Since 1995, the U.S. EPA (EPA) has created incentives for regulated entities to voluntarily disclose regulatory violations. In particular, if an entity discloses a violation and corrects the problem within 60 days, the EPA will not recommend criminal charges and will reduce any penalties based on the seriousness of the environmental harm (the “gravity” of the violation) by at least 75%.
Recently, as the disclosure program increased in popularity and EPA resources dwindled, the EPA began efforts to modernize this system by creating an online “eDisclosure system.” On December 9, 2015, following public input, the EPA released an online portal through its Central Data Exchange.
With limited exceptions for new owner self-disclosures and potential criminal violations disclosed to the Voluntary Disclosure Board, the online portal must be used to disclose a violation within 21 days of its discovery. The disclosure must be followed by the regulated entity’s certifications of compliance within 60 days (90 days for small businesses.) The EPA has clarified its policies regarding the ability of companies to obtain additional time to prepare their compliance certifications. Requests for extensions can also be submitted through the online portal, but the amount of time requested and the amount of justification required depend on individual factors, such as the size of the regulated entity, the nature of the violation, and the date the violation was discovered.
This video explains more about how the online portal works:
In addition to creating an online portal, the EPA also made some substantive changes. For instance, EPA will classify the disclosures either as Category 1 (all EPCRA violations except chemical disclosures or “significant economic benefit”) or Category 2 (all other violations). For Category 1 eDisclosures, entities will automatically receive an electronic Notice of Determination (eNOD) confirming that all violations are resolved with no assessment of civil penalties. (Conditioned, of course, on the accuracy of the reporting.) Category 2 eDisclosures will instead receive an Acknowledgment Letter, and will be screened by the EPA for significant concerns such as criminal conduct and potential imminent hazards.
The EPA has stressed that regulated entities should exercise proper care in deciding which information to submit through the online portal. This would include Confidential Business Information (CBI), which the portal is not designed to process securely. Thus, the EPA is keeping the written disclosure processes in place. Similar caution is recommended in the case of disclosures that include personal information, such as social security numbers, birth dates, medical records, or other financial information.
Although the eDisclosure system is intended to reduce transaction costs and provide companies with more certainty, that result may be limited to Category 1 violations. We have several questions about how the new system will work for the more complex cases. First, the EPA has announced that it is changing its approach to addressing FOIA requests for disclosure materials. Previously, requests for materials relating to an unresolved voluntary disclosure would be denied under the “law enforcement proceeding” exception to FOIA. Now, the agency has adopted a presumption in favor of producing the documents, although it will still evaluate on a case-by-case basis whether a FOIA exception should apply. Second, the correction periods for certain disclosures appear to be more stringent and may be problematic. Category 2 violations, which are complex in scope, have a maximum 180 day correction period (up to 360 days for a small business). The flexibility of the former written audit policy appears to be more limited. Third, as the eDisclosure system is put into practice, the EPA recommends that companies use their help desk to resolve any issues that may fall outside the system. (email@example.com or 888-890-1995). It is not clear how the help desk will be staffed, or whether discussions with the help desk will be considered confidential.
The EPA’s new eDisclosure system does not change the factors EPA applies to voluntary disclosures, and does not change the factors a client should consider when deciding whether to voluntarily disclose environmental violations. Furthermore, many states have their own disclosure policies that the EPA’s eDisclosure portal might not cover. If you have any questions concerning the EPA’s audit policies or the new eDisclosure process, please contact any of our attorneys.
Jennifer Nijman, firstname.lastname@example.org
Susan Franzetti, email@example.com
Kristen Gale, firstname.lastname@example.org
Vince Angermeier, email@example.com