U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Early Warning Report:
Use of Contractors to Conduct
Clean Air Act Risk Management
Program Inspections in
Certain States Goes Against
Court Decisions
Report No. 12-P-0376
March 28, 2012

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Report Contributors:	Rick Beusse
Jim Hatfield
Bao Chuong
Rebecca Matichuk
Mona Mafi
Abbreviations
CAA:	Clean Air Act
EPA:	U.S. Environmental Protection Agency
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
e-mail:	OIG Hotiirie@epa.aov	write: EPA Inspector General Hotline
phone:	1-888-546-8740	1200 Pennsylvania Avenue NW
fax:	202-566-2599	Mailcode 2431T
online:	http://www.epa.gov/oig/hotline.htm	Washington, DC 20460

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PRO^fcC
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
March 28, 2012
MEMORANDUM
SUBJECT: Early Warning Report: Use of Contractors to Conduct Clean Air Act Risk
Management Program Inspections in Certain States Goes Against Court Decisions
Report No. 12-P-0376
The Office of Inspector General is currently evaluating whether the U.S. Environmental
Protection Agency (EPA) has adequate management controls for ensuring the effectiveness of its
Clean Air Act (CAA) Section 112(r) risk management program inspections. During the
preliminary research phase of our evaluation, we learned that EPA has used contractors to
perform risk management program inspections in Kansas, Kentucky, and Tennessee despite
federal court decisions prohibiting EPA's use of contractors to conduct CAA inspections in these
states and the EPA policy memo that incorporated the decisions. While we continue our
evaluation in the field work phase, this situation requires your immediate attention.
Background
Under the CAA 112(r) risk management program, stationary sources that have more than the
threshold quantity of regulated substances on-site in any one process must implement a risk
management program. All covered facilities must submit a Risk Management Plan to EPA that
describes and documents the facility's hazard assessment and its prevention and response
programs. When properly performed by trained, knowledgeable inspectors who are authorized
representatives of the Administrator, CAA 112(r) risk management program inspections are an
essential component of the program for ensuring that facilities comply with risk management
program requirements. Compliance with risk management program requirements helps to
prevent accidents and mitigate the harm to human health and the environment from those that do
occur.
FROM: Arthur A. Elkins, Jr.
Inspector General
TO:
Cynthia Giles
Assistant Administrator
Office of Enforcement and Compliance Assurance
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Case law is split on the use of contractors to perform CAA inspections.
	The Tenth Circuit Court, in Stauffer Chemical Co. v. EPA (1981), and the Sixth Circuit
Court, in United States v. Stauffer Chemical Co. (1982), had ruled that contractors may
not be designated by EPA as "authorized representatives" of the Administrator under
CAA Section 114 on recordkeeping, inspections, monitoring, and entry. [Stauffer
Chemical Co. v. EPA, 647 F.2d 1075 (10th Cir. 1981); U.S. v. Stauffer Chemical Co.,
684 F.2d 1174 (6th Cir. 1982).]
	The Ninth Circuit Court, in Bunker Hill Co. v. EPA (1981), and one District Court in the
Fourth Circuit, in Aluminum Co. of America v. EPA (1980), had ruled that EPA may
designate contractors as authorized representatives under CAA Section 114. [Bunker Hill
Co. v. EPA, 658 F.2d 1280 (9th Cir. 1981); Aluminum Co. of America v. EPA,
No. M-80-13 (M.D.N.C. Aug. 5, 1980).]
EPA's authority to designate contractors as "authorized representatives" of the Administrator to
conduct inspections under CAA Section 114 was one of two issues presented to the U.S.
Supreme Court in United States v. Stauffer Chemical Co. in 1983 [U.S. v. Stauffer Chemical Co.,
464 U.S. 165 (1984)]. The case was heard by the Supreme Court on November 2, 1983, and
decided on January 10, 1984. Because the Supreme Court did not address the question of
statutory authority, its decision left unresolved the pre-existing split in the Circuit Courts on the
question of EPA's statutory authority to use contractors for CAA inspections.
EPA issued a policy memo on February 22, 1984, stating that contractors should not, absent
express permission from headquarters, be designated as representatives of EPA to conduct CAA
inspections in states located in the Sixth and Tenth Circuits. The states in the Sixth and Tenth
Circuits are: Colorado, Kansas, Kentucky, Michigan, New Mexico, Ohio, Oklahoma, Tennessee,
Utah, and Wyoming. These states are within EPA Regions 4, 5, 6, 7, and 8.
EPA Is Using Contractors to Conduct CAA Risk Management Program
Inspections in Kansas, Kentucky, and Tennessee
EPA Regions 4 and 7 use contractors to conduct CAA 112(r) risk management program
inspections in Kansas, Kentucky, and Tennessee despite decisions by the Sixth and Tenth Circuit
Courts prohibiting this practice and the EPA policy memo that reiterated this prohibition. The
Region 4 risk management program coordinator told us that he was aware of EPA's 1984
guidance on this subject but neither the region nor headquarters had questioned this practice, and
inspected facilities have not challenged the region's use of contractors in Kentucky and
Tennessee. The staff coordinator confirmed that Region 4 had not obtained approval from
counsel to use contractors for these inspections. The risk management program team leader in
Region 7 told us that he was not aware of EPA's 1984 policy memo prohibiting the use of
contractors in Kansas. The team leader was not aware of any specific discussions with counsel
regarding the use of contractors to conduct inspections in Kansas.
EPA should immediately review the legality and appropriateness of its practice of using
contractors to perform CAA risk management program inspections in the states covered by the
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Sixth and Tenth Circuit Courts (Colorado, Kansas, Kentucky, Michigan, New Mexico, Ohio,
Oklahoma, Tennessee, Utah, and Wyoming). This review should also determine whether
contractors are used to conduct other CAA program inspections in states covered by the Sixth
and Tenth Circuit Courts. If needed based on the results of its review, EPA should take
immediate action to eliminate or revise its use of contractors to conduct risk management
program inspections. EPA should also update and reissue its policy memo on the use of
contractors to perform CAA inspections.
Thank you for your prompt attention to this important matter. If you have any questions,
please contact me at (202) 566-0847 or elkins.arthur@,epa. gov, or Elizabeth Grossman at
(202) 566-0838 or grossman. elizabeth@,epa. gov.
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