Five years ago, the EPA reorganized its compliance programs to make EPA's enforcement and compliance programs more effective in protecting public health, safety and the environment. The regulations also improved and enhanced EPA's ability to reach out to small businesses with information to help them comply with environmental requirements. EPA conducted outreach efforts recently to obtain feedback on compliance and enforcement activities, on ways to further improve public health, safety and the environment through compliance efforts, and on actions EPA has taken over the past five years. From these and other outreach efforts and from meetings and conference calls with interested stakeholder groups, the Office of Enforcement and Compliance Assurance (OECA) received feedback that improvements were needed to both its Audit Policy and to its Small Business Policy. In response to that feedback, OECA reviewed ways to improve these Policies.
The Small Business Compliance Policy
The "Policy on Compliance Incentive for Small Business", which is commonly called the "Small Business Compliance Policy", is intended to promote environmental compliance among small businesses by providing incentives for them to make use of compliance assistance programs, environmental audits, or compliance management systems (CMS), or to participate in any activities that may increase small businesses' understanding of the environmental requirements with which they must comply.
The Policy accomplishes this in two ways: by setting forth guidelines for the EPA to apply in reducing or waiving civil penalties to which small business might otherwise be subject, and by deferring to State, local government and Tribal authorities that offer these incentives consistent with the criteria established in this Policy. Under the existing Small Business Policy, EPA will waive or reduce civil penalties whenever a small business makes a good faith effort to comply with environmental requirements by discovering violations as part of a government sponsored compliance assistance program or a voluntary environmental audit, promptly disclosing those violations, and correcting them in a timely manner. If the small business meets all the criteria in the policy, including violation history, correction timeframe, and lack of harm, EPA will waive 100% of the gravity component of the civil penalty. If, however a small business has obtained a significant economic benefit from the violation(s), EPA will still waive 100% of the gravity component of the penalty, but may seek the full amount of the significant economic benefit associated with the violations. The "gravity component" of the penalty includes everything except the economic benefit amount. Moreover, EPA will defer to State, local and Tribal actions that are consistent with the criteria set forth in this Policy. The Small Business Policy provides penalty reduction as an incentive for small businesses to ask for compliance assistance. This policy is also simpler for small business to use.
Major revisions to the policy include lengthening the prompt disclosure period from 10 to 21 calendar days, and broadening the applicability of this Policy to violations uncovered by small business through any means of voluntary discovery, i.e.:
1. Clarify and Lengthen the Disclosure Period. The revised Small Business Compliance Policy extends the time period within which the small business must fully disclose a violation from 10 to 21 calendar days. The original Policy required "prompt disclosure" for compliance assistance discovery and 10 days disclosure for discoveries made through an environmental audit. Lengthening the disclosure period to 21 calendar days regardless of how the violation was discovered will give small businesses more opportunity to make use of the Small Business Compliance Policy while allowing EPA to get timely reporting of violations. Lengthening the disclosure period to 21 calendar days is also consistent with a similar change that EPA made to the Audit Policy.
2. Expanded Options for Discovery of Violations. The EPA has decided in the revised Small Business Compliance Policy to allow small businesses to obtain penalty relief if violations are discovered by any voluntary means, in addition to discovery as the result of government sponsored on-site compliance assistance activities or environmental audits. For example, voluntary discovery could result from compliance management systems (CMSs), pollution prevention assessments, participation in mentoring programs, training classes, use of on-line compliance assistance centers, and use of checklists. These programs and activities need not be associated with environmental regulatory agencies, but may be associated with any public, private, or non-profit organization. The Agency wants to encourage participation in those programs or activities that could increase compliance, improve efficiency, and reduce pollution.
Applicability-The Small Business Compliance Policy applies to facilities owned by small businesses as defined in here. A small business is a person, corporation, partnership, or other entity that employs 100 or fewer individuals (across all facilities and operations owned by the small business). Entities also include small governments and small organizations. Facilities that are operated by municipalities or other local governments may be covered under the Small Communities Policy. Facilities that are disclosing violations involving multiply facilities should refer to the sections on multiply facilities in the Policy on Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations (the Audit Policy) of April 11, 2000.
The Audit Policy
The complete name of the policy is "Discovery, Disclosure, Correction and Prevention of Violations", commonly referred to as the "Audit Policy." The purpose of this Policy, which is available to entities of any size, is to enhance protection of human health and the environment by encouraging regulated entities to voluntarily discover, promptly disclose and expeditiously correct violations of Federal environmental requirements. Benefits available to businesses that qualify for the Audit Policy include reductions in the amount of civil penalties and no recommendation for prosecution of potential criminal violations. The Policy also restates EPA's long-standing practice of not requesting copies of regulated entities' voluntary audit reports to trigger Federal enforcement investigations.
This revised Audit Policy replaces the 1995 Audit Policy, which was issued on December 22, 1995, and took effect on January 22, 1996. The revisions maintain the basic structure and terms of the 1995 Audit Policy while clarifying some of its language, broadening its availability, and confirming the provisions of the Policy to actual Agency practice. The revisions being released also lengthen the prompt disclosure period from 10 days to 21 days, clarify that the independent discovery condition does not automatically preclude penalty mitigation for multi-facility entities, and clarify how the prompt disclosure and repeat violation conditions apply to newly acquired companies.
Applicability--This policy applies to settlement of claims for civil penalties for any violations under all of the federal environmental statutes that EPA administers, and supersedes any inconsistent provisions in media-specific penalty or enforcement policies and EPA's 1995 Policy on "Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations."
Difference Between These Two Policies
There are several notable differences between the existing Audit Policy and Small Business Policy.
First, the policies allow penalty reduction for violations discovered in different ways. The Audit Policy addresses violations discovered through systematic methods such as environmental audit as well as through non-systematic methods. The Small Business Policy applies only to violations discovered through audits and during government sponsored on-site compliance assistance activities.
Second, the penalty reduction granted by the policies varies. The Audit Policy provides 100% reduction of the gravity component of the penalty for systematic discoveries (i.e., part of a regular audit program) and 75% for non-systematic discoveries. The Small Business Policy provides for up to 100% reduction of the gravity component of the penalty for violations discovered either through regular audits or during government sponsored on-site compliance assistance activities.
The period within which violations must be corrected is different. Under the Audit Policy, businesses must correct a violation within up to 60 days of its discovery of the violation to qualify for penalty reduction. Under the Small Business Policy, a business must generally correct a violation within 180 days of its discovery to qualify for penalty reduction, and within 360 days if the correction involves pollution prevention modifications.
In addition to these notable differences, the Audit Policy addresses issues not covered by the Small Business Policy: criminal conduct and multi-facility disclosures. The Small Business Policy is inapplicable for criminal violations. Violations that may involve criminal conduct can be addressed under the Audit Policy. In the unlikely situation where a disclosure involves a multi-facility business, the Agency will identify the relevant provisions of the Audit and Small Business Policies.
For Further Information Contact: Catherine Malinin Dunn (202) 564-2629 or Leslie Jones (202) 564-5123. Additional documentation relating to the development of this policy is contained in the EPA's Office of Enforcement and Compliance Assurance (OECA) public docket. An index to the docket may be obtained by containing the Enforcement and Compliance Docket and Information Center by telephone at (202) 564-2614 or (202) 564-2119, by fax at (202) 564-1011, or by email at docket.oeca@epa.gov. Office hours are 8:00a.m. to 4:00pm EST.
