environmental audits

Environmental Audits

• New Jersey Hospital Association - May 2, 2005

• Patrick T. Mottola, Esq.

• This presentation and materials do not constitute and are not legal advice

Norris, McLaughlin & Marcus, P.A.

Self-Disclosure of Violations

• Environmental Protection Agency (“EPA”) Audit Policy

• New Jersey Department of Environmental Protection (“NJDEP”) Policy


United States Constitution – Bill of Rights

• Amendment V (1791)• “No person … shall be compelled in any criminal case

to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law.”

• Generally recognized as a right against self-incrimination

• Less latitude in the administrative, rather than criminal context


To Audit, or Not to Audit? That is the Question

• Self-audit without disclosure and await EPA inspection

• Benefit: no disclosure

• Risk: violations found later during an EPA inspection (especially documentation cases)

• EPA’s Audit Program does provide incentives to disclose


EPA – Key Topics

• Audit Policy• Audit Agreements


EPA Audit Policy

• Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations (“Audit Policy”)

• Federal Register, April 11, 2000 (Fed. Reg. Vol. 65, No. 70)

• Updated EPA’s 1995 Policy


Incentives for Self-Reporting Under the Audit Policy

• Elimination of Gravity-Based Penalties when all 9 conditions of the Audit Policy are met

• Reduction of Gravity-Based penalties by 75% when all but the “systematic discovery” component is met

• No recommendation for criminal prosecution• The audit will not trigger enforcement

investigations


EPA Civil Penalty Assessments

• Economic Benefit– The economic advantage gained by the violators past

competitive advantage through non-compliance with environmental laws

• Gravity-Based Component– The punitive portion of a penalty– Penalty above the economic benefit– Based on the behavior of the violator


Audit Policy – Conditions for Penalty Mitigation (Nine Total)

• (1) Systematic discovery of a violation– Environmental audit– Environmental compliance management system

• (2) Voluntary discovery– Not those discovered through a regularly-required

monitoring program (e.g., NJPDES Permit, Air Permit)



• (3) Prompt disclosure– In writing to EPA with 21 Days of DISCOVERY (but see

exception with Audit Agreement)– When an officer, director, employee or agent of the facility

has an objectively reasonable basis for belief a violation occurred

• (4) Independent discovery and disclosure– Before EPA would have identified the violation through its

own investigation or report by a third party



• (5) Correction within 60 days of discovery

• (6) Take steps to prevent recurrence of the violation

• (7) Repeat violations not eligible– If occurred within the past 3 years

– If part of a pattern of violations within the past 5 years at other facilities



• (8) Ineligible Violations– Result in serious actual harm

– Present an imminent and substantial endangerment to human health or the environment

– Violations of an administrative or judicial order or consent decree

• (9) Cooperation


Audit Agreements

• A mechanism for complying with the Audit Policy

• Key features:– allows entity to set a schedule with EPA

– allows for disclosure of violations beyond the 21-day requirement


Benefits to an Audit Agreement

• Provides an opportunity to evaluate institutional environmental practices and SOPs outside the context of an enforcement action

• Provides comfort that disclosure over a mutually-agreeable schedule will meet EPA’s requirements for timely disclosure


Effect on State Law

• EPA developed the Audit Policy with consultation from the states

• EPA will share information from an audit with a state

• States are free to develop their own audit programs so long as they maintain the minimum requirements set forth by the federal government.


Audit Agreements for Hospitals and Universities

• As of last year, EPA had 14 agreements with colleges and universities

• EPA had at least 23 agreements with hospitals


Audit Policy Case Results

• 130 Audit Policy disclosures

• About $3.4 million in penalties waived

• Time from disclosure to resolution – 6 to 18 months


Audit Policy Case Results

• EPA issues a Notice of Determination (EPA’s resolution method)

• 75% to 100% reduction

• Many facilities are assessed $0.00 in penalties (100% reduction)

• Penalties, after a 75% reduction, range from $6,800 to $27,000


Types of Audit Agreements

• Letter – simple, one page

• Formal – detailed, many pages


Formal Audit Agreement

• 8 Sections

• Appendices

• EPA will negotiate the Agreement to some degree, but the Agency is moving away from extremely tailored language


Audit Agreement – Section I

• Introduction– Identifies parties

– Recognizes the Audit Policy as the regulatory program governing the Agreement


Audit Agreement – Section II

• Scope of the Audit– Air Programs– Water Programs– Pesticide Programs– Solid and Hazardous Waste– Hazardous Substances and Chemicals, Emergency Response,

Emergency Planning and Community Right-to-Know Programs– Toxic Substances


Audit Agreement – Section III

• Disclosure– Written disclosure reports in accordance with a schedule (Section

IV)

– EPA waives the 21-day disclosure requirement of the Policy in favor of the schedule in the Audit Agreement

– Provides a 60-day period in which to correct violations discovered

– Does NOT cover pre-Agreement activities


Audit Agreement – Section IV

• Schedule– Notify EPA of the consultant within 14 days of the Audit

Agreement

– Commence the audit within 30 days

– Submit Audit Reports within X days (this can be negotiated, 90 or 120 days is typical)


Audit Agreement – Section V

• Corrective Action– Correct violations within 60 days of discovery

– If correction cannot be achieved within 60 days, EPA may grant an extension

– Requires expeditious correction for violations that “may present an imminent and substantial endangerment to human health or the environment”


Audit Agreement – Section VI

• Civil Penalties for Disclosed Violations– No gravity-based penalties pursuant to the Policy– When assessing penalties for economic benefit from past non-

compliance, EPA will consider the LEAST expensive means for coming into compliance

– During the Audit period, EPA will not recommend civil enforcement to other agencies

– EPA reserves the right to disclose and discuss a case with other regulatory agencies


Audit Agreement – Section VII

• Regional Inspections - Compliance inspections will be assigned a low priority until after completion of the Audit, except:– Areas outside the scope of the audit;

– When EPA receives a citizen complaint

– If EPA has reason to believe there is a threat of danger to public health or the environment


Audit Agreement – Section VIII

• Miscellaneous Provisions– Hospital identifies a “responsible official” who must certify that

each disclosure report is true, accurate and complete

– Hospital identifies a “contact person” who is typically the hospital’s attorney

– EPA identifies a contact person

– Provides that the hospital may make confidentiality claims


Audit Agreement – Appendix A

• Covered Campuses and Off-Site Facilities– Hospital building

– Auxiliary laboratories and medical service offices

– Off-site storage

– Vehicle garages

– Offices

– Doctors’ offices


Audit Agreement – Appendix B

• Scope of Audit Program– Documents to Review (3 years prior)– Facilities Operations and Maintenance– Fleet Maintenance– Hazardous Waste/Tanks/Wells– Laboratories– Patient Care– Pharmacy– Use and Disposal of Chemicals/Products of Concern– Photo processing– Morgue


Practical Issues

• Client can discuss legal issues under the attorney-client privilege

• Project Team: client, technical (consultant), and legal (attorney)

• Client departments– Environmental compliance manager– Facilities manager– Laboratory manager


Post-Audit Considerations

• Follow-up reports if required

• EPA may ask for information on the COST associated with coming into compliance as a result of the audit

• Implement an Environmental Management System (“EMS”) to ensure future compliance


EMS

• Create a general policy that expresses the institution’s commitment to comply with environmental laws

• Establish and maintain procedures to identify environmental compliance points

• Develop a compliance plan, including assignment of responsible personnel and employee training

• Implement mechanisms for detecting violations of law (self-audits)

• Provide for appropriate management review
