Transcript Title Title Title - Norris McLaughlin & Marcus

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
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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 selfincrimination
• Less latitude in the administrative, rather than
criminal context
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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
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EPA – Key Topics
• Audit Policy
• Audit Agreements
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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
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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
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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
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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)
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Audit Policy – Conditions for Penalty
Mitigation (Nine Total)
• (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
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Audit Policy – Conditions for Penalty
Mitigation (Nine Total)
• (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
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Audit Policy – Conditions for Penalty
Mitigation (Nine Total)
• (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
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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
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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 mutuallyagreeable schedule will meet EPA’s requirements for
timely disclosure
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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.
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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
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Audit Policy Case Results
• 130 Audit Policy disclosures
• About $3.4 million in penalties waived
• Time from disclosure to resolution – 6 to 18 months
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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
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Types of Audit Agreements
• Letter – simple, one page
• Formal – detailed, many pages
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Formal Audit Agreement
• 8 Sections
• Appendices
• EPA will negotiate the Agreement to some degree, but the
Agency is moving away from extremely tailored language
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Audit Agreement – Section I
• Introduction
– Identifies parties
– Recognizes the Audit Policy as the regulatory program governing
the Agreement
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Audit Agreement – Section II
• Scope of the Audit
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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
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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
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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)
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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”
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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 noncompliance, 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
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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
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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
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Audit Agreement – Appendix A
• Covered Campuses and Off-Site Facilities
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Hospital building
Auxiliary laboratories and medical service offices
Off-site storage
Vehicle garages
Offices
Doctors’ offices
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Audit Agreement – Appendix B
• Scope of Audit Program
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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
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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
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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
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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
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