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April 17, 2013

EPA Contemplates Future of Its Audit Policy

Bergeson & Campbell, P.C.

In its April 30, 2012, publication, FY 2013 Office of Enforcement and Compliance Assurance (OECA) National Program Manager (NPM) Guidance, OECA discusses its enforcement objectives and program priorities for fiscal year (FY) 2013. In discussing notable changes for FY 2013 from FY 2012, OECA lists budget challenges and states that it must cut resources in certain areas: “Anticipating tight budgets in FY 2013 and beyond, EPA’s enforcement program needs to focus its limited resources on the most pressing environmental and noncompliance problems.” Among budget areas requiring reduction, EPA lists the Audit Policy/Self-Disclosures program and states the following:

Audit Policy/Self-Disclosures: Since implementation of the Audit Policy began in 1995, EPA’s enforcement program has increased its understanding of environmental compliance auditing, and believes that internal reviews of compliance have become more widely adopted by the regulated community, as part of good management. In addition, EPA has found that most violations disclosed under the Policy are not in the highest priority enforcement areas for protecting human health and the environment. EPA believes it can reduce investment in the program to a limited national presence without undermining the incentives for regulated entities to do internal compliance reviews to find and correct violations. As we reduce investment in this program, EPA is considering several options, including a modified Audit Policy program that is self-implementing.

The vagueness of these statements has given the regulated industry pause and raised concerns that EPA might be considering repeal of its Audit Policy. Recently, the Corporate Environmental Enforcement Council (CEEC) submitted to OECA a robust set of comments, stating: “CEEC understands that the Agency is seriously considering eliminating the Audit Policy, based on a desire to conserve and better deploy its limited enforcement resources.” In its comments, the CEEC sets forth compelling arguments why such an effort would be misdirected and instead suggests changes to the Audit Policy intended to increase its efficiency while reducing the demand on EPA resources. For a copy of the February 8, 2013, CEEC comments, please send an e-mail to Chad Howlin.

During an April 16, 2013, Environmental Law Institute (ELI) webinar, Andrew Stewart, the Acting Division Director, Special Litigation & Projects Division, OECA, confirmed that the current Audit Policy remains in effect. Stewart further stated that OECA is assessing how to update the Audit Policy such that the types of disclosures are better aligned with EPA’s enforcement priorities, thereby producing higher yielding and more targeted results. While noncompliance that has resulted in serious harm to the environment or imminent and substantial endangerment is ineligible for penalty mitigation under the Audit Policy, Stewart stated that EPA believes many “serious violations” would remain eligible.


Many in industry believe EPA’s Audit Policy has been a successful tool in encouraging prompt disclosure and correction of noncompliance, with benefits including reduced or no gravity-based penalties for qualifying disclosures. The rewards associated with application of the Audit Policy have exceeded the potential burden the policy imposes on EPA. Thus, the rumblings that have been expressed over the past six months or so that EPA may be revisiting or eliminating the Audit Policy have inspired concern and a good deal of anxiety within the regulated community.

The ELI program was useful in clarifying that EPA does not appear at this time inclined to scuttle the policy as much as recalibrate it to ensure it better aligns with EPA’s enforcement priorities. Based on Stewart’s remarks, it appears EPA’s intent is to modify the policy to encourage more “focused” disclosures. It appears, based on Stewart’s remarks, that EPA wishes for disclosure of more “serious violations” that are aligned with EPA’s enforcement priorities, as well as disclosures that EPA could leverage into cross-industry corrective programs.

One recent related EPA effort is a pilot program for electronic Audit Policy self-disclosure through EPA’s Central Data Exchange (CDX) system, which seeks to diminish EPA’s resources for managing disclosures. (More information about EPA Audit Policy Electronic Self-Disclosure is available online.) How EPA would modify the Audit Policy to focus disclosures on noncompliance aligned with EPA’s enforcement priorities and according to what timetable remains unclear. Interested parties should monitor these developments carefully, consider how they affect internal compliance management practices, and seek to engage EPA to ensure the Audit Policy remains a useful and effective tool to industry’s compliance efforts and EPA’s response to them.