995. If the PROJECT model appears inappropriate to a particular fact situation, EPA Headquarters should be consulted to identify an alternative approach. For example, the December 1993 version of PROJECT does not readily calculate the cost of an accelerated compliance SEP. The cost of such a SEP is the additional cost associated with doing the project early (ahead of the regulatory requirement) and it needs to be calculated in a slightly different m2nner. 12 The penalty mitigation guidelines in subsection E.3 provide that the amount of mitigation should not exceed the net cost of the project. To provide penalty mitigation for profitable projects would be providing a credit in excess of net costs. ------- Revised SEP Policy * * * May 1995 Page 13 • Benefits to the Public or Environment at Large . While all SEPs benefit public health or the environment, SEPs which perform well on this factor will result in significant and quantifiable reduction in discharges of pollutants to the environment and the reduction in risk to the general public. SEPs also will perform well on this factor to the extent they result in significant and, to the extent possible, measurable progthss in protecting and restoring ecosystems (including wetlands and endangered species habitats). • Irmovativeness . SEPs which perform well on this factor will further the development and implementation of innovative processes, technologies, or tuethods which more effectively: reduce the generation, release or disposal of pollutants; conserve natural resources; restore and protect ecosystems; protect endangered species; or promote compliance. This includes “technology forcing” techniques which may establish new regulatory “benchmarks.” • Environmental Justice . SEPs which perform well on this factor will mitigate damage or reduce risk to minority or low income populations which may have been disproportionately exposed to pollution or are at environmental risk. • Multimedia Impacts . SEPs which perform well on this factor will reduce emissions to more than one medium. • Pollution Prevention . SEPs which perform well on this factor will develop and implement pollution prevention techniques and practices. The better the performance of the SEP under each of these factors, the higher the mitigation percentage may be set. As a general guideline, the final mitigation percentage should not exceed 80 percent of the SEP Cost. For small businesses, government agencies or entities, and non-profit organizations, this percentage may be set as high as 100 percent. For any defendant/respondent, if one of the five factors is pollution prevention, the percentage may be set as high as 100 percent. A lower mitigation percentage may be appropriate if the government must allocate significant resources to monitoring and reviewing the implementation of a project. In administrative enforcement actions in which there is a statutory limit on administrative penalties, the cash penalty obtained plus the amount of penalty mitigation credit due to the SEPs shall not exceed the statutory administrative penalty limit. F. PERFORMA1 CE BY A THIRD PARTY SEPs are generally performed either by the defendant/respondent itself (using its own employees) andlor by contractors or consultants.’ 3 In the past in a few cases, a SEP has ‘3 Of course, non-profit organizations, such as universities and public interest groups, may function as contractors or consultants. ------- RevisedSEPPolicy *** May 1995 *** Page 14 been performed by someone else, commonly called a third party. Because of legal concerns and the difficulty of ensuring that a third party implements the project as required (since by definition a third party has no legal or contractual obligation to implement the project as specified in the settlement document), performance of a SEP by a third party is not allowed. G. OVERSIGHT AND DRAFflNG ENFORCEABLE SEPS The settlement agreement should accurately and completely describe the SEP. (See related legal guideline 4 in § C above.) It should describe the specific actions to be performed by the defendant/respondent and provide for a reliable and objective means to verify that the defendant/respondent has timely completed the project. This may require the defendant/respondent to submit periodic reports to EPA. If an outside auditor is necessary to conduct this oversight, the defendant/respondent should be made responsible for the cost of any such activities. The defendant/respondent remains responsible for the quality and timeliness of any actions performed or any reports prepared or submitted by the auditor. A final report certified by an appropriate corporate official, acceptable to EPA and evidencing completion of the SEP, should be required. To the extent feasible, defendant/respondents should be required to quantify the benefits associated with the project and provide EPA with a report setting forth how the benefits were measured or estimated. The defendant/respondent should agree that whenever it publicizes a SEP or the results of the SEP. it will state in a prominent manner that the project is being undertaken as part of the settlement of an enforcement action . The drafting of a SEP will vary depending on whether the SEP is being performed as part of an administrative or judicial enforcement action. SEPs with long implementation schedules (e.g., 18 months or longer), SEPs which require EPA review and comment on interim milestone activities, and other complex SEPs may not be appropriate in those administrative enforcement actions where EPA lacks injunctive relief authority or is subject to a penalty ceiling. Specific guidance on the proper drafting of SEPs will be provided in a separate guidance document. H. FAILURE OF A SEP AND STIPULATED PENALTIES If a SEP is not completed satisfactorily, the defendant/respondent should be required, pursuant to the terms of the settlement document, to pay stipulated penalties for its failure. Stipulated penalty liability should be established for each of the scenarios set forth below as appropriate to the individual case. 1. Except as provided in paragraph 2 immediately below, if the SEP is not completed satisfactorily, a substantial stipulated penalty should be required. Generally, a substantial stipulated penalty is between 50 and 100 percent of the amount by which the settlement penalty was mitigated on account of the SEP. ------- Revised SEP Policy * * * May 1995 * * * Page 15 2. If the SEP is not completed satisfactorily, but the defendant/respondent: a) made good faith and timely efforts to complete the project; and b) certifies, with supporting documentation, that at least 90 percent of the amount of money which was required to be spent was expended on the SEP, no stipulated penalty is necessary. 3. If the SEP is satisfactorily completed, but the defendant/respondent spent less than 90 percent of the amount of money required to be spent for the project, a small stipulated penalty should be required. Generally, a small stipulated penalty is between 10 and 25 percent of the amount by which the settlement penalty was mitigated on account of the SEP. 4. If the SEP is satisfactorily completed, and the defendant/respondent spent at least 90 percent of the amount of mone ’ required to be spent for the project, no stipulated penalty is necessary. The determinations of whether the SEP has been satisfactorily completed (i.e., pursuant to the terms of the agreement) and whether the defendant/respondent has made a good faith, timely effort to implement the SEP is in the sole discretion of EPA. EPA PROCEDURES 1. Mprovals The authority of a government official to approve a SEP is included in the official’s authority to settle an enforcement case and thus, subject to the exceptions set forth here, no special approvals are required. The special approvals apply to b administrative and judicial enforcement actions as follows: 14 a. Regions in which a SEP is proposed for implementation shall be given the opportunity to review and comment on the proposed SEP. b. In all cases in which a SEP may not fully comply with the provisions of this Policy, the SEP must be approved by the EPA Assistant Administrator for Enforcement and Compliance Assurance. c. In all cases in which a SEP would involve activities outside the United States, the SEP must be approved in advance by the Assistant Administrator and, for judicial cases only, the Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. ‘ In judicial cases, the Department of Justice must approve the SEP. ------- RevisedSEPPolicy May1995 Pagel6 d. In all cases in which a SEP includes an environmental compliance promotion project, the SEP must be approved by the Office of Regulatory Enforcement in OECA. With time, this approval requirement may be delegated to Regional officials. 2. Documentation and Confidentiality In each case in which a SEP is included as part of a settlement, an explanation of the SEP with supporting materials (including the PROJECT model printout, where applicable) must be included as part of the case file. The explanation of the SEP should demonstrate that the five criteria set forth in Section A.3 above are met by the project and include a description of the expected benefits associated with the SEP. The explanation must include a description by the enforcement attorney of how nexus and the other legal guidelines are satisfied. Documentation and explanations of a particular SEP may constitute confidential settlement information that is exempt from disclosure under the Freedom of Information Act, is outside the scope of discovery, and is protected by various privileges, including the attorney-client privilege and the attorney work-product privilege. While individual Agency evaluations of proposed SEPs are confidential documents, this Policy is a public document and may be released to anyone upon request. This Policy is primarily for the use of U.S. EPA enforcement personnel in settling cases. EPA reser ’es the right to change this Policy at any time, without prior notice, or to act at variance to this Policy. This Policy does not create any rights, duties, or obligations, implied or otherwise, in any third parties. ------- SECTION A DOCUHENT 21 Drafting Guidance for Revised Interim Supplemental Environmental Projects Policy 05/24/95 21 ------- UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C. 20460 1 4 pq t& May 24, 1995 - OFFICE OF MEMORANDUM ENFORCEMENT AND ____________ COMPUANCE ASSURANCE SUBJECT: Drafting Guidance for Revised Interim Supplemental Environmental Projects Policy FROM: Robert Van Heuvelen, Director\ Off ice of Regulatory Enforcement TO: Regional Counsels Regional Program Division Directors On May 3, 1995, the Office of Enforcement and Compliance Assurance (OECA) issued the revised Interim Supp1em ntal Environmental Projects (SEP) Policy. This Policy is effective May 8, 199 and supersedes the February 12, 1991 “Policy on the Use of Supplemental Environmental Proj ects in EPA Settlements.” In order to assist the Regions in implementing the Policy and to ensure that SEPs included in settlements of Agency enforcement actions are within EPA’S legal authority and meet all Policy requirements, the Office of Regulatory Enforcement is developing a training program for the Regions in the use of the Policy and the PROJECT Model. Representatives of the Multimedia Enforcement Division are now scheduling training sessions to be held this sutmner in the Regional Offices. Attached tO this memorandum are two documents designed to assist Regional litigation teams in implementing the revised SEP Policy. The first is a Checklist which details the step-by-step process for evaluating proposed SEPs to ensure that they meet all the requirements of the Policy; the second is a model Consent Agreement and Final/Consent Order (CAFO/CACO) which contains proposed language for inclusion in a settlement agreement which includes performance ,of a SEP. As part of the process of revising the SEP Policy, we worked with the Office of General Counsel in drafting a legal opinion supporting the new Policy. This opinion sets forth our authority to do SEPs and the legal guidelines we need to follow. The attached model CAFO/CACO is designed to keep our settlements squar ly within our legal authority. Perhaps the most important legal advice we can offer on drafting settlement agreements containing SEPs is to avoid portraying the SEP as an alternative part of the penalty. A SEP pecyclediPecyelable & i SopCas la Ink papII 4aa 75% recycled kbof ------- -2- is not part of the penalty. Rather a SEP is a factor EPA considers in determining an appropriate settlement amount. For purposes of drafting a settlement agreement, the penalty provi- sions must be drafted separately from the provisions for imple- mentation of the SEP. The following are examples Of penalty provisions that must not be used. Prohibited language example #1 Respondent consents to pay a civil penalty’ of $100,000, which shall consist of a cash payment of $60,000 and a Supplemental Environmental Project valued at $40,000. Prohibited language example #2 “Respondent shall pay a mitigated civil penalty of $75,000 to the United States. The balance of the proposed penalty is deferred and shall become due and payable in the event Respondent fails to comply with this order. Prohibited language example #3 “Respondent shall pay a civil penalty of $100,000 to the United States for the violations set forth in the complaint and will offset an additional $50,000 in penalties by per- formance of the Supplemental Environmental Project, as set forth in paragraph — below.” In contrast 1 an appropriate penalty paragraph should be similar to this: Pursuant to §309 of the Clean Water Act, EPA has considered the nature of the violations, Respondent’s agreement to perform a SEP and other relevant factors, and has deter- mined that an appropriate and fair civil penalty to settle this action is in the amount of (___________ dollars ($____ _)]. Respondent consents to the payment of this civil penalty and all other provisions in this order. If you have any questions concerning use f the Policy or the attached documents, you may call David A. Hindin, Acting Chief, Multimedia Enforcement Branch, Multimedia Enforcement Division, at 202-564-6004; Gerard C. Kraus at 202-564-6047 or Peter W. Moore at 202-564-6014. You also may wish to contact the appropriate division in the Office of Regulatory Enforcement for statute-specific questions. Attachments CC: (w/attachments) ORE Division Directors Regional Enforcement Coordinators DOJ EES Assistant and Deputy Chiefs ------- SEP Checklist To evaluale whether a proposed project appears to meet all the requirements of the May 8 1995 Interim Revised SEP Policy, use the following checklist. For specific requirements, refer to the appropriate sections in the Policy. BASIC DEFINITION 1. Proposed SEP is an environmentally beneficial project D 2. Defendant/respondent is undertaking in settlement of enforcement action D 3. Defendant/respondent not otherwise legally required to perform project 4. SEP reduces neither stringency nor timeliness requirements of Federal 0 environmental statutes and regulations II. LEGAL GU1DEUNES 1. Sufficient Nexus exists 0 2. Project advances objective(s) of environmental statute(s) at basis of action 0 3. EPA plays no role in managing funds or controlling performance of SEP 0 4. Type and scope of project are determined in signed agreement D 5. Does not supplement EPA appropriations 0 III. CATEGORIES OF SEPs - project fits into one or more category 1. Public Health 0 5. Assessments and Audits 0 2. Pollution Prevention 0 6. Env. Compliance Promotion 0 3. Pollution Reduction 0 . Emergency Pbinning and Preparedness 0 4. Env. Restoration and Protection IV. CALCULATION OF THE FINAL PENALTY 1. Penalty - penalty captures economic benefit of non-compliance plus 0 at least 10% of gravity component, or 25% of gravity, whichever is greater Exception: For government agencies or entities or non-profit organizations. smaller penalty may be allowed pursuant to applicable penalty policy 0 2. SEP Cost is calculated using PROJECT computer model (or other appropriate method) 0 3. Penalty Mitigation - percentage of SEP Cost that may be applied as 0 mitigation against penalty is determined by examining whether and how effectively project achieves following: • Benefits to the Public I Environmental Justice or Environment at Large • Multimedia Impacts • Innovativeness I Pollution Prevention ------- 2 V. OVERSIGHT AND DRAFTING 1) Settlement agreement accurately and completely describes SEP 0 2) Defendantlrespondent required to submit interim reports/audits as 0 necessary to allow EPA to determine compliance with terms of SEP 3) Final report, certified by an appropriate dorporate official, documenting 0 completion of the SEP, is required 4) SEP drafting guidelines have been reviewed and applied accordingly VI. EPA PROCEDURES 1. Approvals A) Agreement is approved by appropriate government official 0 B) For multi-Region SEPs, all affected Regions have opportunity to 0 review and comment C) In case where SEP may not fully comply with provisions of this Policy, 0 agreement approved in advance by AA for OECA D) In case where SEP involves activities outside U.S., agreement approved in 0 advance by ORE in OECA - E) For Environmental Compliance Promotion SEP (category 6.), agreement approved in advance by ORE in OECA 2. Documentation - Case file includes: A) PROJECT model printout (where applicable) 0 B) Description how five steps in Policy (see § A. 3. of Policy) are met by project 0 C) Description of expected benefits associated with SEP 0 D) Description by enforcement attorney how legal guidelines are satisfied 0 SEP Checklist — page 2 — May 24, 1995 ------- MODEL SEP CAPO Explanatory text is indicated in bracketed italics type, preceded by the word Note. Placeholder text which fact specific information should be inserted in is indicated in bracketed bold text. May 1995 ITED STATES ENVIRONMEN’rAL PROTECTION AGENCY REGION BEFORE THE ADMINISTP) TOR In the Matter of (Respondent’s Name] ) Docket No. [ Respondent’ a Address] Respondent. CONSE2T AGREEMENT AND ORDER Complainant, the United States Environmer ta1 Protection Agency (“EPA”), having filed the Complaint herein on (date] against Respondent (Respondent’s Name], the Parties herein; and Complainant and Respondent having agreed that settlement of this matter is in the public interest, and that entry of this Consent Agreement and Order without further litigation is the most appropriate means of resolving this matter; NOW, THEREFORE, before the taking of any testimony, upon the pleadings, without adjudication of any issue of fact or law, and upon consent and agreement of the Parties, it is hereby Ordered and Adjudged as follows: ------- I. PRELIMINARY STATEMENT 1. EPA initiated this proceeding for the assessment of a civil penalty, pursuant to (statute and regulations]. 2. The Complaint alleges that Respondent violated regulations concerning (violations]. 3. Respondent filed an Answer and requested a hearing pursuant to (statute and regulations]. 4. This Consent Agreement and Order shall apply to and be binding upon Respondent, its officers, directors, servants, employees, agents, successors and assigns, including, but not limited to, subsequent purchasers. 5. Respondent stipulates that EPA has jurisdiction over the subject matter alleged in the Complaint and that the Complaint states a claim upon which relief can be granted against Respondent. Respondent waives any defenses it might have as to jurisdiction and venue, and, without admitting or denying the factual allegations contained in the Complaint, consents to the terms of this Consent Agreement and Order. 6. Respondent hereby waives its right to a judicial’ Or ad- ministrative hearing on any issue of law or fact set forth in the Complaint. II. TERMS OF SETTLEMENT 7. Respondent has demonstrated to the satisfaction of EPA that Respondent has achieved compliance with the requirements that formed the basis of Counts _____ of the Complaint. Model SEP CAFO, May 1995 page 2 ------- 8. Respondent has certified to EPA that Respondent is now in compliance with each of the relevant provisions of (cite statute] 9. Pursuant to § ____ of (statute], the nature of the violations, Respondent’s agreement to perform a SEP and other - relevant factors, EPA has determined that an appropriate civil penalty to settle this action is in the amount of (__________ dollars (S )] (Note: In order to avoid conflicts with the Miscellaneous Receipts Act, the civil penalty provisions must be drafted separately fro n the provisions for implthnentation of the SEP.] 10. Respondent consents to the issuance of the Consent Order hereinafter recited and consents for the purposes of settlement to the payment of the civil penalty cited in the foregoing paragraph and to the performance of the Supplemental Environmental Project. (Note: Remember that the Respondent must consent to the issuance of the Final Order and the performance of the SEP] 11. Within thirty (30) days of receiving a copy of this Consent Agreement and Order signed by the EPA Regional Administrator, Region —, Respondent shall submit a cashier’s or certified check, to the order of the “Treasurer, United States of America,” in the amount of C____ dollars ($ )], to: EPA -- Region — P.O. Lock Box ______ (address] Model SEP CAFO, May 1995 page 3 ------- Respondent shall provide a copy of the check to: Regional Hearing Clerk (Regional Address] and (Attorney Name and Address] Interest and late charges shall be paid or specified in Paragraph 24 herein. - 12. The penalty specified in Paragraph 9, above, shill represent civil penalties assessed by EPA and shall not be deductible for purposes of Federal taxes. 13 [ Des ript ion f the SEPI Respondent shall undertake the following supplemental environmental project (“SEP ”), which the parties agree is intended to secure significant environmental or public health protection and improvements. Within thirty (30) days of receiving a copy of this Cotisent Agreement signed by the Regional Administrator, Respondent shall [ brief description of SEP]. Respondent shall complete the SEP as follows: [ date), (identify specific goal or objective of SEP and milestones, if any]. The SEP is more specifically described in the scope of work (hereinafter, the “Scope of Work”), attached hereto as Exhibit A and incorporated herein by reference. (Note: Ensure that the description of the SEP to be perfont ed is clear, complete and specific. Ambiguous language in settlement agreements which allows EPA too much flexibility to control the specifics of the SEP raises legal issues.] Model SEP CAFO, May 1995 page 4 ------- (If applicable, or insert other case-specific language:] 14. [ New chemical not more toxic thai eliainated chemicalJ Respondent anticipates that the facility will use (new chemical] as a substitute for (eliminated chemical] in the new systems constituting the SEP. In nà event, however, shall any substitute chemical be used in connection with the SEP which is more toxic or hazardous than (new chemical], as such characteristics are described on the material safety data sheet (MSDS) for (new chemical] attached hereto as Exhibit B.] 15. [ Cost of SEP1 The total expenditure for the SEP shall be not less than ($000,000], in accordance with the specifications set forth in the Scope of Work. Respondent shall provide Complainant with documentation of the expenditures made in connection with the SEP by (date]. 16 [ Certification that SEP 10 not otherw .se re n.red1 Respondent hereby certifies that, as of the date of this Consent Agreement, Respondent is not required to perform or develop the SEP by any federal, state or local law or regulation; nor is Respondent required to perform or develop the SEP by agreement, grand or as injunctive relief in this or any other case or in compliance with state or local requirements. Respondent further certifies that Respondent has not received, and is not presently negotiating to receive, credit in any other enforcement action for the SEP. Model SEP CAFO, May 1995 page 5 ------- (Note: This language ensures that the SEP is not required by any other law (federal, state or local); nor is it required by any other agreement, grant or as injunctive relief in the instant or any other case. In addition, the language precludes Respondent from attempting to obtain double credit for the sasne project. Also, Respondent cannot be allowed to “bank” projects (i.e. Respondent is not to be given credit for projects it has already commenced or completed in advance of the enforcement action by EPA.)J 17. £ pA to judge achieve ent ó goaIa Whether Respondent has complied with the terms of this Consent Agreement and Order through (identify specific SEP goal] as herein required shall be the sole determination of EPA. (Note: In all settlement agreements, EPA retains the discretion to determine whether a SEP has been completed satisfactorily or not. Otherwise, this determination becomes open to question and litigation could ensue under standard dispute resolution provisions. 3 18. tSEP Repo ts]’ (a) SE ?. Completion Report Respondent shall submit a SEP Completion Report to EPA by (construction/installation completion date]. The SEP Report shall contain the following information: S (i) A detailed description of the SEP as implemented; (ii) A description of any operating problems encountered and the solutions thereto; (iii) Itemized costs, documented by copies of purchase orders and receipts or canceled checks; (iv) Certification that the SEP has been fully implemented pursuant to the provisions of this Consent Agreement and Order; and (v) A description of the environmental and public health benefits resulting from implementation of the SEP (with a quantification of the benefits and pollutant reductions, if feasible). Model SEP CAFO, May 1995 page 6 ------- (b) Periodic Reports Respondent shall submit any additional reports required by the Scope of Work to EPA in accordance with the schedule and requirements recited therein. (Note: For any SEP where implementation is estimated to exceed one (1) year, EPA should require submission of periodic reports by Respondent). (c) Respondent agrees that failure to submit the SEP Completion Report or any Periodic Report required by subsections a) and b) above shall be deemed a violation of this Consent Agreement and Order and Respondent shall become liable for stipulated penalties pursuant to paragraph 23 below. (If applicable] 19. tEFA.rig1 t to.: nspect3 Respondent agrees that EPA may inspect the facility at any time in order to confirm that the SEP is operating properly and in conformity witI the representations made herein. fNote: Consistent with the provisions below for Failure to Complete SEP and EPA To Judge Achievement of SEP. this language provides vehicle for EPA to exercise its discretion in determining if SEP has been completed satisfactorily and whether stipulated penalties should be assessed.J (If appl].cable 3 20 [ Re óndent *ust use SEP L Respondent shall continuously use or operate the systems installed as the SEP for not less than (number] year(s) subsequent to installation, and Respondent shall not reinstate the use of (toxic chemical] at any time. 21 tio ument retention an cert .caU.onJ Respondent shall maintain legible copies of documentation of the underlying research and data for any and all documents or reports submitted Model SEP CAFO, May 1995 page 7 ------- to EPA pursuant to this Consent Agreement, and Respondent shall provide the documentation of any such underlying research and data to EPA within seven days of a request for such information. In all documents or reports, including, without limitation, the SEP Report, submitted to EPA pursuant to this Consent Agreement; Respondent shall, by its officers, sign and certify under penalty of law that the information contained in such document or report is true, accurate, and not misleading by signing the following statement: - I certify under penalty of law that I have examined and am familiar with the information submitted in this document and all attachments and that, based on my inquiry of those individuals immediately responsible for obtaining the information, I believe that the information is true, accurate, and complete. I am aware that there are significant penalties for submitting false information, incl,uding the possibilit’y of fines and imprisonment. 22 1EP acceptanae of SEP P e øtt1 (a) Following receipt of the SEP Report described in paragraph 18 above, EPA will do one of the following: (i) accept the SEP Report; (ii) reject the SEP Report, notify the Respondent, in writing, of deficiencies in the SEP Report and grant Respondent an additional thirty (30) days in which to correct any deficiencies; or (iii) reject the SEP Report and seek stipulated penalties in accordance with paragraph 23 herein. (b) If EPA elects to exercise option (ii) above, EPA shall permit Respondent the opportunity to object in writing to the notification of deficiency or disapproval given pursuant to this Model SEP CAFO, May 1995 page 8 ------- paragraph within ten (10) days of receipt of such notification. EPA and Respondent shall have an additional thirty (30) days from the receipt by the EPA of the notification of objection to reach agreement. If agreement cannot be reached on any such issue within this thirty (30) day period, EPA shall provide a written statement of its decision to Respondent, which decision shall be final and binding upon Respondent. Respondent agrees to comply with any requirements imposed by EPA as a result of any such deficiency or failure to comply with the terms of this Consent Agreement and Order. In the event the SEP is not completed as contemplated herein, as determined by EPA, stipulated penalties shall be due and payable by Respondent to EPA in accordance with paragraph 23 herein. 23. tStipu1ate Penalties fá ailu e to Complete ZEP/Pailure t sped ag eed-on.emou ti (a) In the event that Respondent fails to comply with any of th terms or provisions of this Agreement relating to the performance of the SEP described in paragraph 13 above and/or to the extent that the actual expenditures for the SEP do not equal or exceed the cost of. the SEP described in paragraph 15 above, Respondent shall be liable for stipulated penalties according to the provisions set forth below: (i) Except as provided in subparagraph (ii) immediately below, for a SEP which has not been completed satisfactorily pursuant to paragraph 17, Respondent shall pay a stipulated penalty to the United States in the amount Model SEP CAFO, May 1995 page 9 ------- of $ (50 - 100 percent of the amount by which the settlement penalty was mitigated on account of the SEP]. (ii) If the SEP is not completed satisfactorily, but the defendant/respondent: a) made good faith and timely efforts to complete the project; and b) certifies, with supporting documentation, that at least 90 percent of the amount of money which was required to be spent was expended on the SEP , Respondent shall not pay any stipulated penalty. (iii) If the SEP is satisfactorily completed, but the defendant/respondent spent less than 90 percent of the amount of money required to be spent for the project, Respondent shall pay a stipulated penalty to the United States in the amount of $ (10 - 25 percent of the amount by which the settlement penalty was mitigated on account of the SEP]. - (iv) If the SEP is satisfactorily completed, and the defendant/respondent spent at least 90 percent of the amount of money required to be spent for the project, Respondent shall not pay any stipulated penalty. (v) For failure to submit the SEP Completion Report required by paragraph 18(a) above, Respondent shall pay a stipulated penalty in the amount of $(amount] for each day after (date in paragraph 18] until the report is submitted. (vi) For failure to submit any other report required by paragraph 18(b) above, Respondent shall pay a stipulated Model SEP CAFO, May 1995 page 10 ------- penalty in the amount of $(amou.nt] for each day after the report was originally due until the report is submitted. (b) The determinations of whether the SEP has been satisfactorily completed and whether the defendant/respondent has made a good faith, timely effort to implement the SEP shall be. in the sole discretion of EPA. (c) Stipulated penalties for subparagraphs (v) and (vi) above shall begin to accrue on the day after performance is due, and shall continue to accrue through the final day of the completion of the activity. (d) Respondent shall pay stipulated penalties within fifteen (15) days of receipt of written demand by EPA for such penalties. Method of payment shall be in accordance with the provisions of paragraph 11 above. Interest and late charges shall be paid as stated in paragraph 24 herein. (e) Nothing in this agreement shall be construed as prohibiting, altering or in any way limiting the ability of EPA to seek any S other remedies or sanctions available by virtue of Respondent’s violation of this agreement or of the statutes and regulations upon which this agreement is based, or for Respondent’s violation of any applicable provision of 1aw. (Note: Language included for payment of an additional penalty for non-completion of SEP or failure to expend amount of funds committed to in Consent Agreement must not appear to give EPA a choice between: 1) collection of an addi tional penal ty; or 2) additional SEP expenditures by Respondent. Such a provision would effectively give EPA control or discretion over the use df the funds which may raise legal issues.] Model SEP CAFO, May 1995 page 11 ------- 24. Payment Provisions Pursuant to 31 U.s.c. § 3717, EPA is entitled to assess interest and penalties on debts owed to the United States and a charge tO cover the cost of processing and handling a delinquent claim. Interest will therefore begin to accrue on a civil or stipulated penalty if it is not paid by the last date required. Interest will be assessed at the rate of the United States Treasury tax and loan rate in accordance with 4 C.F.R. § 102.13(c) . A charge will be assessed to cover the costs of debt collection, including processing and handling costs and attorneys fees. In addition, a penalty charge of twelve (12) percent per year compounded annually will be assessed on any portion of the debt which remains delinquent more than ninety (90) days after payment is due. Any such penalty charge on the debt will accrue from the date the penalty payment becomes due and is not paid. 4 C.F.R. § 102.13(d) and (e). 25 [ Pu 1 1 c s ateiner ts must aduiow1edge enforcement act i.onl Any public statement, oral or written, made by Respondent making reference to the SEP shall include the following lang .iage, “This project was undertaken in connection with the settlement of an enforcement action taken by the U.S. Environmental Protection Agency for violations of (citation t 9 statute violated] .“ (Note: Consistent with Section C. of the Policy, Respondents should be required to “come clean” in the event they decide to publicize their performance of a SEP.J Model SEP CAFO, May 1995 page 12 ------- 26. tNo r lief from compliance; n endorsement by E?A1 This Consent Agreement and Order shall not relieve Respondent of its obligation to comply with all applicable provisions of federal, state or local law, nor shall it be construed to be a ruling on, or determination of, any issue related to any federal, state or local permit, nor shall it be construed to constitute EPA approval of the eqi.iiprrtent or technology installed by Respondent in connection with the SEP under the terms of this Agreement. 27. (Force Majeure- -if appropriate and requested by respondent] (a) If any event occurs which causes or may cause delays in the completion of the SEP as required under this Agreement, Respondent shall notify Complainant in writing within 10 days of the delay or Respondent’s kriowledge of the anticipated delay, whichever is earlier. The notice shall describe in detail the anticipated length of the delay, the precise cause or causes of the delay, the measures taken and to be taken by Respondent tO prevent or minimize the delay, and the timetable by which those measures wi 11 be implemented. The Respondent shall adopt all reasonable measures to avoid or minimize any such delay. Failure by Respondent to comply with the notice requirements of this paragraph shall render this paragraph void and of no effect as to the particular incident involved and constitute a waiver of the Respondent’s right to request an extension of its obligation under this Agreement based on such incident. Model SEP CAFO, May 1995 page 13 ------- (b) If the parties agree that the delay or anticipated delay in compliance with this Agreement has been or will be caused by circumstances entirely beyond the control of Respondent, the time for performance hereunder may be extended for a period no longer than the delay resulting from such circumstances. In such event, the parties shall stipulate to such extension of time. (C) In the event that the EPA does not agree that a delay in achieving compliance with the requirements of this Consent Agreement and Order has been or will be caused by circumstances beyond the control of the Respondent, EPA will notify Respondnet in writing of its decision and any delays in the completion of the SEP shall not be excused. Cd) The burden of proving that any delay is caused by circumstances entirely beyond the cóntrólof the Respondent shall rest with the Respondent. Increased costs or expenses associated with the imp Lementation of actions called for by this Agreement shall not, in any event, be a basis for changes in this Agreement or extensions of time under section (b) of this paragraph. Delay in achievement of one interim step shall not necessarily justify or excuse delay in achievement of subsequent steps. 28. Respondent hereby agrees that any funds expended in’ the performance of the SEP shall not be deductible as a business expense for purposes of Federal taxes. In addition, Respondent hereby agrees that, within thirty (30) days of the date it submits its Federal tax reports for the calendar year in which Model SEP CAFO, May 1995 page 14 ------- the above-identified SEP is completed, it will submit to EPA certification that any funds expended in the performance of the SEP have not been deducted from Federal taxes. (Note: If Respondent is not willing to agree to this provision, omit it but then only the after-tax cost of the SEP should be used in the Calculation of the Cost of the SEP. See page 12 of the Interim Revised SEP Policy. J 29. This Consent Agreement Sand Order constitutes a settlement by EPA of all claims for civil penalties pu suant to (cite statute] for the violations alleged in the Complaint. Nothing in this Consent Agreement and Order is intended to nor shall be construed to operate in any way to resolve any criminal liability of the Respondent. Compliance with this Consent Agreement and Order shall not be a defense to any actions subsequently commenced pursuant to Federal laws and regulations administered by EPA, and it is the responsibility of Respondent to comply with such laws and regulations. 30. Each undersigned representative of the parties to this Consent Agreement certifies that he or she is fully authorized by the party represented to enter into the terms and conditions of this Consent Agreement and to execute and legally bind that party to it. 31. Each party shall bear its own costs and attorneys fees in connection with the action resolved by this Consent Agreement and Order. Model SEP CAFO, May 1995 page 15 ------- For Complainant: For Respondent: ______________ Director , President ________________Division Company U.S. Environmental Protection Agency, Region — - Date: ____________ Date: _____________ _______________________ _________________ Esq. Assistant Regional Counsel (Fix Name] Date: ______________ Date: _______________ Model SEP CAFO, May 1995 page 16 ------- III. ORDER The foregoing Consent Agreement is hereby approved and incorporated by reference into this Order. The Respondent is hereby ordered to comply with the terms of the above Consent Agreement, effective irTm ediately. Date: ________________ [ Regional Administrator or delegatee] [ Ti tie] U.S. Environmental Protection Agency Region — Model SEP CAFO, May 1995 page 17 ------- SECTION A DOCUNEWr 22 Interim Policy on Compliance Incentives for Small Businesses NOTE: Also published j a Federal Register notice, 60 Fed. reg. 32675 (6/23/95). 06/13/95 22 ------- _______ n 1/ ‘Iiitérim o11cy op çornplia c Incentives’ forSmalI Bushiesses , a * ‘ UnIte i States Ehvironmental Protection Agency ‘ ‘1’.’ J e l995 :E ’ [ Published June 23; 1995 60 FR 32675] A. INTRODUCTION This document sets forth the Environmental Protection Agency’s Interim Policy on compliance incentives for small businesses. This Policy is one of the 25 regulatory reform initiatives announced by President Clinton oa March 16, 1995, and implements, in part, the Executive Memorandum on Regulatory Reform, 60 FR 20621 (April’26, 1995). The Executive Memorandum provides in pertinent part: To the extent permitted by law, each agency shall use its discretion to modify the penalties for small businesses in the following situations. Agencies shall exercise their enforcement discretion to waive the imposition of all or a portion of a penalty when the violation is corrected within a time period appropriate to the violation in question. For those violations that may take longer to correct than the period set by the agency, the agency shall use its enforcement discretion to waive up to 100 percent of the financial penalties if the amounts waived are used to bring the entity into compliance. The provisions [ of this paragraph] shall apply only where there has been a good faith effort to comply with applicable regulations and the violation does not involve criminal wrongdoing or significant threat to health, safety, or the environment. Pursuant to this Interim Policy, EPA will exercise its discretion, under applicable media- eciflc policies, to refrain from initiating an enforcement action seeking civil - penalties, or to mitigate civil penalties, whenever a small business n akes a good faith effort to comply with environmental requirements and where there is no criminal behavior and no significant health, safety or environmental threat. In addition, as announced in the package of regulatory reform initiatives, EPA is creating special incentives for small businesses who take the initiative to identify and correct environmental violations by requesting compliance assistance from the government. In such circumstances, and provided the small business meets certain other criteria set forth below, EPA will exercise its discretion to waive the entire penalty. Moreover, EPA will defer to state actions that are consistent with this Policy. ------- Compliance Incentives for Small Businesses * * * June 199S Interim Policy * * $ page 2 B. BACKGROUND The Clean Air Act (CAA) Amendments of 1990 require that states establish Small Business Assistance Programs (SBAPs) to provide technical and environmental compliance assistance to stationary sources. On August 12, 1994, EPA issued an enforcement response policy which provided that an authorized or delegated state program may, consistent with federal requirements, either: (1) assess no enalties against small businesses that voluntarily seek compliance assistance and correct violations revealed as a result of compliance assistance within a limited period of time; or (2) keep confidential information that identifies the names and locations of specific small businesses with violations revealed through compliance assistance, where the SBAP is independent of the state enforcement program. In a further effort to assist small businesses to comply with environmental regulations, - and to achieve health, safety, and envir6nmental benefits, the Agency is adopting a simil2r policy for water, toxics, hazardous waste, and other media programs. This interim Policy sets forth the Agency’s implementation of the Executive Memorandum. C. PURPOSE This interim Policy is intended to promote environmental compliance among small businesses by providing incentives for participation in compliance assistance programs, and encouraging the prompt correction of violations. The Policy accomplishes this in two ways: by setting forth a settlement penalty Policy that rewards such behavior, and by providing guidánc for States and local governments to offer these incentives. EPA is committed to a strong enforcement and compliance assurance program as a means to protect human health and the environment. We expect this Policy to encourage greater participation in compliance assistance programs that offer services to small businesses (referred to generically as SBAPs in this Policy). The Policy will allow greater openness among SBAPs and specific facilities, the small business community in general, and other federal and state officials. It will promote the sharing of information on pollution prevention measures, cost effective means of compliance and other valuable compliance-related activities with and among the regulated community. Application of the policy to all media programs should encourage small businesses to look for “whole facility” approaches to environmental compliance. Ultimately, by bringing many small businesses into compliance, this Policy will enhance the quality of our air, water, and land. ------- Compliance Incentiv for Small Business * * * June 1995 Interim Policy * * * page3 Measuring the success of compliance assistance pro razns is a critical component of - EPA’s ability to assess the results of compliance and enforcement activities. EPA will work with States to evaluate the effectiveness of this Policy and, in 1997,- EPA will consider whether this Policy should be continued, modified or discontinued. D. APPLICABILITY This Policy applies to facilities owned by small businesses as defined here. A small business is a person, corporation, partnership, or other entity who employs 100 or fewer individuals (on a company wide basis). This definition is a simplified version of the CAA §507 definition of small business. On balance, EPA determined that-a’single definition would make implementation of this Policy simple and would allow for consistent application of the Policy in a multimedia context. This interim policy is effective immediately. This Policy applies tóThll civil judicial and administrative enforcement actions taken under the authority of the environmental statutes and regulations that EPA administers, except for corrective action programs and the• Public Water System Supervision Program under the Safe Drinking Water Act.’ This Policy applies to all such actions filed after the effective date of this Policy, and to all pending cases in which the government has not reached agreement in principle with the alleged violator on the amount of the civil penalty. - This Policy sets forth how the Agency expects to exercise its enforcement discretion in deciding on an appropriate enforcement response and determining an appropriate civil settlement penalty for violations by small businesses. This Policy is to be used for settlement purposes and is not intended for use in pleading, or at hearing or trial. To the extent that this Policy may differ from the terms of applicable enforcement response policies under media-specific programs, this document supersedes those policies. This Policy supplements, but ddei not supplant the August 12, 1994 Eiy rcenzem Response Policy for 7)eaxment of 1i formanon Obtained Through Clean Air Act Section 507 Small Business Assistance Programs. This Policy does not apply to corrective action programs (such as CERCLA, RCRA §7003, and SDWA §1431) because these programs are primarily remedial in nature and generally dq not seek penalties. This Policy does not apply to the Public Water System Supervision Program because EPA is developing another policy which addresses compliance by small communities. ------- Complianceincentives forSmallBusinesses * * a June l995 lnterimPolicy*** page4 E. CRiTERIA FOR CIVIL PENALTY MITIGATION EPA will eliminate or mitigate its settlement penalty demands against small businesses based on the following criteria: 1) For purposes of sections F(l) and F(2), the small business has made a _ g ood faith effort to comply with applicable environmental requirements as demonstrated by receiving compliance assistance from a non-confidential government or government supported program that offers services to smali businesses (such as a SBAP or state university), and the violations are detected during the compliance assistance. 2 Good faith does not exist if an agency specifically offered a compliance assistance program concerning the relevant regulated activities to the business and it failed to participate in such program. 2) This is the small liusiness’s first violation of this requirement . This Policy applies to businesses that have not previously been subject toa warning letter, notice of violation, field citation, or other enforcement action by a government agency for a violation of that - requirement within the past five years. If a business has been subject to multiple enforcement actions for violations of environmental requirements in the past five years, this Policy does not apply even if this is the first violation of this particular requirement. 3) The policy does not apply if: a) The violation has caused actui 1 serious harm to public health, safety, or the environment or - Ii) The violation may present an imminent and substantial endangerment to public healti r the environment; or c) The violation presents a significant health, safety or environmental threat (e.g., violations involving hazardous or toxic substances may present such threats). 4) The violation does not invOlve criminal conduct , 2 If the compliance or technical assistance program keeps the information obtained confidential (i.e., does not share or disclose facility specific information on compliance status with a regulatory agency), this Policy does not apply. However, if a small business wishes to obtain a corrections period after receiving compliance assistance from a confidential program, the business need only disclose the violations to the appropriate regulatory agency pursuant to criterion 1 and com ly with the other provisions of this Policy. ------- Compliance Incentives for Sna ilI Businesses * * June 1995 Interim Policy * $ page 5 5) The business corrects the violation within the correction s period set forth below . Small businesses are expected to remedy the violations within the shortest practicable period of time. Small businesses may take up to 90 days following detection of the violation to correct the violation, or to take substantial steps to correct the violations (e.g. apply for necessary permits, secure financing, order equipment). For violations that cannot be corrected within 90 days, the correction period may be extended for an additional period not to exceed 90 days, so long as the business enters into a written agreement that sets forth the additional correction period and any additional steps to be undertaken by the business to achieve compliance. The schedule may extend for an additional period of 180 days, , up to a period of one year from the date the violation is detected, only if necessary where the small business corrects the violation by implementing pollution preveirtion measures. Correcting the violation includes remediating any environmental harm associated with the violation. 3 Any corrections period longer than 180 days should be incorporated into an enforceable order. The requirements of the correction period should be made clear to the small business prior to offering compliance assistance. F. PENALTY MITIGATION GUIDELINES EPA will exercise its enforcement discretion to eliminate or mitigate civil settlement penalties as follows. 1. EPA will eliminate the civil settlement penalty in any enforcement action if a small business satisfies all of the criteria in section E. 2. If the smailbusiness meetsallofthecriteria, exceptitneedsalonger correctiqns period than provided by criterion 5 (i.e., more than 180 days for non-pollution prevention remedies, or 360 days for pollution prevention remedies), EPA will waive up to 1007 ’ 1 of the gravity component of the penalty, but may seek the full amount of any economic benefit associated with the violations. 4 3. Ifasmallbusinesshasnotmetallthecriteriaabove,buthasotherwisemadea good faith effort to comply, EPA has discretion, pursuant to its applicable policies, to refrain - from flhing’an enforcement action seeking civil penalties or to mitigate its demand for ‘ If significant efforts will be required to remediate the harm, criterion 3 is likely not to have been satisfied. ‘ In determining how much of the gravity component of the penalty is appropriate, EPA should consider the nature of the violations, the duration of the violations, the environmental o public health impacts of the violations, good faith efforts by the small business to promptly remedy the violation, and the facility’s overall record of compliance with environmental requirements. ------- Compliance Incentives for Small Businesses * S * June 1995 Interim Policy * * page 6 penalties to the maximum extent appropriate. These policies g nerally recognize good faith efforts to comply and allow for mitigation of the penalty where there is a documented inability to pay all or a portion of the penalty, thereby placing emphasis on enabling the small business to finance compliance. G. OThER FACTORS To ensure that this Policy enhances and does not compromise public health and the environment, the following conditions apply: - 1. Violations detected through federal, state, or local enforcement inspections or reported to an agency as required by applicable regulations or permits remain fljll enforceab1e. 2. A business is subject to all applicable enforcement response policies (which may include discretion whether or not to take formal enforcement action) for all violations that ha I been detected through compliance assistance and were not remedied within the corrections period. The penalty in such action may include the time period before and during the correction period. 3. A business’s good faith efforts to correct violations detected during compliance assistance should be considered as a mitigating factor in determining an appropriate enforcement response or penalty in a subsequent enforcement action. However, a State’s or EPA’s actions in providing compliance assistance is not a legal defense in any enforcement action. This Policy does not limit EPA or a state’s discretion to use information on violations revealed through compliance assistance as evidence in subsequent enforcement actions. H. I PPLICABIL1TY TO STATES. EPA recognizes that states are partners in enforcement and compliance assurance. Therefore, EPA will defer to state actions in delegated or approved programs that are generally consistent with the guidelines set forth in this Policy. This Policy does not require SBAPs to provide toEPA information that identifies the names or locations of specific businesses that are found to be in violation through compliance assistance. EPA recommends, however, that whenever an agency provides a correction period to a small business, the agency notify the appropriate EPA Region or state of its action, to assure that federal and state enforcement responses to the identified violations are ------- Compliance incentives for Small Businesses * * * June 1995 Interim Policy * * * page 7 consistent. A state program that offers confidentiality may,’not also offer a corrections period for the same violations (see footnote 2). In developing this Policy, EPA balanced three primary considerations. First, the Agency is seeking to provide States with ample opportunity to adopt innovative approaches to environmental compliance. Thus, the Policy provides the parameters within which States have flexibility to tailor SBAPs to their needs. Second, EPA recognizes that participation in SBAPS by individual businesses is typically voluntary. Assistance is provided generally upon request. Thus, the Agency is seeking to assure states of the ability to provide incentives that will encourage many small businesses to participate in SBAPs. Third, the environmental statutes covered by this Policy generally require, as a condition of delegation or authorization, that programs be consistent with Federal requirements and that states have the authority to take appropriate enforcement action with respect to violations. 6 Thus, EPA has an obligation to ensure that state SBAPs are structured so as to maintain an appropriate level of enforcement authority within delegated or authorized state programs. The Agency believes this Policy will allow states sufficient latitude to use an appropriate combination of delegated state enforcement authority and compliance assistance activity to improve compliance in the small business community. The CAA §507 policy establishes criteria for EPA approval of SBAPs in State Implementation Plans to satisfy the mandate in the CAA, and addresses confidential assistance in that context. 6 For example, the Resource Conservation and Recovery Act provides that the Administrator may authorize any State to administer and enforce the Act unless he finds, among otherçthings, that Nsuch program does not provide adequate enforcement of compliance with the requitèments of’ the Act. 42 U.S.C. §6926(b). ------- SECTION A DOCUMENT 23 Qs and As on Interim Policy on Compliance Incentives for Small Businesses 09/19/95 23 ------- UNITED STATES ENVIRONMENTAL PROTECTION AGENCY fr WASHINGTON, D.C 20460 PRO1 ’ SEP I 9 995 OFFKE OF EN FORCE NT AND MEMORANDUM COMPUANCE ASSURANCE SUBJECT. Qs and As on Interim Policy on Compliance Incentives for ,8 all Businesse ’ / kM JJ V FROM: Rob t-t Van Heuvelèn, Director Office of Regulatory Enforcement / Elaine G. Stanley, Directo Office of Compliance TO: Regional Program Division .Directors Regional Counsels On June 13, 1995, the Assistant Administrator issued the Interim Policy on Compliance Incentives for Small Businesses. The Policy was subsequently published in the Federal Register for public comment on June 23, 1995 (60 FR 32675) . We have received a variety of questions from EPA Regions and the public on how the Policy was intended to be implemented. We expect to finalize this Policy, with appropriate revisions, by the end of the calendar year. In the interim, in order to provide nationally consistent guidance on proper implementation of the Policy, we have compiled answers to the most common questions. Attached is a “Q and A” guidance document. The attached guidance document answers the following questions: 1. What is the definition of compliance assistance for purposes of this Policy? 2. What procedures should be used to document violations discovered during compliance assistance? 3. What are the goals and objectives of this Policy? 4. What are good faith efforts to comply under the Policy? 5. What penalty mitigation is available if a small business makes a good faith effort to comply, but compliance assistance was not available or was not sought? 6. Why does the Policy apply only to “nonconfidential” compliance assistance programs? 7. What impact does the Policy have on citizen suits? 8. How does the Policy define a “small business”; how does a parent corporation fit in? 9. Does the Policy apply to violations that occurred prior to the effective date of the Policy? Q RecycIod/ ecycIabts P ,Vnad th Soy Canaa k1 pie. , th ------- -2- In a few enforcement cases, respondents have filed motions asserting that a Region has failed to provide the respondent with the benefits of the Policy. And in a few cases, an Administrative Law Judge has questioned whether this Policy should be applied. EPA Regions should consult with the appropriate contact person in the Office of Regulatory Enforcement in every case in which application of this Policy is raised as an issue. The contact persons in the Office of Regulatory Enforcement are as follows: Steven Vigg ani, Air - Stationary Sources, 202 564-2002; Marc Hilison, Ai - Mobile Sources, 202 564-2255; Kathryn Smith, Water, 202 564-3252; Barbara Reilly, Toxics and Pesticides, 202 564-4176; and Susan Garcia, RCRA, 202 564-4013. Questions also may be directed to David Hindin in the Multimedia Enforcement Division, 202 564-6004,.or to Karin Left, 202 564- 7068, in the Office of Compliance who are coordinating implementation of the Policy. Finally, this cover memorandum and the attached Q and A guidance document are both public documents. Attachment cc: (w/attachment) Steven Herman Small Business Ombudsman - Regional Enforcement Coordinators OECA Office Directors ORE and OC Division Directors Chief, EES, ENRD, Depar nent of Justice Assistant Chiefs, EES, NRD, Department of Justice ------- Questions and Answers on Interim Policy on Compliance Incentives for Small Businesses U.S. EPA -- September 19, 1995 1. What is the definition of compliance assistance for purposes of this Policy? Compliance assistance’ is information or assistance provided by EPA, State or another government agency or government supported entity to help the regulated commumty comply with legally mandated environmental requirements 2 Compliance assistance does not include enforcement inspections or enforcement actions. In its broadest sense, the content of compliance assistance can vary greatly, ranging from basic information on the legal requirements to specialized advice on what technology may be best suited to achieve compliance at a particular facility Compliance assistance also may be delivered in a variety of ways, ranging from general outreach through the Federal Register or other publications, to targeted conferences and computer bulletin boards, to on- site assistance provided in response to a specific request for help. The special penalty mitigation considerations provided by this Policy only apply to civil violations which were identified as part of a non-confidential compliance assistance visit. The key component of compliance assistance in this Policy is the detection of the violations during the compliance assistance visit. While a facility may discover it has violations based on information obtained through reading a brochure, calling a hotline or attending a seminar, the Policy does not apply unless the violations were detected as part of the compliance assistance. 2. What procedures should be used to document violations discovered during the compliance assistance visit? Section E.5 of the Policy recommends that before the compliance assistance is provided businesses should be informed of their obligation to promptly remedy any violations discovered during the compliance assistance. Before a government agency provides on-site compliance assistance pursuant to this Policy or similar State policy, the agency should provide the facility with a short document explaining how the program works and the responsibilities of each party. The document should emphasize the responsibility of the facility to remedy all violations discovered within the corrections period and the types of violations which are excluded from penalty mitigation (e.g., violations that caused serious harm). The facility should sign a simple form acknowledging that it understands the Policy. Compliance assistance is sometimes called compliance assessments, compliance audits, or technical assistance. 2 Legally mandated environmental requirements include currently effective requirements and requirements which have been enacted by Congress or promulgated by EPA and thus will become effective within a few years. ------- September 1995 page 2 Qs and As -- Interim Pohcy on Compliance Incentives for Small Businesses At the end of the compliance assistance visit, the government agent should provide the facility with a list of all violations observed. (Any violations that do not fit within the penalty mitigation guidelines in the policy -- e.g., those that caused serious harm -- should be identified.) If the violations cannot all be corrected within 90 days, the facility should be requested to submit a schedule for remedying the violations within a short period after the on-site visit, usually no longer than a month. Documentation explaining the nature of the compliance assistance visit and the penalty mitigation guidelines is essential to ensure that the facility understands the Policy. These documentation procedures are not burdensome and many States already use similar procedures. 3. What are the goals and objectives of this Policy? The ultimate goal of the Policy is to bring more small businesses into compliance in order to protect public health and our environment. To this end, the Policy has two objectives: to stimulate demand for compliance assistance and to stimulate the supply of such programs. First on the demand side, the Policy is intended to encourage small businesses to use government sponsored on-site compliance assistance programs. On-site compliance assistance programs have tremendous potential to help small businesses understand their obligations to comply. Without the incentives of penalty elimination or mitigation offered by this Policy, small businesses may be reluctant to have government agents visit their facilities to identify compliance problems. Thus, EPA hopes the incentives .created by this Policy will encourage small businesses to seek out compliance assistance. Second, on the supply side, the Policy is intended to stimulate the growth of compliance assistance programs by providing EPA offices, States and local governments with the flexibility and the incentives to create successful compliance assistance programs. EPA recognizes that compliance assistance programs are currently not available in all states for all programs and thus hopes this Policy will stimulate the creation of additional programs. 4. What are good faith efforts to comply under the Policy? President’s Clinton Executive Memorandum on Regulatory Reform of April 26, 1995 (60 FR 20621) directs each federal agency, to the extent permitted by law, use its enforcement discretion to mitigate or waive penalties “only where there has been a good faith effort to comply with applicable regulations and the violation does not involve criminal wrongdoing or significant threat to health, safety, or the environment [ emphasis added].” Each federal agency has the discretion to define what are good faith efforts to comply. In an effort to expand the existing compliance assistance policy under the Clean Aff Act to all media programs, and to provide the regulatory community with clear guidance on when EPA will eliminate or mitigate penalties pursuant to this Policy, EPA has defmed good faith under this Policy as receiving compliance assistance from a non-confidential government or government supported program in which the violations are detected ------- September 1995 page 3 Qs and As -- Interim Policy on Compliance Incentives for Small Businesses during the compliance assistance. This is the first criterion (in section E of the Policy) which a small business must satisfy in order for a civil penalty to be either eliminated entirely or for the gravity portion to be mitigated. The specific penalty mitigation guidelines set forth in subsections F(1) and F(2) of the Policy only apply where the violations were detected as part of the compliance assistance visit and assuming all other provisions of the Policy have been satisfied The second criterion for penalty mitigation in the Policy -- that the violations detected in the compliance assistance visit are first time violations -- also relates to good faith If a small business has received a warning letter, notice of violation, field citation, or other enforcement action by a government agency for a violation within the past five years, subsequently seeking compliance assistance for that violation does not qualify as good faith under the Policy. Good faith efforts to comply are proactive and occur before the initiation of the enforcement action. The objective of this Policy is to stimulate new incentives for compliance in which companies seek help in complying before an enforcement action occurs. 5. What penalty mitigation is available if a small business makes a good faith effort to comply, but compliance assistance was not available or was not sought? Good faith efforts to comply require a company to take some proactive efforts to comply before a government agency discovers a violation or issues a notice of violation, a warning letter or otherwise takes an enforcement action. Under this Policy, EPA has specifically defined good faith as receiving compliance assistance from a non-confidential government or government supported program in which the violations are detected during the compliance assistance This is the first of five criteria in section E of this Policy which a small business must satisfy in order for a civil penalty to be either eliminated entirely or for the gravity portion to be mitigated. As stated in subsection F(3) of the Policy, if a violation was not discovered through compliance assistance, but the company has otherwise made a good faith effort to comply, EPA has discretion, pursuant to other applicable policies, to refrain from filing an enforcement action seeking civil penalties or to mitigate its demand for penalties to the maximum extent appropriate. Subsection F(3) does not modify any of the existing enforcement policies, but only serves to highlight the discretion that already exists in these policies to mitigate penalties based on good faith. Many of the media specific penalty policies have specific mitigation factors for good faith compliance efforts. Further, in some media specific penalty policies, if good faith efforts are undertaken, the penalty calculation automatically factors in such efforts through a potentially smaller economic benefit or gravity amount Penalties also may be mitigated pursuant to the Interim Revised Supplemental Environmental Projects Policy of May 1995, or the Guidance on Determining a Violator’s Ability to Pay a Civil Penalty of December 1986. Finally, another way a small business (or any business) may receive penalty mitigation is by conducting a voluntary compliance evaluation. If the small business ------- September 1995 page 4 Qs and As -- Interim Policy on Compliance Incentives for Small Businesses discovers its violations through a voluntary compliance audit or self-evaluation and voluntarily discloses its violations in writing to the appropriate government agency and otherwise complies with the conditions in EPA’s Voluntary Environmental Self-Policing and Self-Disclosure Interim Polky Statement, 60 FR 16875 (April 3, 1995), EPA may reduce or eliminate the gravity portion of the civil penalty. In contrast, some businesses have argued that their prompt efforts to remedy a violation after the government agency has discovered the violation through an inspection or filed an enforcement action should be considered as good faith. While EPA appreciates and expects companies to promptly remedy violations after a notice of violation or an enforcement action has occurred, such efforts to comply are not good faith efforts. If such efforts were considered as good faith, there would be no incentives for companies to make any effort to comply until after an enforcement action had been initiated. Good faith efforts to comply require a company to take some proactive efforts to comply before a government agency discovers violations through an enforcement action, issues a notice of violation, or otherwise takes an enforcement action. 6. Why does the Policy only apply to “nonconfidential’ compliance assistance programs? EPA recognizes that many technical and compliance assistance programs offer services to the regulated community on a confidential basis -- j , information about specific companies or facilities is not shared with the enforcement agency. Nothing in this Policy affects the continued operation of these programs. The purpose of this Policy is to encourage small businesses to use compliance assistance programs. With respect to programs in regulatory agencies or sponsored by such agencies, the policy provides an opportunity to correct violations within a specified period of time without being subject to penalties, while assuring that EPA or the State retains the authority to address serious environmental problems and criminal behavior. In the case of a confidential compliance assistance program, such an incentive is not necessary or appropriate because the company is not exposing itself to enforcement by virtue of its participation in the program. Nonetheless, as indicated in the Policy, a company that wants an opportunity to correct violations without being subject to penalties after receiving confidential assistance may do so by disclosing the violations to the appropriate enforcement authority, provided it complies with the other provisions of the Policy. 7. What impact does the Policy have on citizen suits? Many of the statutes EPA implements contain provisions authorizing citizens to commence actions seeking civil penalties and injunctive relief for certain violations. These provisions generally require citizens to follow certain procedures in bringing these suits (e.g., ------- September 1995 page 5 Qs and As -- lntenm Policy on Compliance Incentives for Small Businesses provide the alleged violator and EPA with advance notice of the Suit) and bar such Suits if the violation is being appropriately addressed by a state or federal enforcement action. Whether a small business that receives compliance assistance pursuant to the terms of this Policy will be protected from citizen suits will depend on the specific facts of the case and the specific citizen suit provision of the relevant statute 8. How does the Policy define a “small business”; how does a parent corporation fit in? For purposes of this Policy, “small business” means a business owned and operated by a person, corporation, partnership, or other entity that employs 100 or fewer individuals on a company-wide basis, This means that a facility with 50 employees that is a division or subsidiary of a corporation that has more than 100 employees on a corporate wide basis, is not a small business. Thus, any business that is owned by a parent company where the aggregate employee number exceeds 100 persons is ineligible for consideration as a small business under this Policy. The number of employees should be considered as full-time equivalents on an annual basis and does not include contractors and consultants. Employees who work less than 35 hours per week are generally not considered full-time employees For example, for purposes of determming the applicability of this Policy, a company with 150 employees, with 120 of those employees workmg only 20 hours per week, would be considered to have 90 full-time equivalents and thus would fit the defimtion of a small business. 9. Does the Policy apply to violations that occurred prior to the effective date of the Policy? Yes. Section D of the Policy states: “ This Policy applies to all [ enforcement] actions filed after the effective date [ June 13, 1995] of this Policy, and to all pending cases in which the government has not reached agreement in principle with the alleged violator on the amount of the civil penalty.” This means that the date when the violation occurred is irrelevant for purposes of determining application Cases in which an agreement on a civil penalty had not been reached to prior to June 13, 1995, are potentially subject to the Policy, assuming all other conditions of the Policy are satisfied. ------- SECTION A DOCUMENT 24 Policy on Flexible State Enforcement Responses to Small Community Violations 11/22/95 24 ------- 0 / 4 4I UNITED STATES ENVIRONMENTAL PROTECTiON AGENCY WASHINGTON, D.C. 20460 t NOV22 1995 OFFICE OF EN FORCE .ENT AND COMPliANCE ASSURANCE MEMOR.ANDUM SUBJECT: Policy on Flexible St Enforcement Responses to Small Community Violati FROM: Steven A. He: Assistant Admini, TO: Assistant Administrators General Counsel Regional Administrators Deputy Regional Administrators Regional Counsel Regional Enforcement Coordinators The attached Policy on Flexible State Enforcement Responses to Small Community Violations (Small Communities Policy) implements parts of Reinventing Environmental Regulation Initiatives 13 and 21 announced by President Clinton on March 16, 1995. These two initiatives seek to enhance the environmental compliance of small communities and to promote alternative strategies for communities to achieve environmental and economic goals. Specifically, the Small Communities Policy seeks to assure States that they have, within appropriate limits, the flexibility to design and use multimedia compliance assistance and compliance prioritization measures as alternatives to traditional enforcement responses when addressing a small community’s environmental violations. The Small Community Policy establishes the parameters for State small community environmental compliance assistance programs that EPA will generally consider adequate and recommends options for States to follow in developing and implementing their programs, but leaves many of the details to the discretion of States. EPA believes this approach will ensure adequate protection of public health and the environment while affording States flexibility to develop small community environmental compliance assistance programs tailored to local conditions and specific State needs. £0 RcycI.d/ .cycIabIa <9 P VIIId .‘th So CvU. Ofl PIPSI PM U 11 50% recydd 1ib . ------- -2,- Please note that this policy does not mandate action on the part of States. States are free to offer compliance assistance or not. Should States choose, however, to offer environmental compliance assistance to small communities, those doing so in a manner consistent with the framework provided in this policy can generally expect EPA to defer to their actions. I wish to thank the many commenters who reviewed the June 30, 1995 draft policy and provided comments. The policy I issue today is a better document because of your efforts. If you have questions or further comments, please contact Kenneth Harmon of the Chemical, Commercial Services and Municipal Division at (202) 564-4079. Attachments CC: Small Community Coordinators, Regions I-X ------- Policy on Flexible State Enforcement Responses to Small Community Violations United States Environmental Protection Agency November 1995 This policy expresses EPA’s support for States’ 1 use of enforcement flexibility to provide compliance incentives for small communities. EPA acknowledges that States and small communities can realize environmental benefits by negotiating, entering into, and implementing enforceable compliance agreements and schedules that require communities to correct all of their environmental violations expeditiously while allowing the community to prioritize among competing environmental mandates on the basis of comparative risk 2 . States may provide small communities an incentive to request compliance assistance by waiving part or all of the penalty for a small community’s violations if the criteria of this policy have been met. IfaStateactsinacancewiththispolicyandaddressessmall community environmental noncompliance with compliance assistance in a way that represents reasonable progress toward compliance, EPA generally will not pursue a separate Federal civil administrative or judicial action for penalties or additional injunctive relief. This policy does not apply to any criminal conduct by small communities or their employees. To the extent that this policy may differ from the terms of other applicable enforcement response policies, this document supersedes those policies. 1 T policy will also apply to the actions of territories and to the actions of Native American Tribes where conditions have been met for EPA to treat the Tribe as a State. 2 EPA currently has a number of risk assessment resources available to the public, including its computer-based Information Risk Information System (IRIS). EPA comparative risk projects across the country have provided training and technical assistance to more than 45 State, local, tribal and watershed risk assessment efforts in an attempt to bring together stakeholders to reach consensus on which local environmental problems pose the most risk to human health, ecosystem health, and quality of life; and to develop consensus on an action plan to reduce those risks. EPA does not suggest that States and small communities need prepare a formal comparative risk assessment as part of the small community environmental compliance assistance process. ------- Flexible State Enforcanent Respoas to Small Community Violatiom * Novenber 1995 * page 2 F’exible State Enforcement Responses EPA’s deference to a State’s exercise of enforcement discretion in response to a small community’s violations will be based on an assessment of the adequacy of the process the State establishes and follows in: • responding expeditiously to a community’s request for compliance assistance; • selecting the communities to which it offers compliance assistance and a flexible enforcement response; • assessing the community’s good faith and compliance status; • establishing priorities for addressing violations; and • ensuring prompt correction of all environmental violations. EPA will give its deference more readily to a State that has previously submitted a description of its small community environmental compliance assistance program to the Agency, thereby allowing EPA to familiarize itself with the adequacy of the State’s processes. Selecting communities EPA intends this policy to apply only to small communities unable to satisfy all applicable environmental mandates without the State’s compliance assistance. Such communities, generally comprised of fewer than 2,500 residen&, should be: • non-profit • governing entities (incorporated or unincorporated) • that own facilities that supply municipal services. EPA’s evaluation of the appropriateness of a State’s small community environmental compliance assistance program will depend in part on whether the State uses measures of administrative, technical, and financial capacity to limit provision of the benefits of this policy to those communities that truly need assistance. Such capacity measures could 3 EPA selected a population figure of 2,500 to be consistent with 42 U.S.C. 6908, which established the Small Town Environmental Planning Program, and which defined the term small town to mean “an incorporated or unincorporated community... with a population of less than 2,500.” ------- Flexible State Enforc nent Respostscs to Small Community Violatioes SS y Ij . 1995 $ $ page 3 include, among other things, number of staff and their responsibilities, degree of isolation from other nearby communities; evaluation of existing infrastructure, average household income, the last decade’s median housing values, employment opportunities, population projections, population age representation, revenue sources, revenue generating capacity, the level of government that operates the utility systems, current bond debt, and an assessment of the impact of other Federal mandates competing with environmental mandates for the community’s resources. Not less than quarterly, a State should provide EPA with a list of communities participating in its small community environmental compliance assistance program to ensure proper State and Federal coordination on enforcement activity. Assessing good faith and compliance status In considering whether a State has established and is following an adequate process for assessing a small community’s good faith, EPA generally will look at such factors as the participating communities’ candor in contacts with State regulators and the communities’ efforts to comply with applicable environmental requirements. Measures of a small community’s efforts to comply include: • attempts to comply or a request for compliance assistance prior to the initiation of an enforcement response; • prompt correction of known violations; - • willingness to remediate harm to public health, welfare, or the environment; • readiness to enter into a written and enforceable compliance agreement and schedule; and • adherence to the schedule. A Stale’s assessment of a small community’s compliance status should identify: • eveiy environmental requirement to which the community’s municipal operations are subject; the community’s current and anticipated future violations of those requirements: • the comparative risk to public health, welfare, or the environment of each current and anticipated future violation; and • the community’s compliance options. ------- Flexible State Enforcanent Respoitses to Sn 2II Community Vi latiom Novnnber 1995 * * page 4 In addition, EPA recommends that the process developed by the State include consideration of regionali72tion and restructuring as compliance alternatives, and consideration of the impact of promulgated regulations scheduled to become effective in the future. Priorities for addressing violations States seeking EPA’s deference should require small communities to correct any identified violations of environmental regulations as soon as possible, taking into consideration the community’s administrative, technical, and financial capacities, and the State’s ability to assist in strengthening those capacities. A small community should address all of its violations in order of risk-based priority. 4 Any identified violation or - circumstance that may present an imminent and substantial endangerment to, has caused or is causing actual serious harm to, or presents a serious threat to, public health, welfare, or the environment is to be addressed immethat ly in a manner that abates the endangerment or harm and reduces the threat. Activities necessary to abate the endangerment or harm and reduce the threat posed by such violations or circumstances are not to be delayed while the State and small community establish and implement the process for assigning priorities for correcting other violations. Ensuring prompt correction of violations If the small community cannot correct all of its violations within 180 days of the State’s commencement of compliance assistance to the community, the State and the community should, within 180 days of the State’s commencement of compliance assistance to the community, enter into and begin implementing a written and enforceable compliance agreement and schedule 5 that: establish a specified period for correcting all outstanding violations in order of risk- based priority;’ 4 EPA does not intend that establishment of risk-based priorities be viewed as mandating delay in addressing low priority violations that can be easily and quickly corrected without affecting progress toward addressing higher priority violations requiring long term compliance efforts. Neither a State nor a community may unilaterally alter or supersede a community’s obligations under existing Federal administrative orders or Federal judicial consent decrees. ‘States may allow weighing of unique local concerns and characteristics, but the process should be sufficiently standardized and objective that an impartial third person using the same process and the same facts would not reach significantly different results. Public notification and public participation are an important part of the priority setting process. ------- F exii,Ie St&te Enforcanent Rapons€s to Small Community Violatioen • ‘ Novanber 1995 * page 5 • incorporate interim milestones that demonstrate reasonable progress toward compliance; • contain provisions to ensure continued compliance with all environmental requirements with which the community is in compliance at the time the agreement is entered; and • incorporate provisions, where they would be applicable to the small community, to ensure future compliance with any additional already promulgated environmental requirements that will become effective after the agreement is signed. Consultation with EPA during the drafting of a compliance agreement and schedule and the forwarding of final compliance agreements and schedules to EPA are recommended to ensure appropriate coordination between the State and EPA. Limits on EPA Deference EPA reserves all of its enforcement authorities. EPA will generally defer to a State’s exercise of its enforcement discretion in accordance with this policy, except that EPA reserves its enforcement discretion with respect to any violation or circumstance that may present an imminent and substantial endangerment to, has caused or is causing actual serious harm to, or presents a serious threat to, public health, welfare, or the environment. 7 The Policy on Flexible State Enforcement Responses to Small Community Violations does not apply if, in EPA’s judgment: • a State’s small community environmental compliance assistance program process fails to satisfy the adequacy criteria stated above; or • a State’s application of its small community environmental compliance assistance program process fails in a specific case adequately to protect public health and the environment because it neither requires nor results in reasonable progress toward, and achievement of, environmental compliance by a date certain. EPA will regard any unaddressed violation or circumstance that may present an imminent and substantial endangerment to, has caused or is causing actual serious harm to, or presents a serious threat to, public health, welfare, or the environment in a small community participating in a State environmental compliance assistance program as a matter of national significance which requires consultation with or the concurrence of, as appropriate, the Assistant Administrator for Enforcement and Compliance Assurance or his or her delegatee before initiation of an EPA enforcement response. ------- Flexible State Enforcoment R poILsm to Small Community Violatiom • Novenber 1995 S page 6 Where EPA determines that this policy does not apply, and where EPA has reserved its enforcement discretion, other existing EPA enforcement policies remain applicable. The State’s and EPA’s options in these circumstances include discretion to take or not take formal enforcement action in light of factual, equitable, or community capacity considerations with respect to violations that had been identified during compliance assistance and were not corrected. Neither the State’s actions in providing, nor in failing to provide, compliance assistance shall constitute a legal defense in any enforcement action. However, a community’s good faith efforts to correct violations during compliance assistance may be considered a mitigating factor in determining the appropriate enforcement response or penalty in subsequent enforcement actions. Nothing in this policy is intended to release a State from any obligations to supply EPA with required routinely collected and reported information. As described above, States should provide EPA with lists of participating small communities and copies of final compliance agreements and schedules. States should also give EPA immediate notice upon discovery of a violation or circumstance that may present an imminent and substantial endangerment to, has caused or is causing actual serious harm to, or presents serious threats to, public health, welfare, or the environment. This policy has no effect on the existing authority of citizens to initiate a legal action against a community alleging environmental violations. This policy sets forth factors for consideration that will guide the Agency in its exercise of enforcement discretion. It states the Agency’s views as to how the Agency intends to allocate and structure enforcement resources. The policy is not final agency action, and is intended as guidance. This policy is not intended for use in pleading, or at hearing or trial. It does not create any rights, duties, obligations, or defenses, implied or otherwise, in any third parties. Policy Assessment Measuring the success of compliance assistance programs is a critical component of EPA’s ability to assess the results of compliance and enforcement activities. EPA will work with Stales to evaluate the effectiveness of the Policy on flexible Stale Enforcement Responses to Small Community Violations. Within three years following its issuance, EPA will consider whether the policy should be continued, modified, or discontinued. ------- SECTION A DOCIJ1IIENT 25 Guidance on Use of Penalty Policies in Administrative Litigation 12/15/95 25 ------- O Sr 4 ,. c 1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON, D.C 20460 December 15, 1995 O FICEOF ENFORCEMENT AND COMPliANCE ASSURANCE MEMORANDUM SUBJECT. Gu nce on Use f Penalty Policies in Administrative Litigation FROM: RoL eu/1 tor Office of Regulatory Enforcement TO: Regional Cou isels, Regions I - X - Director, Office of Environmental Stewardship, Region I Director, Compliance Assurance & Enforcement Division, Region VI Director, Office of Enforcement, Compliance & Environmental Justice, Region VIII Regional Enforcement Coordinators, Regions l.-X A Introduction - This document provides guidance on how penalty amounts should be pled and argued in administrative litigation and how penalty policies should be used in this process. Background On September 29, 1995. Chief Administrative Law Judge Lotis issued an Initial Decision in In Re Employers Insurance of Wausiu , ruling that EPA must present evidence other than the PCB Penalty Policy in order to support its proposed penalty. We think the decision in the Wausau case is inconsistent with decisions on the use of penalty policies by the Environmental Appeals Board, in particular DIC Americas. Inc. , TSCA Appeal No. 94-2 (September 27, 1995). The Agency is appealing the Wausau decision to the Environmental Appeals Board. Accordingly, this document is being issued in response to the Wausau decision to provide guidance on our administrative penalty pleading practices and use of penalty policies After we receive a decision from the Environmental Appeals Board on our appeal we may revise this guidance as appropriate. Rec ’jc edIRecyclabI. with 5oyICv IfI On a qf n a n3 Io Q% rocydec be ------- page 2 . Use of Penalty Policies in Administrative Litigation 1. Federal environmental statutes set forth various factors which EPA or a court must consider in establishing penalties. EPA’s penalty policies are based on the statutory penalty factors. The policies provide EPA enforcement staff with a logical calculation methodology for determining appropriate penalties. The policies help EPA apply the statutory penalty factors in a consistent and equitable manner so that members of the regulated community are treated similarly for similar violations across the country. As policies, they are not substantive rules under the Administrative Procedure Act. t 2. The penalty amount sought in the administrative complaint is based on the relevant statutory factors. The penalty amount pled should be calculated pursuant to any applicable penalty policy and the specific facts of the case. 2 If there is no applicable policy, the penalty amount to be pled in the complaint should be based on the statutory factors governing penalty assessment, case law interpreting such factors, and the facts of the particular case. 3 3. The administrative complaint should explain that the penalty requested is based on the statutory provisions governing penalty assessment and it was calculated using a policy that applies the statutory factors. Accordingly, the administrative complaint should contain a paragraph similar to this model: The proposed civil penalty has been determined in accordance with [ cite to relevant statutory penalty provision]. For purposes of determining the amount of any penalty to be assessed, [ section of the Act] requires EPA to take into The policies are a mix of legal interpretations, general policy, and procedural guidance in how EPA should allocate its enforcement resources and exercise its enforcement discretion As such, they are exempt from the notice and comment rulemaking requirements of the Administrative Procedures Acr,5USC §553 2 Not all EPA programs have penalty policies that establish calculation methodologies for use in determining the penalty amount to plead in an administrative complaint. For example, the May 1995 Interim Revised Clean Water Act Settlement Policy and the May 1994 Public Water System Supervision Settlement Penalty Policy only establish how the Agency expects to calculate the minimum penalty for which it would be willing to settle a case, these policies are not to be used in pleading penalties, or in a hearing or at trial The Region should not use the policy in a particular case if the penalty amount produced by the calculation methodology produces an amount that appears inconsistent with the statutory penalty factors or otherwise unreasonable In such a case, the Region must consult with OECA prior to deviating from the policy. See Redelegarion of Authority and Guidance on Headquarters Involvement in Regulatory Enforcement Cases, memo issued by the Assistant Administrator, on July 11, 1994, especially page 3. and page 2 of the redelegation issued the same date, and subsequent program specific implementing guidances. ------- page 3 account [ enumerate statutory penalty factors]. To develop the proposed penalty in this complaint, complainant has taken into account the particular facts and circumstances of this case with specific reference to EPA s [ name of relevant penalty policy, if applicable], a copy of which is enclosed with this Complaint. This policy provides a rational, consistent and equitable calculation methodology for applying the statutory penalty factors enumerated above to particular cases. 4. As further support of the penalty proposed in the complaint, a case ‘record’ file should document or reference all factual information on which EPA relied to develop the penalty amount pled in the complaint. If the Agency has an applicable penalty policy (other than an exclusive settlement policy), the file should contain a computation worksheet setting forth how the penalty was calculated in the specific case, along with a narrative description of the specific calculation. This narrative description need not be lengthy, but it should explain how any applicable penalty policy methodology was applied to the specific facts in the case. 4 If there was no applicable penalty policy, the record file should contain a narrative description of how the statutory penalty factors were applied to develop the amount pled in the complaint. In short, the record file should document the facts and rationale which formed the basis for the penalty amount pled in the administrative complaint. In the prehearing exchange, EPA counsel may provide the respondent with copies of relevant documents from the case record file. 5 5. Pursuant to the Consolidated Rules of Practice Governing the Administrative Assessment of Civil Penalties, 40 CFR §22.24, the complainant (usually the Region), has the burden of presenting why the proposed penalty is appropriate. This burden of persuasion may be subdivided into three tasks or parts: a) why any applicable penalty policy is a reasonable approach to use in the instant case; b) proving the facts relevant to penalty assessment; and c) why the particular facts merit the penalty proposed in the complaint. Each of these three tasks is discussed below. See, e g . the RCRJ4 Civil Penalty Policy, October 1990, pages 6 to 8, 41 to 47 The case record file only should contain final documents, and not preliminary, draft, or confidential documents For example, documents evaluating the appropriate enforcement action. planning legal strategy, or establishing a settlement penalty amount are not part of the record file and should not be released ------- page 4 a. Presenting any applicable penalty policy as a reasonable approach In the prehearing exchange or at the hearing, EPA counsel should briefly explain why the applicable penalty policy is a reasonable way to apply the statutory factors. This explanation is a legal and policy analysis, which can be presented primarily, if not entirely, in briefs based on the written policy. Administrative law judges, however, may prefer some parts of this analysis to be presented through testimony or affidavits. If the Presiding Officer or respondent challenges the rationale or the basis for the penalty policy, complainant should provide a detailed explanation of why the penalty policy is a fair and logical way to apply the statutory factors. 6 Since penalty policies are not binding rules, such challenges must be responded to on the merits. Counsel should explain how the penalty policy provides a consistent, fair and logical framework for quantifying the statutory penalty factors to the particular circumstances of the instant case. Of course, the Presiding Officer is free to adopt a different framework other than the penalty policy for applying the statutory factors and ultimately arriving at a penalty amount. - b Proving the facts relevant to penalty assessment . In the prehearing exchange or hearing, the facts relevant to determining an appropriate penalty under the particular statute should be presented as evidence. The relevant facts will depend on the circumstances of the specific case and the statutory penalty factors. Such facts usually include the number, duration, and types of violations, any economic benefit resulting from the violations, the pollutants involved, and the environmental impact of the violations. Some of these facts may have been established in proving the violations. c. Why the Darticular facts merit the penalty proposed in the complaint . This task requires the complainant to persuade the Presiding Officer why the penalty requested in the complaint is appropriate based on the statutory penalty factors and the facts in the case. If a penalty policy was used to calculate the penalty, an explanation of the calculation methodology should be presented. This task is primarily, if not exclusively, a legal and policy analysis and should be done through briefs or argument. If the Presiding Officer requires testimony regarding such analysis, the Region may identify a Regional enforcement person experienced in using and understanding the applicable penalty policy, and capable of discussing the nature and seriousness of the violations in the instant case. This expert should not be the counsel in the case. If you have any questions regarding this guidance, you may call David Hindin at 202 564-6004, or Scott Garrison at 202 564-4047. cc: Sylvia K. Lowrance; ORE Division Directors ORE Branch Chiefs; Workgroup members 6 Regions should consult with ORE on how to respond to such challenges ------- SECTION A DOCUMENT 26 Incentives for Self—Policing: Discovery, Disclosure, Correction and Prevention of Violations NOTE: Contained in a Federal Register notice, 60 Fed. Reg. 66706 (12/11/95) 12/18/95 26 ------- 66706 Federal Register / Vol. 60, No. 246 / Friday, December 22, 1995 I Notices ENViRONMENTAL PROTECTION AGENCY - - [ FRL-64 00—1J incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations AGENCY: Environmental Protection Agency (EPA). ACTION: Final Policy Statement . SUMMARY: The Environmental Protection Agency (EPA) today issues its final policy to enhance protection of human health and the environment by encouraging regulated entities to voluntarily discover, and disclose and correct violations of environmental requirements. Incentives include eliminating or substantially reducing the gravity component of civil penalties and not recommending cases for ausninal prosecution where specified conditions are met, to those who voluntarily self-disclose and promptly correct violations. The policy also restates EPA’s long-standing practice of not requesting voluntary audit reports to trigger enforcement investigations. This policy was developed in close consultation with the U.S. Department of Justice, states, public interest groups and the regulated community. and will be applied uniformly by the Agency’s enforcement programs. DATES: This policy is effective January 22, 1998. FOR FURTHER INFORMATION CONTACT Additional documentation relating to the development of this policy is contained in the environmental auditing public docket. Documents from the docket may be obtained by calling (202) 260—7548, requesting an index to docket #C-94—O1, and faxing document requests to (202) 260-4400. Hours of operation are 8 a.m. to 5:30 p.m.. Monday through Friday, except legal holidays, Additional contacts are Robert Fentress or Brian Riedel, at (202) 564— 4187. - SUPPLEMENTARY NFORMATION I. Explanation of Policy A. Introduction The Environmental Protection Agency today issues its final policy to enhance - protection of human health and the environment by encouraging regulated entities to discover voluntarily, disclose. correct and prevent violations of federal environmental law. EffOctive 30 days from today, where violations are found through voluntary environmental audits or efforts that reflect a regulated entity’s due diligence, and are promptly - disclosed and expeditiously corrected. May of 1994, the Administrator asked EPA will not seek gravity-based (i.e.. - the O ce of Enforcemeni and non-economic benefit) penalties and Compliance Assurance (OECA) to wiLl generally not recommend a ’irninal determine whether additional prosecution against the regulated entity. incentives were needed to encourage EPA will reduce gravity-based penalties voluntary disclosure and correction of by 75% for violations that are - - violations uncovered during voluntarily discovered, and are environmental audits. promptly disclosed and corrected, even EPA began its evaluation with a two- if not found through a formal audit or day public meeting in July of 1994. in due diligence. Finally, the policy Washington, D.C.. followed by a two- restates EPA’s long-held policy and -. .day meeting in San Francisco on practice to refrain from routhierequests.’Tjanuary 19, 1995 with stakeholders from for environmental audit reports.. . industry, trade groups. state The policy includes important . - environmental commissioners and safeguards to deter irresponsible - attorneys general, district attorneys. behavior and protect the public and . public interest organizations and environment. For example. in addition professional environmental auditors. to prompt disclosure and expeditious The Agency also established and correction, the policy requires . . maintained a public docket of testimony companies to act to prevent recurrence presented at these meetings and all of the violation and to remedy any..: comment and correspondence environmental harm which may have submitted to EPA by outside parties on occurred. Repeated violations or those this issue. which result in actual harm or may In addition to considering opinion present imminent and substantial . and information from stakeholders. the endangerment are not eligible for relief Agency examined other federal and under this policy, and companies will state policies related to self-policing. not be allowed to gain an economic - -. self-disclosure and correction. The advantage over their competitors by Agency also considered relevant surveys delaying their investment in - -- on auditing practices in the private compliance. Corporations remain sector. EPA completed the first stage of criminAlly liable for violations that this effort with the announcement of an result from conscious disregard of their interim policy on April 3 of this year. obligations under the law, and which defined conditions under which individuals are liable for criminal EPA would reduce civil penalties and misconduct. not recommend criminal prosecution for The issuance of this policy concludes . companies that audited. disclosed, and EPA’s eighteen-month public evaluation corrected violations. of the optimum way to encourage Interested parties were asked to voluntary seU pollcing while preserving submit comment on the interim policy fair and effective enforcement. The by June30 of this year (60 FR 16875). incentives, conditions and exceptions and EPA received over 300 responses announced today reflect thoughtful from a wide variety of private and - suggestions from the Department of - public organizations. (Comments on the Justice, state attorneys general and local interim audit policy are contained in the prosecutors. state environmental - Auditing Policy Docket, hereinafter, agencies. the regulated community. and “Docket”.) Further, the American Bar public interest orgnniriitlons. EPA Association SONREEL Subcommittee believes that it has found a balanced hosted ave days of dialogue with and responsible approach, and will - representatives from the regulated conduct a study within three years-to industry, states and public interest determine the effectiveness of this - organizations in June and September of policy. ,r. - this year. which identified options for B Public Process — - - - strengthening the tntenm policy. The changes to the interim policy One of the Environmental Protection announced today reflect insight gained Agency’s most important - through comments submitted to EPA. responsibilities is ensuring compliance the ABA dialogue, and the Agency’s with federal laws that protect pu practical experience implementing the health and safeguard the environi .enJ interim policy. Effective deterrence requires inspecting. bringing penalty actions and securng C. Purpose compliance and remediatlon of harm.- This policy is designed to encourage But EPA realizes that achieving greater compliance with laws and compliance also requires the .:--. regulations that protect human health cooperation of thousands of busin sme and the environment. It promotes a and. other regulated entities subjecttn9 higher standard of self-policing by these requirements. Accordingly, in waiving gravity-based penalties for ------- Federal Register / 246 / Friday, December 22, 1995 / Notices 66707 violations that are promptly disclosed and corrected, and which were discovered through voluntary audits or compliance management systems that demonstrate due diligence. To further promote compliance, the policy reduces- gravity-based penalties by 75% for any violation voluntarily discovered and promptly disclosed and corrected, even if not found through an audit or compliance management system. EPA’s enforcement program provides a strong incentive for responsible behavior by imposing stiff sanctions for noncompliance. Enforcement has contributed to the dramatic expansion of environmental auditing measured in numerous recent surveys. For example. more than 90% of the corporate respondents to a 1995 Price-Waterhouse survey who conduct audits said that one of the reasons they did so was to find and correct violations before they were found by government inspectors. (A copy of the Price-Waterhouse survey is contained In the Docket as document Vffl-A-76) At the same time, because government resour are limited, maximum compliance cannot be achieved without active efforts by the regulated community to police themselves. More than half of the respondents to the same 1995 Price-Waterhouse survey said that they would expand environmental auditing in exchange for reduced penalties for violations discovered and corrected. While many companies already audit or have compliance management programs. EPA believes that theincentives offered in this policy will improve the frequency and quality of these self-monitoring efforts, D. incentives for Se!f-Poiiciiig - - - Section C of EPA’s policy identifies the major incentives that EPA will provide to encourage self-policing, self- disclosure, and Fompt self-correction. These include not seeking gravity-based civil penalties or reducing them by 75%, declining to recommend criminal prosecution for regulated entities that self-police, and refraining from routine requests for audits. (As noted in Section C of the policy, EPA has refrained from making routine requests for audit reports since issuance of its 1986 policy on environmental auditing.) 1. Eliminating Gravity-Based Penalties Under Section C(1) of the policy, EPA wilL not seek gravity-based penalties for violations found through auditing that are promptly disclosed and corrected. Gravity-based penalties will also be waived for violations found through any documented procedure for self-policing, where the company can show that it has a c pflance management program that meetsthe critena for due diligence in Secfidn B of the policy. Giivity-based penalties (defined in SectIdh.B of the policy) generally reflect theueriousness of the violator’s beba .tOi. EPA has elected to waive such pen ltIe for violations discovered through due diligence or environmental audIts, recognizing that these voluntary effd play a critical role in protecting human health and the environment by identifying, correcting and ultimately preventing violations. All of the conditions set forth in Section D, which include prompt disclosure and expeditious correction, thust be satisfied for graTvi -based penalties to be waived: As lathe interim policy, EPA reserves the right to collect any economic benefit that may have been realized as a result of noncompliance, even where companies meet all other conditions of the policy. Economic benefit may be waived; however, where the Agency determines that it is insignificant. After considering public comment, EPA has decided to retain the discretion to recover economic benefit for two reasons. First, it provides an incentive to comply on time. Taxpayers expect to pay interest or a penalty fee if their tax payments are late; the same principle should apply to corporations that have delayed their investment In compliance. Second-it is fair because it protects responsible companies from being undercut by their noncomplying competitors, thereby preserving a level playing field. The concept of recovering economic benefit was supported in public comments by many stakeholders, including industry representatives (see, e g., Docket, li—F—39. U—F—28, and Il—F— 18). - - 2. 75%•Reduction of Gravity The policy a ppropriately limits the completewaiver of gravity-based civil penalties to companies that meet the higher standard of environmental auditing or systematic compliance management. However, to provide additional encouragement for the kind of self-policing that benefits the public, gravlty:bosed penalties will be reduced by 75% for a violation that is - voluntarily discovered, promptly disclosed and expeditiously corrected, even if it was not found through an environmental audit and the company cannot document due diligence. EPA expects that this will encourage companies to come forward and work with the Agency to resolve environmental problems and begin to developan effective compliance management program. Gravity-based penalties will be - reduced 75% only where the company meets all conditions in. Sections D(2) through D(9). EPA has eliminated language from the interim policy indicating that penalties may be reduced “up to” 75% where “most” conditions are met, because the Agency believes that all of the conditions in D(2) through D(9) are reasonable and essential to achieving compliance. This change also responds to requests for greater clarity and predictability. 3. No Recommendations for Criminal Prosecution EPA has never recommended criminal prosecution of a regulated entity based on voluntary disclosure of violations discovered through audits and disclosed to the government before an -. investigation was already under way. Thus, EPA will not recommend criminal prosecution for a regulated entity that uncovers violations through environmental audits or due diligence, promptly discloses and expeditiously corrects those violations, and meets all other conditions of Section D of the policy. This policy is limited togood actors, and therefore has important limitations. It will not apply, for example, where corporate officials are consciously involved in or willfully blind to violations, or conceal or condone noncompliance. Since the regulated entity must satisfy all of the conditions of Section D of the policy, violations that caused serious harm or which may pose imminent and substantial endangerment to human health or the environment are not covered by this policy. Finally, EPA reserves the right to recommend prosecution for the criminal conduct of any culpable individual. Even where all of the conditions of this policy are not met, however, it is important to remember that EPA may decline to recommend prosecution of a company or individual for many other reasons under other Agency enforcement policies. For example, the Agency may decline to recommend prosecution where there is no significant harm or culpability and the individual or corporate defendant has cooperated fully. Where a company has met the conditions for avoiding a recommendation for criminal prosecution under this policy, it will not face any civil liability for gravity- based penalties. That is because the seine conditions for discovery, disclosure, and correction apply in both cases. This represents a clarification of the interim policy, not a substantive change. ------- 66708 Federal Register / Vol. 6a.No. 246 / Friday. December 22, 1995 I Notices 4. No Routine Requests for Audits EPA is reaffirming its policy, in effect since 1986. to refrain from routine requests for audits. Eighteen months of public testimony and debate have produced no evidence that the Agency has deviated, or should deviate, from this policy. If the Agency has independent evidence of a violation, it may seek information needed to establish the extent and nature of the problem and the degree of culpability. In general. however, an audit which results in prompt correction clearly will reduce liability, not expand It. Furthermore, a review of the criminal docket did not reveal a single criminal prosecution for violations discovered as a result of an audit self-disclosed to the government. E. Conditions Section D describes the nine conditions that a regulated entity must meet in order for the Agency not to seek (or to reduce) gravity-based penalties under the policy. As explained in the Summary above, regulated entities that meet all nine conditions will not face gravity-based civil penalties. and will generally not have to fear criminal prosecution. Where the regulated entity meets all of the conditions except the first (D(1)), EPA will reduce gravity- based penalties by 75%. 1. Discovery of the Violation Through an Environmental Audit or Due Diligence Under Section D(1), the violation must have been discovered through either (a) an environmental audit that is systematic, objective, and periodic as defined in the 1988 audit policy, or (b) a documented, systematic procedure or practice which reflects the regulated. entity’s due diligence in preventing. detecting, and correcting violations. The interim policy provided full credit for any violation found through “voluntary self-evaluation,” even if the evaluation did not constitu.te an audit In order to receive fuJi credit under the final policy, any self-evaluation that is not an audit must be part of a “due diligence” program. Both “environmental audit” and “due diligence” are defined in Section B of the policy. Where the violation is discovered through a “systematic procedure or practice” which is not an audit, the regulated entity will be asked to document how its program reflects the criteria for due diligence as defined in Section B of the policy. These criteria, which are adapted from existing codes of practice such as the 1991 Criminal Sentencing Guidelines, were fully discussed during the ABA dialogue. The criteria are flexible enough to accommodate different types and sizes of businesses. The Agency recognizes that a variety of compliance management programs may develop under the due diligence criteria, and will use its review under this policy to determine whether basic criteria have been met. Compliance management programs which train and motivate production staff to prevent, detect and correct violations on a daily basis axe a valuable complement to periodic auditing. The policy Is responsive to recommendations received during public comment and from the ABA - dialogue to give compliance - management efforts which meet the criteria for due diligence the same penalty reduction offered for - -. environmental audits. (See, e.g.. [ I—F— 39. lI—E-18, and II.-G--18 in the Docket.) EPA may require as a condition of penalty mitigation that a description of the regulated entity’s due diligence efforts be made publicly available. The Agency added this provision in response to su estIons from - environmental groups. and believes that the availability of such information will allow the public to judge the adequacy of compliance management systems. lead to enhanced compliance, and foster greater public trust in the integrity of compliance management systems. 2. Voluntary Discovery and Prompt Disclosure Under Section D(2) of the final policy, the violation must have been identified voluntarily, and not through a monitoring. sampling, or auditing procedure that Is required by statute,. regulation, permit. judicial or administrative order, or consent agreement Section D(4) requires that disclosure of the violation be prompt and in writing. To avoid confusion and respond to state requests for greater clarity, disclosures under this policy should be made to EPA. The Agency will work closely with states in- implementing the policy. The requirement that discovery-of the violation be voluntary is consistent with proposed federal and state bills which would reward those discoveries that the regulated entity can legitimately’4 . attribute to its own voluntary efforts.. The policy gives three specific examples of discovery that woulcinot be voluntary, and therefore would uo be eligible for penalty mitigation: - enussions violations detected through a required continuous emissions monitor, violations of NPDES discharge limits found through prescribed monitoring, and violations discovered through a compliance audit required to be performed by the terms of a consent order or settlement agreement. The final policy generally applies to any violation that is voluntarily discovered, regardless of whether the violation is required to be reported. This definition responds to comments pointing out that reporting requirements are extensive, and that excluding them from the policy’s scope would severely limit the incentive for self-policing (see. e.g., II-C—48 in the Docket). The Agency wishes to emphasize that the integrity of federal environmental law depends upon timely and accurate reporting. The public relies on timely and accurate reports from the regulated community, not only to measure compliance but to evaluate health or environmental risk and gauge progress in reducing pollutant loadings. EPA expects the policy to encourage the kind of vigorous self-policing that will serve these objectives, and not to provide an excuse for delayed reporting. Where violations of reporting requirements axe voluntarily discovered, they must be promptly reported (as discussed below). Where a failure to report results in imminent and substantial endangerment or serious harm, that violation is not covered under this policy (see Condition D(8)). The policy also requires the regulated entity to prevent recurrence of the violation, to ensure that noncompliance with reporting requirements is not repeated. EPA will closely scrutinize the effect of the policy in furthering the public interest in timely and accurate reports from the regulated community. Under Section D(4), disclosure of the violation should be made within 10 days of its discovery, and in writing to EPA. Where a statute or regulation requires reporting be made in Less than 10 days, disclosure should be made within the time Limit established by law. Where reporting within ten days is not practical because the violation is - complex and compliance cannot be determined within that period, the Agency may accept later disclosures if the circumstances do not present a serious threat and the regulated entity meets-its burden of showing that the additional time was needed to determine compliance status. This condition recognizes that it is critical for EPA to get timely reporting of violations in order that it aught have clear notice of the violations and the opportunity to respond if necessary. as well as an accurate picture of a given facility’s compliance record. Prompt disclosure is also evidence of the regulated entity’s good faith in wanting - ------- Federal Register / 22. 1995 I Notices 66709 Vo1 6O, No. 246 / Friday, December to achieve or return to compliance as soon as possible. In the final policy, the Agency has added the words, “or may have occurred,” to the sentence, “The regulated entity fully discloses that a specific violation has occurred, or may have occurred * s.” This change. which was made in response to comments received, clarifies that where an entity has some doubt about the existence of a violation, the recommended course is for it to disclose and allow the regulatory authorities to make a definitive determination. In general, the Freedom of Information Act will govern the Agency’s release of disclosures made pursuant to this policy. EPA will, independently of FOJA. make publicly available any compliance agreements reached under the policy (see Section H of the policy), as well as descriptions of due diligence programs submitted under Section D.i of the Policy Any material claimed to be Confidential Business Information will be treated in accordance with EPA regulations at 40 C.F.R. Part 2. 3. Discovery and Disclosure Independent of Government or Third Party Plaintiff Under Section D(3), in order to be “voluntary”, the violation must be identified and disclosed by the regulated entity prior to the commencement of a federal state or local agency inspection. investigation, or information request: notice of a citizen suit: legal complaint by a third party: the reporting of the violation to EPA by a “whistleblower” employee; and imminent discovery of the violation by a regulator ’ agency. This condition means that regulated entities must have taken the initiative to find violations and promptly report them, rather than reacting to knowledge of a pending enforcement action or third-party complaint This concept was reflected ui the interim policy and in federal and state penalty immunity laws and did not prove controversial in the public comment process. 4 Correction and Remediation Section D(5) ensures that, in order to receive the penalty mitigation benefits available under the policy, the regulated entity not only voluntarily discovers and promptly discloses a violation, but expeditiously corrects it, remedies any harm caused by that violation (including responding to any spill and carrying out any removal or remedial action required by law), and expeditiously certifies in writing to appropriate state, local and EPA authorities that violations have been corrected. It also enables EPA to ensure that the regulated entity will be publicly accountable for its comm it.ments through binding written agreements, orders or consent decrees where necessary. The final policy requires the violation to be corrected within 60 days, or that the regulated entity provide written notice where violations may take longer to correct EPA recognizes that some violations can and should be corrected immediately, while others (e.g., where capital expenditures are involved), may take longer than 80 days to correct. In all cases, the regulated entity will be expected to do its utmost to achieve or return to compliance as expeditiously as possible. Where correction of the violation depends upon issuance of a permit which has been applied for but not issued by federal or state authorities, the Agency will, where appropriate, make reasonable efforts to secure timely review of the permit 5. Prevent Recurrence Under Section D(6), the regulated entity must agree to take steps to prevent a recurrence of the violation, including but not limited to improvements to its environmental auditing or due diligence efforts. The final policy makes clear that the preventive steps may include improvements to a regulated entity’s environmental auditing or due diligence efforts to prevent recurrence of the violation. In the interim policy, the Agency required that the entity implement appropriate measures to prevent a recurrence of the violation, a requirement thafoperates prospectively. However, a separate condition in the interim policy also required that the violation not indicate “a failure to take appropriate steps to avoid repeat or recurring violations’ ‘—a requirement that operates retrospectively. In the interest of both clarity and fairness, the Agency has decided for purposes of this condition to keep the focus prospective and thus to require only that steps be taken to prevent recurrence of the violation after it has been disclosed. 6, No Repeat Violations In response to requests from commenters (see, e g., II—F—39 and Il-C— 18 in the Docket), EPA has established “bright lines” to determine when previous violations will bar a regulated entity from obtaining relief under this policy. These will help protect the public and responsible companies by ensuring that penalties are not waived for repeat offenders Under condition D(7), the same or closely-related violation must not have occurred previously within the past three years at the same facility, or be part of a pattern of violations on the regulated entity’s part over the past five years. This provides companies with a continuing incentive to prevent violations, without being unfair to regulated entities responsible for managing hundreds of facilities. It would be unreasonable to provide unlimited amnesty for repeated violations of the same requirement The term “violation” includes any violation subject to a federal or state civil judicial or administrative order, consent agreement. conviction or plea agreement. Recognizing that minor violations are sometimes settled without a formal action in court, the term also covers any act or omission for which the regulated entity has received a penalty reduction in the past. Together, these conditions identify situations in which the regulated community has had clear notice of its noncompliance and an opportunity to correct. 7. Other Violations Excluded Section D(8) makes clear that penalty reductions are not available under this policy for violations that resulted in serious actual harm or which may have presented an imminent and substantial endangerment to public health or the environment. Such events indicate a serious failure (or absence) of a self- policing program, which should be designed to prevent such nsks, and it would seriously undermine deterrence to waive penalties for such violations. These exceptions are responsive to suggestions from public interest organizations, as well as other commenters. (See, e.g., II—F—39 and Il— G— .18 in the Docket.) The final policy also excludes penalty reductions for violations of the specific terms of any order, consent agreement, or plea agreement. (See, U—E—60 in the Docket.) Once a consent agreement has been negotiated. there is little incentive to comply if there are no sanctions for violating its specific requirements. The exclusion in this section applies to violations of the terms of any response, removal or remedial action covered by a written agreement. 8. Cooperation Under Section D(9), the regulated entity must cooperate as required by EPA and provide information necessary to determine the applicability of the policy. This condition is largely unchanged from the interim policy. In the final policy, however, the Agency has added that “cooperation” includes ------- 66710 Federal Register / Vol. 60, No. 246 I Friday. December 22, 1995 / Notices assistance in deternuning the facts of any related violations suggested by the disclosure, as well as of the disclosed violation itself. This was added to allow the agency to obtain information about any violations indicated by the disclosure, even where the violation is not initially identified by the regulated entity. F Opposition to Privilege The Agency remains firmly opposed to the establishment of a statutory evidentiary privilege for environmental audits for the following reasons: 1. Privilege, by definition, invites secrecy, instead of the openness needed to build public trust in industry’s ability to self-police. Amencan law reflects the high value that the public places on fair access to the facts. The Supreme Court, for example, has said of privileges that. ‘iwihatever their origins, these exceptions to the demand for every man’s evidence are not lightly created nor expansively construed, for they are in derogation of the sea.rch for truth.” United States v. Nixon, 418 U.S. 883 (1974). Federal courts have unanimously refused to recognize a privilege for environmental audits in the context of government investigations. See. e.g., United States v. Dexter. 132 F RD. 8.9-10 (D.Conn. 1990) (application of a privilege “would effectively impede tEPA’sl ability to enforce the Clean Water Act, and would be contrary to stated public policy.”) 2. Eighteen months have failed to produce any evidence that a privilege is needed. Public testimony on the interim policy confirmed that EPA rarely uses audit reports as evidence. Furthermore, surveys demonstrate that environmental auditing has expanded rapidly over the past decade without the stimulus of a privilege. Most recently, the 1995 Price Waterhouse survey found that those few large or mid-sized companies that do not audit generally do not perceive any need to; concern about confidentiality ranked as one of the least important factors in their decisions. 3. A privilege would Invite defendants to claim as “audit” material almost any evidence the government needed to establish a violation or determine who was responsible. For example, most audit privilege bills under consideration in federal and state legislatures would arguably protect factual information—such as health studies or contaminated sediment data—and not just the conclusions of the auditors. While the government might have access to required monitoring data under the law, as some industry commenters have suggested. a privilege of that nature would cloak underlying facts needed to determme whether such data were accurate. 4 An audit privilege would breed litigation, as both parties struggled to determine what material fell within its scope. The problem is compounded by the lack of any dear national standard for audits. The “in camera” (i.e., non- public) proceedings used to resolve these disputes under some statutory schemes would result in a series of time-consuming, expensive mini-trials. 5. The Agency’s policy eliminates the need for any privilege as against the government, by reducing civil penalties and criminal liability for those companies that audit, disclose and correct violations. The 1995 Price Waterhouse survey indicated that companies would expand their auditing programs in exchange for the kind of incentives that EPA provides in its policy. 6. Finally, audit privileges are strongly opposed by the law enforcement community. including the National District Attorneys Association, as well as by public interest groups. (See. e.g., Docket, fl-C-21, ll-C—28, if— C—52. IV—G—10. II-.C—25. U-C—33. LI-C— 52, if-C--48, and U-C—13 through l I-C— 24.) C. Effect on States The final policy reflects EPA’s desire to develop fair and effective incentives for self-policing that will have practical value to states that share responsibility for enforcing federal environmental laws. To that end, the Agency has consulted closely with state officials in developing this policy, through a series of special meetings and conference calls in addition to the extensive opportunity for public comment As a result, EPA believes Its final policy is grounded in common-sense principles that should prove useful in the development of state programs and policies. As always, states are encouraged to experiment with different approaches that do not jeopardize the fundamental national interest in assuring that violations of federal law do not threaten the public health or the environment, or make it profitable not to comply. The Agency remains opposed to state legislation that does not include these basic protections, and reserves its right to bring independent action against regulated entities for violations of federal law that threaten human health or the environment, reflect criminal conduct or repeated noncompliance, or allow one company to make a substantial profit at the expense of its law-abiding competitors. Where a state has obtained appropriate sanctions needed to deter such misconduct, there is no need for EPA action. H ’ Scope of Policy EPA has developed this document as a policy to guide settlement actions EPA employees will be expected to follow this policy, and the Agency will take steps to assure national consistency in application. For example, the Agency will make public any compliance agreements reached under this policy. in order to provide the regulated community with fair notice of decisions and greater accountability to affected communities. Many in the regulated community recommended that the Agency convert the policy into a regulation because they felt it might ensure greater consistency and predictability. While EPA is taking steps to ensure consistency and predictability and believes that it will be successful, the Agency will consider this issue and will provide notice if it determines that a rulemaking is appropriate. IL Statement of Policy fncenth’es for Self Policing Discover 1 ’, Disclosure, Correction and Prevention A. Purpose This policy is designed to enhance protection of human health and the environment by encouraging regulated entities to voluntarily discover, disclose. correct and prevent violations of federal environmental requirements. B. Definitions For purposes of this policy, the following definitions apply: “Environmental Audit” has the definition given to it in EPA’s 1986 audit policy on environmental auditing. i.e.. “a systematic. documented, periodic and objective review by regulated entities of fecility operations and practices related to meeting environmental requirements.” “Due Diligence” encompasses the regulated entity’s systematic efforts, appropriate to the size and nature of its business, to prevent, detect and correct violations through all of the following: (a) Compliance policies, standards and. procedures that identify how employees, and agents are to meet the requirements of laws, regulations, permits and other sources of authority for environmental requirements; (b) Assignment of overall responsibility for overseeing compliance with policies, standards, and procedures, and assignment of specific responsibility for assuring compliance at each facility or operation; ------- Federal_Register/ Vol. 60. No. 246 / Friday, December 22, 1995 / Notices 66711 (C) Mechanisms for systematica fly assuring that compliance policies. standards and procedures are being carried out, including monitoring and auditing systems reasonably designed to detect and correct violations, periodic evaluation of the overall performance of the compliance management system, and a means for employees or agents to report violations of environmental requirements without fear of retaliatien, (dl Efforts to communicate effectively the regulated entity’s standards and procedures to all employees and other agents; (e) Appropriate incentives to managers and employees to perform in accordance with the compliance policies, standards and procedures, including consistent enforcement through appropnate disciplinary mechanisms; and (I) Procedures for the prompt and appropriate correction of any violations, and any necessary modifications to the regulated entity’s program to prevent future violations. “Environmental audit report” means the analysis, conclusions, and recommendations resulting from an environmental audit, but does not include data obtained in, or testimonial evidence concerning, the environmental audit. “Gravity-based penalties” are that portion of a penalty over and above the economic benefit., i.e., the punitive portion of the penalty. rather than that portion representing a defendant’s economic gain from non-compliance. (For further discussion of this concept, see A Framework for Statute-Specific Approaches to Penalty Assessments”, #CM-22, 1980, U.S EPA Ceneral Enforcement Policy Compendium). “Regulated entity” means any entity, including a federal, state or municipal agency or facility, regulated under federal environmental laws. C Incentives for Self-Policing 1. No Gravity-Based Penalties Where the regulated entity establishes that it satisfies all of the conditions of Section D of the policy, EPA will not seek gravity-based penalties for violations of federal environmental requirements. - 2. Reduction of Gravity-Based Penalties by 75% EPA will reduce gravity-based penalties for violations of federal environmental requirements by 75% so long as the regulated entity satisfies all of the conditions of Section D(2) through D(9) below. 3. No Criminal Recommendations (a) EPA will not recommend to the Department of Justice or other prosecuting authority that criminal charges be brought against a regulated entity where EPA determines that all of the conditions in Section D are satisfied, so long as the violation does not demonstrate or involve: U) a prevalent management philosophy or practice that concealed or condoned environmental violations; or (ii) high-level corporate officials’ or managers’ conscious involvement in, or willful blindness to, the violations. (b) Whether or not EPA refers the regulated entity for criminal prosecution under this section, the Agency reserves the right to recommend prosecution for the criminal acts of individual managers or employees under existing policies guiding the exercise of enforcement discretion. 4. No Routine Request for Audits EPA will not request or use an environmental audit report to initiate a civil or criminal investigation of the entity For example, EPA will not request an environmental audit report in routine inspections. If the Agency has independent reason to believe that a violation has occurred, however, EPA may seek any information relevant to identifying violations or determining liability or extent of harm. D. Conditions I Systematic Discovery The violation was discovered through: (a) an environmental audit; or (b) an objective, documented, systematic procedure or practice reflecting the regulated entity’s due diligence in preventing, detecting, and correcting violations. The regulated entity must provide accurate and complete documentation to the Agency as to how it exercises due diligence to prevent, detect and correct violations according to the criteria for due diligence outlined in Section B. EPA may require as a condition of penalty mitigation that a description of the regulated entity’s due diligence efforts be made publicly available. 2. Voluntary Discovery The violation was identified voluntarily, and not through a legally mandated monitoring or sampling requirement prescribed by statute, regulation, permit, judicial or administrative order, or consent agreement. For example, the policy does not apply to: (a) emissions violations detected through a continuous emissions monitor (or alternative monitor established in a permit) where any such monitoring is required; WI violations of National Pollutant Discharge Elimination System (NPDES) discharge limit. detected through required sarnplm or monitoring; (c) violations discovered through a compliance audit required to be performed by the terms of a consent order or settlement agreement. 3. Prompt Disclosure The regulated entity fully discloses a specific violation within 10 days (or such shorter period provided by law) after it has discovered that the violation has occurred, or may have occurred, in wilting to EPA, 4. Discovery and Disclosure independent of Government or Third Party Plaintiff The violation must also be identified and disclosed by the regulated entity prior to: (a) the commencement of a federal, state or local agency inspection or investigation, or the issuance by such agency of an information request to the regulated entity; (b) notice of a citizen suit, (c) the filing of a complaint by a third party; (d) the reporting of the violation to EPA (or other government agency) by a “whistieblower” employee, rather than by one authorized to speak on behalf of the regulated entity; or (e) imminent discovery of the violation by a regulatory agency; 5. Correction and Remediation The regulated entity corrects the violation within 60 days, certifies in writing that violations have been corrected, and takes appropriate measures as determined by EPA to remedy any environmental or human harm due to the violation, If more than 60 days will be needed to correct the violation(s), the regulated entity must so notify EPA in writing before the 60-day period has passed. Where appropriate, EPA may require that to satisfy conditions 5 and 6, a regulated entity enter into a publicly available wntten agreement, administrative consent order or judicial consent decree, particularly where compliance or remedial measures are complex or a lengthy schedule for attaining and maintaining compliance or remediating harm is required; 6. Prevent Recurrence The regulated entity agrees in writing to take steps to prevent a recurrence of the violation, which may include improvements to its environmental auditing or due diligence efforts; ------- 66712 Federal Register I Vol. 60, No. 246 I Friday, December 22, 1995 / Notices 7 No Repeat Violations The specific violation (or closely related violation) has not occurred previously within the past three years at the same facility, or is not part of a pattern of federal, state or local violations by the facility’s parent organization (if any), which have occurred within the past five years. For the purposes of this section, a violation is: (a) any violation of federal, state or local environmental law identified in a judicial or administrative order, consent agreement or order, complaint, or notice of violation, conviction or plea agreement: or (b) any act or omission for which the regulated entity has previously received penalty mitigation from EPA or a state or local agency. 8. Other Violations Excluded The violation is not one which (i) resulted in serious actual harm, or may have presented an imminent and substantial endangerment to, human health or the environment, or (ii) violates the specific terms of any judicial or administrative order, or consent agreement. 9. Cooperation The regulated entity cooperates as requested by EPA and provides such information as is necessary and requested l y EPA to determine applicability of this policy. Cooperation includes, at a ininunum, providing all requested documents and access to employees and assistance in investigating the violation, any noncompliance problems related to the disclosure, and any environmental consequences related to the violations. E. Economic Benefit EPA will retain its full discretion to recover any economic benefit gamed as a result of noncompliance to preserve a ‘level playing field” in which violators do not gain a competitive advantage over regulated entities that do comply. EPA may forgive the entire penalty for violations which meet conditions 1. through 9 in section D and, in the Agency’s opinion, do not merit any penalty due to the insignificant amount of any economic benefit. F. Effect on State Law, Regulation or Policy EPA will work closely with states to encourage their adoption of policies that reflect the incentives and conditions outlined in this policy. EPA remains firmly opposed to statutory environmental audit privileges that shield evidence of environmental violations and undermine the public’s right to know, as well as to blanket immunities for violations that reflect criminal conduct, present serious threats or actual harm to health and the environment, allow noncomplying companies to gain an economic advantage over their competitors. or reflect a repeated failure to comply with federal law. EPA will work with states to address any previsions of state audit privilege or immunity laws that are inconsistent with this policy, and which may prevent a timely and appropriate response to significant environmental violations, The Agency reserves its right to take necessary actions to protect public health or the environment by enforcing against any violations of federal law. G. Applicability (1) This policy applies to the assessment of penalties for any violations under all of the federal environmental statutes that EPA administers, and supersedes any inconsistent provisions in media- specific penalty or enforcement policies and EPA’s 1986 Environmental Auditing Policy Statement. (2) To the extent that existing EPA enforcement policies are not inconsistent, they will continue to apply in conjunction with this policy. However, a regulated entity that has received penalty mitigation for satisfying specific conditions under this policy may not receive additional penalty mitigation for satisfying the same or similar conditions under other policies for the seine violation(s), nor will this policy apply to violations which have received penalty mitigation under other policies. (3) This polIcy sets forth factors for consideration that will guide the Agency in the exercise of its prosecutorial discretion. It states the Agency’s views as to the proper allocation of its enforcement resources. The policy is not final agency action, and is intended as guidance. It does not create any nghts, duties, obligations, or defenses, implied or otherwise, in any third parties. (4) This policy should be used whenever applicable in settlement negotiations for both administrative and ci ul judicial enforcement actions. It is not intended for use in pleading, at hearing or at trial. The policy may be applied at EPA’s discretion to the settlement of administrative and judicial enforcement actions instituted prior to, but not yet resolved, as of the effective date of this policy. H. Public Accountability (1) Within 3 years of the effective date of this policy, EPA will complete a study of the effectiveness of the policy in encouraging: - - — - - — (a) changes in compliance behavior within the regulated community, including improved compliance rates: (b) prompt disclosure and correction of violations, induding timely and accurate compliance with reporting requirements; (C) corporate compliance programs that are successful in preventing violations, improving environmental performance, and promoting public disclosure; (d) consistency among state programs that provide incentives for voluntary compliance. EPA will make the study available to the public. (2) EPA will make publicly available the terms and conditions of any compliance agreement reached under this policy, including the nature of the vioLation, the remedy, and the schedule for returning to compliance. L Effective Date This policy is effective January 22. 1996. Datedi December 18. 1995. Staves A. Herman, Assistant Administrator for Enforcement and Corn phonceAssu i unce. (FR Doc. 95—31146 Flied 12—21—95. 8:45 aml enw coes Ett1 ------- ------- ------- 1 tosr \ _j • k_ .Ip r UNITED STATES ENVIRONMENTAL PROTECTION AGENCY j . WASHINGTON. 0 C 20460 - .— - ‘ ,. /\,Ve’ / MAy APR 29 1997 ASS ISTANAOMNISTR.ATOR FOR ENFQRCEMEN wD COMPLLANCE ASSUR & cE MEMORANDUM SUBJECT INTERIM POLICY AND GUIDANCE ON THE USE OF “CREDIBLE A J V ENCE” IN AIR ENFORCEMENT ACTIVITIES (7 FROM ) ‘ VEN A HERMAN ASSISTANT ADMINISTRATOR TO Regional Administrator (EPA Regions I-X) Regional Counsel (EPA Regions I-X) Regional Enforcement Division Directors (EPA Regions I, VI and HI) Air Division Directors (EPA Regions I-X) The Agency recently revised its regulations and reaffirmed its authority to use any credible evidence to enforce continuing compliance with applicable requirements under the Clean Air Act, as amended 62 f j g 8314 (February 24,1997) (commonly and hereinafter referred to as the “credible evidence rule”) For clarity of policy, consistency in application and guidance on the use of “credible evidence” in the Agency’s clean air enforcement program’, the following will serve as interim implementing measures Vithdrawal of Prior Agency Policy and Guidance - Previous policy guidance concerning the use of continuous emission monitoring (CEM) data indicated that this data would be used for direct enforcement of applicable emissions limitations only when specified as the compliance test method in Agency rules, state implementation plans (SIPs), source permits, orders or consent decrees These policies, along with any other Agency-imposed restrictions on its longstanding statutory authority to use “credible evidence”, were superseded by the 1990 amendments to the Clean Air Act Since enactment of those In every enforcement action taken by the Agency we rely on credible evidence of the violation As used in this Policy and Guidance, however, the term “credible evidence” refers specifically to the kinds of evidence discussed in the credible evidence rule (e g, non-reference test method data and other information that are relevant to whether a source would have been in compliance with applicable requirements if the appropriate performance or compliance test procedures or methods had been performed) See 62 Fed Reg 8314 (Feb 24, 1997) / XY necycI.wnecyclabl. & Pf Iad wth 5c Cw’ s , p m A - n 50% , c ded b& ------- amendments, there has been no limit on EPA’s pre-existing statutory authonty to use credible evidence to establish violations With the credible evidence rule, however, the Agency has formally confirmed arid acknowledged its authority, ability and intention to continue to rely upon any credible evidence, including CEM data (as appropnate), to establish a violation and seek appropnate relief Accordingly, credible evidence can be used to establish any violation, regardless of whether the violation occurred before or after promulgation of that rule Certain Agency policy and other memoranda have in the past suggested a distinction between information sufficient to support issuing a notice of violation and information necessary to prove a violation or determine compliance The 1990 amendments to the Clean Air Act and the credible evidence rule eliminated any perceived need or basis for recognizing such an artificial distinction To avoid possible confusion in the future by those required to comply with emissions limitations and misapplication by those involved in enforcing such limitations, all such prior Agency policy and guidance are hereby expressly withdrawn to the extent they imply any limitation on the use of CEM data (or V any other data generated/developed by methods not specified by regulation) in the Agency’s enforcement activities 2 Moreover and to the extent that prior statements of policy or position may be affected by or inconsistent with the credible evidence rule, the credible evidence rule and this policyfguidance control Interim Enforcement Response Policy - The credible evidence rule does affect prior Agency guidance on the “Timely and Appropriate Enforcement Response to Significant Air Pollution Violators”, issued by John S Settz, Director, Office of Air Quality Planning & Standards, and Robert Van Heuvelen, Director of Civil Enforcement, under memorandum dated February 7, 1992, as subsequently clarified and amended, or other following guidance is expressly included in this withdrawal: Memorandum, Guidance Concerning EPA’s Use of Continuous Emission Monitoring Data,’from Kathleen M Bennett, Assistant Administrator for Air, Noise and Radiation, August 12, 1982 Memorandum, Guidance Enforcement Applications of Continuous Emission Monitoring System Data, Edward E Reich, Director, Station Source Compliance Division, and Michael S Alushin, Associate Enforcement Counsel, Air Enforcement Division, April 22, 1986. Policy Statement, CEMS Policy, Gerald A Emison, Director, Office of Air Quality Planning and Standards (OAQPS), March 31, 1988 (reissued). See also Policy Statement, CEMS Policy and FY 1988 Guidance, Gerald A Emison, Director, OAQPS, July 28, 1987. Memorandum, Transmittal of S02 Continuous Compliance Strategy, John S Seitz, Director, Stationary Source Compliance Division (OAQPS), July 5, 1988. ------- guidance of general applicability Agency enforcement resources and activities should continue to focus on addressing significant violations and in causing sources to return to continuous compliance with applicable requirements Enforcement activities (particularly judicial enforcement proceedings) should generally be directed at violations that (I) may threaten or result in harm to public health or the environment, (2) are of significant duration or magnitude, (3) represent a pattern of noncompliance, (4) involve a reftisal to provide specifically requested compliance information, (5) involve criminal conduct, or (6) allow a source to reap an economic benefit See Credible Evidence White Paper, “The Use of Information other Than Reference Test Results for Determining Compliance with the Clean Air Act”, March 21, 1996. Minor violations generally should continue to be a lower judicial enforcement prionty because other tools can typically be used to address these violations without resort to federal court (e g, occasional exceedences of short duration that are quickly and adequately resolved can typically be handled administratively without the use of more formal, judicial enforcement proceedings) Agency enforcement personnel should look at all the facts and circumstances of a case (e g, extent and duration of noncompliance, environmental consequences and economic benefits of noncompliance), including consideration of the full range of types of violations and all available enforcement tools, in deciding whether and, if so, what enforcement response is warranted to address sporadic, infrequent violations identified or determined through the use of credible evidence The Agency has and should maintain a balanced enforcement program that seeks to assure compliance through using a mix of the compliance and enforcement tools available to it Common sense and reasoned enforcement discretion must continue to guide the Agency in assessing and determining whether available information should be proffered or otherwise • used as credible evidence of a violation 3 SIP Revisions Concerning Credible Evidence - Numerous states have submitted or will soon submit revisions to their SIPs to expressly permit the use of “credible evidence” to enforce applicable requirements See 40 CFR 51 212(c), as recently promulgated Some • revisions have been approved, but many others are still pending (due in part to the pendency of the now concluded credible evidence rule) or are yet to be submitted As reflected in the credible evidence rule, EPA (and the states) have had the authority and ability to use credible evidence to enforce Clean Air Act requirements Nonetheless and to ensure clarity at the earliest practicable date, action on these SIP revisions should be expedited, consistent with necessary legal requirements and in consideration of other pending policy matters (e g, state audit immunity policies) For example, the Clean Air Act Stationary Source Civil Penalty Policy (October 25, 1991) recommends that recoupment of economic benefit due to delayed and avoided compliance costs be calculated from the “first provable date of violation” Agency enforcement personnel should utilize their common sense and experience to assess and evaluate all available information in determining what constitutes a “provable” date of violation under that policy ------- rpceedin s Involving the Use of Credible Evidence in FY 97 are “Nationally jgpjficant” - rn redelegating concurrence authority for the settlement of enforcement actions to Regional Counsel, an exception was made for cases raising issues of national significance Memorandum, Redelegation of the Assistant Administrator for OECA’s Concurrence Authority in Settlement of Certain Civil Judicial and Administrative Enforcement Actions, Steven A Herman, Assistant Administrator, July 8, 1994 Guidelines for identifying nationally significant casesiissues were contemporaneously issued, with subsequent guidance further clarifying the matter Memorandum, OECA!Regional Procedures for Civil Judicial and Administrative Enforcement Case Redelegation, Robert Van Heuvelen, Director, Office of Regulatory Enforcement, November 8, 1994. Consistent with such redelegation, guidelines and guidance, the initiation, litigation and resolution of civil proceedings involving the use or anticipated use of non-reference test data to establish/refute the existence or duration of a violation under SIPs, NSPS, or NESHAPs are to be identified and treated as cases involving “nationally significant issues” for at least the next year Regional Counsel should review their current cases (regardless of redelegated authority) to determine whether credible evidence issues have been or are likely to be raised in all future referrals and enforcement actions, Regional Counsel, Enforcement Division Directors and Air Division Directors should consider whether non-reference test method data and/or other information are available and can be used to enforce compliance with applicable Clean Air Act requirements Future Guidance/Work Group Formation - Since the evaluation and use of credible evidence plays an important part in ensuring continuous compliance with emission limitations and requirements, the Regions are encouraged to use non-reference test data where appropriate Such use could be aided, and consistency enhanced, by the issuance of additional guidance and direction on the evaluation and use of all forms of non-reference test data as credible evidence With this memorandum I am also announcing the creation of a Credible Evidence Work Group, to be chaired by ORE’s Air Enforcement Division. This work group is charged with developing additional guidance on the use of credible evidence and other, related materials This activity will undoubtedly benefit greatly from the perspectives and expertise resident in the Agency’s regions, offices and program activities Please submit nominations of persons with both legal and technical expenerice in clean air enforcement matters to Bruce Buckheit, Director, Air Enforcement Division, Office of’ Regulatory Enforcement, not later than June 1, 1997 The measures identified and described in this document are intended solely for the guidance of government personnel (e g, the Interim Enforcement Response Policy). They are not intended and cannot be relied upon to create rights, substantive or procedural, enforceable by any party in litigation with the United States or the Environmental Protection Agency. EPA reserves the right to act at variance with these measures arid to change them at any time without public notice. ------- |