The New Environmental Federalism: Can the EPA's Voluntary Audit Policy Survive?
By Brooks M. Beard
INTRODUCTION
Recent years have been filled with conflicts surrounding Superfund Reauthorization, environmental protection appropriations, and efforts to reduce federal environmental restrictions. The most far-reaching controversy, however, surrounds the efforts by state and federal agencies to afford legal protection to companies that voluntarily investigate, identify, and report environmental violations. At the heart of the voluntary environmental audit conflict is the issue of environmental federalism: how much control over environmental compliance regulations is the federal government willing to give to the states and how much responsibility are the states willing to take?
Protections for companies that have chosen to conduct voluntary environmental audits, particularly at the state level, have become front-page news. These protections range from reduced penalty provisions and privileges for the contents of audits, to full immunity from civil and criminal sanctions. The privilege and immunity provisions, which potentially inhibit a regulatory agency's ability to undertake enforcement actions, strike at the heart of the enforcement philosophy of the United States Environmental Protection Agency (“EPA”): regulated entities must be held accountable for all violations of environmental statutes and regulations.
Generally, the rationale for protecting the results of voluntary audits is to create incentives for the regulated community to evaluate its own environmental compliance status and correct identified violations expeditiously, thereby increasing compliance with environmental requirements and reducing the government resources required to enforce federal, state, and local environmental laws. However, opponents of expansive state audit legislation have expressed concern over the incentives being offered to industry by the states. In particular, opponents contend that the evidentiary privilege and immunity provisions offered by some states, while properly rewarding “good” actors, will enable many “bad” actors to escape responsibility for their actions.
The players involved in the voluntary audit conflict agree that, at least in the abstract, voluntary audit programs should be encouraged and followed by industry. However, even with this general consensus, the EPA's voluntary audit policy has fallen short of its mark because the key players are unsatisfied with the end product. Responding to industry concerns, states have enacted audit protection laws that have created tension between state legislatures and the EPA. Even with such state legislation in place, industry remains concerned about its exposure to liability through the EPA's initiation of federal “overfilings.” Environmental groups, in turn, are threatening to bring suit against the EPA, claiming that the EPA cannot delegate any environmental program to a state with privilege and immunity legislation, since such legislation may conflict with the state's ability to fully meet its enforcement obligations under a federally-delegated program.
The philosophical and political debate over whether protections for voluntary environmental audits will effectively ensure compliance with environmental laws attempts to compare audits with typical enforcement strategies utilizing other methods of compliance assurance. While protections for voluntary environmental audits may offer a means for balancing enforcement and compliance interests, disagreement among various players regarding the proper role of audit protections is intensifying. Regulated industries argue that they should not be subject to civil or criminal sanctions if, at their own initiative, they expend money to identify, characterize, and correct environmental violations, especially where it seems unlikely that a violation would have been detected by regulatory agencies. Environmental organizations, on the other hand, are concerned that, during an era when the community-right-to-know is highly valued, expansive privilege and immunity protections will hinder the public's ability to obtain access to information that is necessary to enforce environmental laws through citizen suits.
Voluntary audits represent a significant shift away from the command-and-control approach to environmental enforcement typically relied on by the EPA. The EPA is now being forced to consider whether a state's ability to enforce environmental laws may be seriously jeopardized by expansive state legislation. While the EPA's new voluntary audit policy is only one example of the agency's relatively recent shift away from command-and-control enforcement, in the EPA's view, state privilege and immunity laws go too far.
As a result of these concerns, states and environmental organizations have questioned whether the EPA has the legal authority, let alone the political will or power, to resolve the conflict. States do not want to lose their authority to administer delegated programs not only because they can essentially control the permitting process, and typically offer a quicker, cheaper permitting process that is valued by industry within the state, but also because they do not want to lose the federal funding that accompanies the delegated authority.
Part II of this Article describes the EPA's official environmental audit policies and the continuing controversy surrounding them. Regulated entities believe that the EPA has retained too much enforcement discretion. On the other hand, the EPA, environmental groups, and some attorneys general are concerned about broad privilege and immunity legislation being enacted at the state level to counter the EPA's policy. Moreover, regulated entities and environmental groups cannot agree on the scope of public disclosure that should be allowed for information derived from voluntary environmental audits.
Part III discusses the goals of each interested player involved in this controversy and the negotiating tools each possesses to accomplish its goals. Even with their divergent interests, the players to this controversy have sufficiently consistent objectives so that, if they are willing to compromise, an effective, mutually beneficial policy can be developed.
Part IV evaluates the EPA's legal authority to reformulate its audit policy into a regulation. A regulation would not allow all regulated entities to escape responsibility for complying with environmental regulations. Through a properly crafted regulation, the EPA would retain sufficient discretion on a case-by-case basis to ensure that regulated entities comply with their environmental responsibilities.
Finally, Part V analyzes proposed changes to the EPA's voluntary environmental audit policy that consider and balance the goals presented by the players. Ultimately, the EPA should re-evaluate its Final Policy Statement to develop a more comprehensive voluntary audit scheme that provides adequate protections from criminal or civil penalties for entities performing voluntary environmental audits, clarifies the required scope of the audit, and controls the dissemination of information to the public. If the parties to the voluntary environmental audit controversy are willing to reach a compromise regarding i) the EPA's retained enforcement authority, ii) the scope and breadth of privileged information and penalty immunity, and iii) what information obtained through the performance of a voluntary environmental audit will be made publicly available, then the competing entities can reach an effective, mutually beneficial agreement.
Recent years have been filled with conflicts surrounding Superfund Reauthorization, environmental protection appropriations, and efforts to reduce federal environmental restrictions. The most far-reaching controversy, however, surrounds the efforts by state and federal agencies to afford legal protection to companies that voluntarily investigate, identify, and report environmental violations. At the heart of the voluntary environmental audit conflict is the issue of environmental federalism: how much control over environmental compliance regulations is the federal government willing to give to the states and how much responsibility are the states willing to take?
Protections for companies that have chosen to conduct voluntary environmental audits, particularly at the state level, have become front-page news. These protections range from reduced penalty provisions and privileges for the contents of audits, to full immunity from civil and criminal sanctions. The privilege and immunity provisions, which potentially inhibit a regulatory agency's ability to undertake enforcement actions, strike at the heart of the enforcement philosophy of the United States Environmental Protection Agency (“EPA”): regulated entities must be held accountable for all violations of environmental statutes and regulations.
Generally, the rationale for protecting the results of voluntary audits is to create incentives for the regulated community to evaluate its own environmental compliance status and correct identified violations expeditiously, thereby increasing compliance with environmental requirements and reducing the government resources required to enforce federal, state, and local environmental laws. However, opponents of expansive state audit legislation have expressed concern over the incentives being offered to industry by the states. In particular, opponents contend that the evidentiary privilege and immunity provisions offered by some states, while properly rewarding “good” actors, will enable many “bad” actors to escape responsibility for their actions.
The players involved in the voluntary audit conflict agree that, at least in the abstract, voluntary audit programs should be encouraged and followed by industry. However, even with this general consensus, the EPA's voluntary audit policy has fallen short of its mark because the key players are unsatisfied with the end product. Responding to industry concerns, states have enacted audit protection laws that have created tension between state legislatures and the EPA. Even with such state legislation in place, industry remains concerned about its exposure to liability through the EPA's initiation of federal “overfilings.” Environmental groups, in turn, are threatening to bring suit against the EPA, claiming that the EPA cannot delegate any environmental program to a state with privilege and immunity legislation, since such legislation may conflict with the state's ability to fully meet its enforcement obligations under a federally-delegated program.
The philosophical and political debate over whether protections for voluntary environmental audits will effectively ensure compliance with environmental laws attempts to compare audits with typical enforcement strategies utilizing other methods of compliance assurance. While protections for voluntary environmental audits may offer a means for balancing enforcement and compliance interests, disagreement among various players regarding the proper role of audit protections is intensifying. Regulated industries argue that they should not be subject to civil or criminal sanctions if, at their own initiative, they expend money to identify, characterize, and correct environmental violations, especially where it seems unlikely that a violation would have been detected by regulatory agencies. Environmental organizations, on the other hand, are concerned that, during an era when the community-right-to-know is highly valued, expansive privilege and immunity protections will hinder the public's ability to obtain access to information that is necessary to enforce environmental laws through citizen suits.
Voluntary audits represent a significant shift away from the command-and-control approach to environmental enforcement typically relied on by the EPA. The EPA is now being forced to consider whether a state's ability to enforce environmental laws may be seriously jeopardized by expansive state legislation. While the EPA's new voluntary audit policy is only one example of the agency's relatively recent shift away from command-and-control enforcement, in the EPA's view, state privilege and immunity laws go too far.
As a result of these concerns, states and environmental organizations have questioned whether the EPA has the legal authority, let alone the political will or power, to resolve the conflict. States do not want to lose their authority to administer delegated programs not only because they can essentially control the permitting process, and typically offer a quicker, cheaper permitting process that is valued by industry within the state, but also because they do not want to lose the federal funding that accompanies the delegated authority.
Part II of this Article describes the EPA's official environmental audit policies and the continuing controversy surrounding them. Regulated entities believe that the EPA has retained too much enforcement discretion. On the other hand, the EPA, environmental groups, and some attorneys general are concerned about broad privilege and immunity legislation being enacted at the state level to counter the EPA's policy. Moreover, regulated entities and environmental groups cannot agree on the scope of public disclosure that should be allowed for information derived from voluntary environmental audits.
Part III discusses the goals of each interested player involved in this controversy and the negotiating tools each possesses to accomplish its goals. Even with their divergent interests, the players to this controversy have sufficiently consistent objectives so that, if they are willing to compromise, an effective, mutually beneficial policy can be developed.
Part IV evaluates the EPA's legal authority to reformulate its audit policy into a regulation. A regulation would not allow all regulated entities to escape responsibility for complying with environmental regulations. Through a properly crafted regulation, the EPA would retain sufficient discretion on a case-by-case basis to ensure that regulated entities comply with their environmental responsibilities.
Finally, Part V analyzes proposed changes to the EPA's voluntary environmental audit policy that consider and balance the goals presented by the players. Ultimately, the EPA should re-evaluate its Final Policy Statement to develop a more comprehensive voluntary audit scheme that provides adequate protections from criminal or civil penalties for entities performing voluntary environmental audits, clarifies the required scope of the audit, and controls the dissemination of information to the public. If the parties to the voluntary environmental audit controversy are willing to reach a compromise regarding i) the EPA's retained enforcement authority, ii) the scope and breadth of privileged information and penalty immunity, and iii) what information obtained through the performance of a voluntary environmental audit will be made publicly available, then the competing entities can reach an effective, mutually beneficial agreement.