EPA ANNOUNCES ENFORCEMENT POLICY
ON ENVIRONMENTAL AUDITS
By:
Paulette S. Wolfson
Houston
The Environmental Protection Agency (EPA) announced its enforcement policy regarding information contained in environmental audits voluntarily conducted by companies which reveal violations of environmental laws and regulations. Several states, including Arkansas, Colorado, Illinois, Oregon, Utah and Virginia, have adopted legislation that would treat environmental audits as privileged information in the event of enforcement action by a regulatory agency or in private litigation. The purpose of the legislation was to encourage companies to conduct audits and correct any violations without fear of enforcement action based on the company's own internal, voluntary environmental audit. It was hoped that EPA would take a similar approach. This was not the case. EPA stated in its policy announcement that it "will scrutinize enforcement more closely in states with audit privilege and/or penalty immunity laws and may find it necessary to increase federal enforcement" in those states. 60 FR 16875, 16878 (April 3, 1995).
No New Privilege Created
EPA's enforcement policy does not recognize a privilege for information included in a company's voluntary internal environmental audit. Instead, the EPA will provide incentives for companies to conduct audits by assessing penalties that "are consistently and predictably lower than for those [companies] who do not" conduct environmental assessments. In addition to significantly lowering penalties, EPA will not recommend that the Department of Justice bring criminal charges against such companies. Finally, EPA will not begin enforcement investigations based on voluntary environmental audits.
What must companies do to qualify for the benefits of EPA's new enforcement policy? A company will qualify if: (1) the audit was voluntary and not the result of an enforcement action or other settlement agreement; (2) the company fully discloses any violations discovered during the course of the audit to the appropriate regulatory authorities, including federal, state and local agencies, before the company is notified by the agency or a citizen's group of the potential violation; (3) the company promptly corrects the violation (within 60 days or, if longer, "as expeditiously as practicable"); (4) the company expeditiously remedies any condition which may cause an imminent and substantial endangerment to human health or the environment; (5) the company remedies environmental harm caused by the violation and implements procedures to prevent repeat violations; (6) the violation was not the result of a lack of appropriate preventative measures; and (7) the company cooperates with EPA so that it may determine whether the company meets the criteria for the policy's benefits by providing documents and access to employees, among other things.
Attorney - Client Privilege
It should be kept in mind that the enforcement policy in no way limits the attorney-client and work-product privileges. Thus, if the audit were conducted in a manner which meets the standards for those privileges, neither EPA nor a private party would normally have access to the audit. If the audit was privileged, the company would still have the option of balancing the risks of disclosure to the government against the benefits of the new policy in determining whether to disclose voluntarily any violations that were discovered during the audit.
EPA has adopted this enforcement policy instead of the privilege or immunities approach adopted in several states because it believes that "across-the-board privileges and immunities . . . could be used to shield criminal misconduct, drive up litigation costs and create an atmosphere of distrust between regulators, industry and local communities."
Policy Only Guidance
The enforcement policy is not final agency action. Although EPA states in the policy that it is meant to provide companies that conduct voluntary environmental audits, take prompt remedial action and disclose their errors to the government with the assurance that they will be treated less harshly than more recalcitrant companies, EPA also notes that this policy is merely "guidance" and cannot be relied upon to create any rights for the violators. Thus, based on the facts of the case, EPA may not follow this policy. EPA also reserves the right to change this policy without public notice.
EPA's new enforcement policy regarding environmental audits does little to change the status quo and may even create confusion due to the trend at the state level to create safeguards for environmental audit information.
