Performing EH&S Audits: What Could Possibly Go Wrong?

ISRI Safety and Environmental Council May 3, 2011 Pamela K. Elkow Richard M. Fil ROBINSON & COLE LLP

Goals and Objectives of Presentation

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Identify Common EH&S Issues Recognize Potential Audit Pitfalls Discuss Why Those Pitfalls Can Present Risks Consider More Protective Approaches Evaluate Options for Improving Audit Procedures Audience Questions and Discussion

Reasons for Performing an Audit

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Required by Law / Permit In Response to or Preparation for an Agency Inspection Employee or Third Party Complaint Routine Best Management Practices Due Diligence for Potential Sale or Purchase of the Business or Real Property

Some Common Environmental / OSHA Issues in the Scrap Industry

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Oils / Metals / PCBs / Fluff Degreasing / Solvents Cutting / Clipping / Chopping Dust / Fumes / Odors EPCRA – Material Storage e-Waste / Off-Spec Materials Storage Tanks Training Guarding

Some More Common Environmental / OSHA Issues

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Stormwater Management Wastewater Discharge Permitting Waste Storage and Disposal Air Emissions Historic Site Operations / Legacy Liabilities Wetlands Neighborhood Impacts

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Nuisance

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Off-site migration

Potential Issues in the Context of an Audit

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Site Conditions

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On-site pollution (current and historic operations) Off-site pollution (migration or disposal) Compliance Requirements

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Permits in place (Have or need? Compliance? Renewal?)

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Operational compliance (including OSHA) Ability to expand or change operations Scope of Relevant Personnel (subcontractors, consultants, borrowed employees, etc.)

Important Pre-Audit Considerations

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Reason(s) for the Audit Resources for Responding to Findings Confidentiality / Report Generation Process for Review of Reports Control / Ownership / Reliance Insurance / Indemnification Access / Cooperation Potential Reporting Requirements EPA / State Agency / OSHA Audit Policies

Site Setting for Deal Facility

A Closer Look at a Scrap Facility

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Spills / Releases

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Current operator Prior owners / operators Exposed Materials / Stormwater Compliance Air and Wastewater Permitting and Compliance OSHA Issues

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Training and recordkeeping PPE availability and use Chemical exposure hazards Physical hazards Storage Tanks (ASTs and USTs)

And Even More Site Issues

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On-Site Waste Storage / Off-Spec Segregation Off-Site Migration Impacts from Nearby Properties Past Off-Site Disposal Practices

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Current operator Current operator’s predecessors Wetlands Water-Based Activities Risks Posed by Theft and Vandalism

The Importance of Words

Some Common Audit Pitfalls

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Use of “Bad Words” / Admissions Failure to Recognize Potential Triggers for Additional Action Not Preserving Confidentiality Through the Use of a Control Group and Process Lack of Preparation for Reporting Obligations Failure to Understand and Utilize Agency Protections

Some More Common Pitfalls

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Creation of a Potential “Smoking Gun” in the Form of an Audit Report Not Recognizing the “Spectrum” of Compliance Options that May be Available Appearing to Benefit Economically from Noncompliance Over-Reliance on In-House Personnel Failure to Adequately Prepare for an Audit

Preparing for an Audit

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Determine the Scope and Purpose (and the Anticipated Responses) Identify the Appropriate Audit Team Members:

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In-house personnel Consultants Attorneys Identify and Understand Potential Agency Protections:

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Audit policies (state and federal, OSHA) Requirements / ability to qualify (e.g., SREA; state vs. federal law)

Limitations on Legal Privileges

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Copying an Attorney or Using a “Privileged” Stamp is Not Enough Must Relate to Legal Advice In-House Counsel and Their “Primary Purpose” Data / Facts vs. Discussions / Thoughts / Strategy Keep in Mind the Roles of Relevant Parties:

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Client Attorney Other advisors Affiliated entities Third parties

More Pre-Audit Considerations

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Establish Communications Protocols Evaluate Potential Obligations if Issues Are:

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Agency notification requirements Required or appropriate response actions Related deadlines Ensure All Initial Documentation is:

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Only generated as and when directed

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Stamped draft and attorney-client privileged Subject to initial review by attorney only

Protective Approaches During the Audit

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Ensure that Team Members Stick to the Plan

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BUT: Implement Improvements as Appropriate Maintain Discipline on Form and Content of:

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Documentation Oral communication Reporting obligations Provide Reminders as Necessary

After the Audit

Responding to Audit Findings

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Identify Corrective Measures:

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Evaluate options (including second opinions)

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Implement as appropriate Remain aware of deadlines

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Document completion and costs Continue to Fine Tune Audit Procedures

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Documentation / communications protocols Team members (participation and performance) Training

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Lessons learned

Give Yourself Credit for Good Outcomes!

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Agencies Local Government Community Press Industry

Other Benefits

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Preparation for Agency Inspections Responses to Complaints and Press Inquiries Crisis Management Skills Reputation of Your Company and the Industry

Closing Thoughts

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Involve Consultants and Lawyers Early, Starting With the Pre-Audit Planning Process Get Documentation in Order Understand What You’re Getting Into and How You’ll Get Out of it Before You Start Establish, Maintain and Continue to Refine the Control Process Take Advantage of Agency Protections and a Job Well Done

Any Questions?

Pamela K. Elkow Robinson & Cole LLP 1055 Washington Boulevard, 9 th Stamford, CT 06901-2249 (203) 462-7548 [email protected]

Floor Richard M. Fil Robinson & Cole LLP One Financial Plaza, Suite 1430 Providence, RI 02903-2485 (401) 709-3329 [email protected]