United States
Environmental Preelection
Agency
Enforcement and
Compliance Assurance
(2201 )
EPA 300-N-97-001
January 1997
Audit Policy Update
FROM THE ASSISTANT ADMINISTRATOR:
Voluntary auditing programs play an important role in helping
companies meet their obligations to comply with environmental law.
EPA's Audit Policy, effective in January of 1996, encourages
self-policing by cutting penalties for any violations that are discovered,
disclosed and corrected through voluntary audits or compliance management
programs. Nor will EPA recommend criminal prosecution of regulated
entities in these circumstances, although individuals remain liable for their
own criminal conduct. The policy includes safeguards to protect the public
and the environment, excluding violations that may result in serious harm or
risk, reflect repeated noncompliance or criminal conduct, or allow a company
to realize a significant economic gain from its noncompliance. (See page 4
for a more complete summary).
So far, 105 companies have disclosed violations under of the policy proving
that environmental auditing can be encouraged without blanket amnesties
or audit privileges that would excuse serious misconduct, frustrate
enforcement, encourage secrecy, boost litigation, and/or lead to public
distrust. This newsletter is the second hi a series of updates on
implementation of EPA's audit policy, and includes information on
settlements, interpretive guidance, and similar state policies. A complete
copy of the audit policy and copies of settlements discussed below can be
obtained by calling (202) 260-7548 or faxing (202) 260-4400 and referencing
docket number C-94-01. For more information, call Brian Riedel, editor of
Audit Policy Update, at (202) 564-4187.
Steve Herman, Assistant Administrator
Office of Enforcement and Compliance Assurance
105 Companies
Disclose Violations
Under Audit Policy
To date, 105 companies
have disclosed environ-
mental violations at more
than 350 facilities under
the EPA interim and final
Audit/Self-Policing
Policies. Among these
disclosures, EPA has
already settled cases/
matters with 40 companies
and 48 facilities, and has
agreed to waive all penal-
ties in most of these cases.
Three recent settlements
are featured in this month's
issue.
Companies Receiving Audit
Policy Relief:
Acadia Polymers, Irongate, VA
Alyeska Pipeline, Prudhoe Bay, AK (2 facilities)
Austin Sculpture, Pharr, TX
Auto Trim, Inc., Brownsville, TX
Baldwin Piano & Organ, Trumann, AR
Bortec Industrial Inc., El Paso, TX
BP Exploration & Oil, Inc., Port Angeles, WA
CENEX, Laurel, MT
Clearwater Co., Pittsburgh, PA
Coilcraft, Inc., El Paso, TX
Cook Composites & Polymers, N. Kansas City, MO
General Electric Corp., Waterford, NY
Gobar Systems, Inc., Brownsville, TX
Goulston Technologies, Inc., Monroe, NC
Hasbro, Inc., El Paso, TX
Invacare, Inc., McAllen, TX
Kingsford Products, Louisville, KY
Koch Refining Co., Corpus Christi, TX
Lambda Electronics, Inc., McAllen, TX
Magnetek, Inc., Brownsville, TX
Microfoam Corp., Utica, NY
Midwestern Machinery, Minneapolis, MN
Minolta Co., Ramsey, NJ
Norton Company, Stephenville, TX
O'Neill Industries, Philadelphia, PA
Outboard Marine Corp., El Paso, TX
Ozark-Mahoning Co., Tulsa, OK
Shure Brothers, Inc., El Paso, TX
Siemens Electromechanical Co., El Paso, TX
Simplot Dairy Products, Nampa, ID
Sunbeam-Oster Co., Bay Springs, MS
Sunbeam-Oster Co., Coushatta, LA
Sunbeam-Oster Co., Hattiesburg, MS
Sunbeam-Oster Co., McMinnville, TN
Sunbeam-Oster Co., Neosho, MO (2 facilities)
Sunbeam-Oster Co., Shubata, MS
Sunbeam-Oster Co., Waynesboro, MS
Transportation Electronics, El Paso, TX
TRW Vehicle Safety Systems, McAllen, TX
TRW Automotive Products Remfg., McAllen, TX
Teccor Electronics, Inc., Brownsville, TX
Thomson Saginaw Ball Screw, Saginaw, MI
Unocal Corp., Cook Inlet, AK
Vastar Resources Inc., La Plata County, CO
Wells Manufacturing Co., McAllen, TX
Zeneca, Inc., Wilmington, DE
Breakdown of Settlements by Type
RCRA
TSCA
CAA
"EPCRA
Totals: 40 companies, 48 facilities
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GE: Curbing Methanol Emissions from
Storage Tanks
General Electric, Inc. voluntarily discovered, disclosed
and corrected violations of the Clean Air Act (CAA) at
its silicone manufacturing facility in Waterford, New
York. The violations resulted from a lack of proper
pollution control equipment on two methanol storage
tanks. Methanol fumes are a hazardous air pollutant
that contributes to smog and can cause serious health
problems. EPA and the Department of Justice agreed to
waive the substantial "gravity-based" component of the
penalty, which reduced the actual penalty in the case to
$60,684, reflecting the amount of economic benefit the
company gained from noncompliance.
DOJ APPI.U I)S (,I. SK II LKMKYI
"This is a great example of what happens when
companies examine their facilities, identify
problems, fix them, and let the public know. It
illustrates this Administration's commitment to
provide incentives for those who perform prompt
and responsible environmental audits."
Lois Schiffer, Assistant Attorney General
Environmental and Natural Resources Division
Department of Justice
VASTAR: Cutting CO Emissions
Vastar Resources Inc., a natural gas production company,
voluntarily discovered, disclosed and corrected Clean Air
Act (CAA) violations involving lack of proper pollution
control equipment to limit the emission of carbon monoxide
(CO) at facilities located on the Southern Ute Indian
Reservation in La Plata County, Colorado. High levels of
CO can cause serious health problems ~ especially for young
children, elderly and those with heart and respiratory
ailments. However, EPA does not believe that CO levels
were that high in this case. The company disclosed the
violations after it took over operation of the facility from
another company and conducted a compliance audit. The
company then quickly brought itself into compliance by
installing the proper control equipment, which will reduce
CO emissions by 3,700 tons or 80% per year. Because the
company met all of the conditions of the Audit Policy, the
gravity-based penalty of several hundred thousand dollars
was waived. Under the settlement, the company's penalty
was limited to $137,949, which represents the economic
benefit the company gained from not initially installing the
proper equipment.
CENEX: Helping Prevent Manufacture of
Unsafe Chemicals
CENEX, Inc., a Montana company, disclosed and corrected
its failure to file reports under the Inventory Update Rule
(IUR) of the Toxic Substances Control Act (TSCA). The IUR
requires manufacturers of chemicals listed on EPA's TSCA
Inventory to report current data on production volume, plant
site and site-limited status. This data forms the basis for
distinguishing which chemicals must undergo a review for
health and environmental effects. Under the Audit Policy,
EPA mitigated $318,750 which represents 75% of the
unadjusted gravity-based penalty, resulting in a total penalty
of $106,250.
OZARK-MAHONING: Cleaning Up & Reporting
Spill of Ferric Sulfate & Hydrofluoric Acid _
Penalties were completely waived under the Audit Policy for
the Ozark-Mahoning Company which voluntarily
discovered, disclosed and corrected CERCLA and NPDES
reporting violations at its Tulsa, Oklahoma facility. The
company had failed to report to the National Response
Center a spill of two CERCLA hazardous substances, ferric
sulfate and hydrofluoric acid, in violation of CERCLA
103(a). The company promptly remediated the spill area and
state authorities verified proper remediation.
In other violations, the company incorrectly reported pH
values under its NPDES permit on four occasions. High
acidity (pH) levels in waters can have a profoundly harmful
effect on water quality and ecosystems. Accurate reporting
of pH levels is critical for monitoring and maintaining water
quality and ecosystems. Because the company met all of the
Policy conditions and did not gain economically from the
CERCLA and NPDES violations, the penalties were reduced
to zero. Ordinarily the penalties for these types would have
been approximately $8,250 for the CERCLA violation and
$40,000 ($10,000 maximum for each) for the four NPDES
violations.
PRAISE for EPA'S POLICY
"It is an excellent policy which worked as intended in our case.
Compliance with the terms of the policy results in penalty
elimination or mitigation. This encourages proactive
environmentally responsible behavior by companies trying to do
the right thing in terms of complying with our nations
environmental laws. "
Peter J. Platzer
President, Midwestern Machinery Co., Inc
t
"It [The Audit Policy] worked quite well for us. "
Rosa Delgado
Warehouse Manager, Austin Sculpture
Page 2
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Audit/Disclosure Can Affect Decision to Prosecute
At least three companies have not been charged with an
environmental crime due to their voluntary disclosure of
violations uncovered in an audit or internal investigation and
their cooperation in the investigation and prosecution of
subsidiary corporations or culpable individuals. While EPA
has not formally invoked the 1995 Audit Policy in these
cases, the decision not to charge them criminally stemmed
from the same considerations now expressly set forth in the
Audit Policy.
For example, in one such case, on February 7, 1996, the
United States Department of Justice announced that Chiquita
Brand, International was not prosecuted due to its voluntary
disclosure that its subsidiary, John Morrell and Company,
had illegally dumped slaughterhouse waste into the Big
Sioux River in Sioux Falls, South Dakota for years and had
deliberately submitted false discharge monitoring reports to
conceal its crimes. John Morrell and Company and several
of MorreU's corporate officials now stand convicted of
conspiracy and various Clean Water Act felonies, but the
government declined to prosecute Chiquita, citing the parent
company's voluntary disclosure and cooperation as the prime
factors. The Office of Criminal Enforcement, Forensics, and
Training is establishing a process whereby criminal
enforcement consideration of the Audit Policy will be made
by a committee at the headquarters level. For questions
regarding application of the Audit Policy in the criminal
context, contact Michael Fenders at (202) 564-2480.
Audit Policy Interpretive G uidance Released
/The Agency's Audit Policy Quick Response Team
(QRT) has completed work on the Audit Policy
Interpretive Guidance which addresses 16 issues
arrising under the Policy. The Guidance, covers such issues
as:
• When Repeat Violations Bar Penalty Mitigation
• When a Violation "May Have Been Discovered"
• Discovery of Violations Under C AA Title V
Permit Applications
• Discovery of Violations During Audits Required
by Settlements
The Interpretive Guidance is in the Audit Policy Docket
and available on the OECA Home Page at:
http://es.inel.gov/oeca/epapolguid.html
The QRT was formed to expeditiously, fairly, and
consistently resolve nationally significant issues involving
application of the Audit Policy in specific cases. Each major
media enforcement program, the Department of Justice and
EPA Regions are represented on the QRT, which is chaired
by the Office of Regulatory Enforcement within EPA's
Office of Enforcement and Compliance Assurance (OECA).
For more information on the Guidance, call Gary Jonesi at
^(202) 564-4002. )
Florida and California Adopt Policies Similar to Audit Policy
U.S. EPA Regional Administrator John H. Hankinson, Jr., in a letter dated September 26,1996, applauded the state of Florida
for adopting a policy modeled on EPA's. Mr. Hankinson reassured Virginia Wetherell, Secretary of the Florida Department
of Environmental Protection (DEP) that, "EPA would cooperate closely with Florida by eliminating duplicative reporting or
burdensome paperwork." Hankinson said, "[W]e see no need for any additional administrative or bureaucratic processes that
may burden Florida's ability to carry out its environmental programs."
"/ am very pleased the EPA is working with the Department to streamline the procedure and reduce the amount of paperwork
required of regulated interests who desire to take advantage of EPA's andDEP's self-audit policies. This determination by EPA
is a significant addition to the incentives we have identified for regulated interests to establish a self-audit program. The policy
is good for business and good for the environment and offers an excellent opportunity for EPA, DEP and regulated interests
to work in partnership toward mutually beneficial goals."
Virginia B. Wetherell
Secretary, Florida DEP
A copy of the letter is available in the Audit Policy Docket. For further information about the Florida DEP Directive on
Incentives for Self-Evaluation, contact Molly Palmer at (206) 553-6521. The California EPA also has recently adopted an audit
policy similar to the U.S. EPA Audit Policy. For further information about the Cal EPA Policy on Incentives for Self-
Evaluation, contact Gerald Johnston at (916) 322-7310.
PageS
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Settled Audit Policy Case/Matter Documents
Contained in Audit Policy Docket
The Audit Policy Docket contains document related to cases
and matters settled under the Audit Policy to date. Examples
of documents include disclosure letters, EPA responses,
Consent Agreements and Consent Orders, and letters of
intent not to enforce. In addition, the Docket contains
hundreds of other documents, such as the new Interpretive
Guidance, and comments and letters related to the Policy and
environmental auditing. The Docket is accessible by calling
(202) 260-7548 or faxing (202) 260-4400 and referencing
docket number C-94-01.
Other Self-Disclosure Programs
The EPA Audit Policy is but one example of how compliance
incentives have encouraged companies to disclose and
correct violations without providing blanket amnesties. Other
examples include the TSCA Compliance Audit Program
(CAP) and EPA Region 7's Subpart 000 (Clean Air Act,
testing and reporting) Voluntary Compliance Program.
Under CAP, about 125 companies disclosed approximately
11,000 "substantial risk" TSCA section 8(e) reports in
exchange for reduced penalties and an overall penalty cap of
$1 million per company. Under the Subpart 000 program, 52
nonmetallic mineral processing companies in Missouri self-
disclosed violations of air emission (NSPS) reporting and/or
testing requirements in exchange for dramatically reduced
penalties. In both programs, participants paid the economic
benefit they gained from noncompliance. For more
information about the TSCA CAP, call Caroline Ahearn at
(202) 564-4163, or about the subpart 000 program, call
Becky Dolph, at (913) 551-7281.
Summary of Audit Policy
Voluntary audit programs play an important role in helping
companies meet their obligation to comply with environmental
laws. EPA's audit policy, effective in January of 1996, will
greatly reduce and sometimes eliminate penalties for
companies that discover, disclose and correct violations
through voluntary audits or compliance management programs,
while including safeguards to protect the public and the
environment from the most serious violations.
"3*° The Policy requires companies to:
promptly disclose and correct violations,
prevent recurrence of the violation, and
remedy any environmental harm.
"5" The Policy excludes:
repeated violations,
violations that result in serious actual harm, and
violations that may present an imminent and
substantial endangerment.
Corporations remain criminally liable for violations resulting
from willful or conscious avoidance of their legal duties, and
individuals remain liable for criminal wrongdoing. EPA
retains discretion to recover the economic benefit gained as a
result of noncompliance, so that companies will not be able to
obtain an economic advantage over their competitors by
delaying investment in compliance. Companies that do not
discover violations through an audit or CMS, yet meet all of
the other Policy conditions, will receive 75% mitigation of
gravity-based penalties.
The Final Audit/Self-Policing policy was published in the
Federal Register on December 22,1996 (60 FR 66706). It took
effect on January 22,1996. For further information, contact the
Audit Policy Docket or call 202-564-4187.
WHOM TO CALL:
Regulated entities that wish to take
advantage of the Policy should fax or send
a written disclosure to the appropriate EPA Regional
contact listed below. Note that the written disclosure must
be made within 10 days of the violation's discovery:
Region 1 (CT,ME,MA,NH,RI,VT), Sam Silverman:
617-565-3441 (telephone)/1141 (fax)
Region 2 (NJ,NY,PR,VI), John Wilk:
212-637-4059/4035
Region 3 (DE,DC,MD,PA,VA,WV), Janet Viniski:
215-566-2999/2905
Region 4 (AL,FL,GA,KY,MS,NC,SC,TN),
Bill Anderson: 404-562-9655/9663
Region 5 (IL,IN,MI,MN,OH,WI), Tinka Hyde:
312-886-9296/353-1120
Region 6 (AR,LA,NM,OK,TX), Chuck Sheehan:
214-665-2175/3177
Region 7 (IA,KS,MO,NE), Becky Dolph:
913-551-7281/7925
Region 8 (CO,MT,ND,SD,UT,WY), Michael Risner:
303-312-6890/6953
Region 9 (AZ,CA,HI,NV), Leslie Guinan:
415-744-1339
Region 10 (AK,ID,OR,WA), Jackson Fox:
206-553-1073/0163
Page 4
rovide ''information to the public and regulated community regarding developments under the EPA Audit Policy.
Editor: Brian Riedel
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