‘eDisclosure'of EPA Violations: Weighing Pros, Cons

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By Renee Schoof

July 20 — There are significant benefits to using the new eDisclosure system of online self-reported environmental violations, but it brings a new risk for some users as well, attorneys say.

Launched in December 2015, the Environmental Protection Agency's new system for self-disclosure automatically processes two types of civil violations. Those in Category One—violations of the Emergency Planning and Community Right-to-Know Act (EPCRA) that meet certain conditions—receive a confirmation that they won't face penalties. All others under the Audit Policy for Small Business Compliance Policy, in Category 2, receive an immediate acknowledgement letter saying the EPA will decide on eligibility for penalty mitigation if it pursues an enforcement action.

A new development raising some concerns is the EPA's decision to no longer exempt this information from Freedom of Information Act (FOIA) releases.

Attorneys suggest caution about the risk that any release of their disclosures could expose them to news stories or citizen suits. Yet they also note that eDisclosure provides significant benefits that should be taken into account—penalty mitigation and a reduced risk referral for criminal prosecution. The EPA says the system has saved time and money, both for the agency and for regulated entities.

Concerns About Electronic Reporting

“The issue of the change of presumption for FOIA releases is definitely a factor that regulated industry is taking into consideration when evaluating self-disclosing,” J. Tom Boer, a partner at Hunton & Williams LLP in San Francisco, told Bloomberg BNA. “If it’s a significant enough potential violation, there going to be some regulated entities that are going to be very concerned about the possibility that the story basically gets out ahead of their effort to address compliance.”

The eDisclosure website itself isn't publicly accessible. The EPA announced it will review any FOIA requests individually but generally plans to release such information. Doing so would put information about disclosed violations on a publicly searchable FOIA website.

Companies using eDisclosure must report violations within 21 days of discovery. Except for Category One EPCRA violations that receive an electronic notice of determination, other disclosures must be followed up within 60 days to 90 days with a certification showing the violations have been corrected, unless an extension is granted.

In complex cases, it could be impossible to resolve the violation within the period the EPA allows, Boer said in an interview.

More Rapid Turnaround

“Where there is potential for improvement is for more rapid turnaround for closing out cases that EPA decides do not necessitate an enforcement response and resolving smaller cases that perhaps have some sort of penalty but are not higher profile or more complex,” he said. “Those were areas EPA really wanted to have improvement. But it's too early to say whether that in fact is how things turn out.”

Joel Eagle, an associate at Thompson Hine LLP law firm in Cleveland, said the new online disclosure system “doesn't change our basic analysis for whether to report issues to the agency, as we will always consider the pros and cons of each unique situation.” But he added that the new system was another factor to consider.

“Often, the benefits of potential civil penalty immunity or mitigation outweigh the risks of disclosing issues to the government and public. But the continued push to increase the availability of information, both publicly and electronically with just a few keystrokes, might weigh more heavily in certain situations going forward,” Eagle told Bloomberg BNA via e-mail. “Overall, we’ve used the benefits of the Audit Policy for many years with significant successes such as penalty avoidance and our clients’ return to compliance in cases where EPA was likely to discover the violation on its own, and we expect to continue to do so.”

The risk of access to eDisclosure submittals through the FOIA process is a factor that is considered, he said, “but this risk, in and of itself, typically would not deter our clients from utilizing the EPA's Audit Policy.”

Eagle said his firm had not heard of any specific instances where a party's eDisclosure was the subject of a FOIA request. A search of EPA FOIA requests for “eDisclosure” also showed none.

Modernized Approach

Before eDisclosure, the EPA said it was receiving so many self-disclosure notices that it had trouble resolving them all promptly.

“After seven months, EPA's online eDisclosure portal is already producing the benefits that EPA sought when it launched this Next Generation Compliance system for automatically processing self-disclosed civil violations, pursuant to EPA's Audit Policy and Small Business Compliance Policy,” the agency told Bloomberg BNA by e-mail.

eDisclosure So Far

According to the EPA, since it launched eDisclosure last December:

  •  more than 340 disclosures submitted electronically.
  •  system on pace to process nearly 550 disclosures in its first year, an increase of 83 percent over the average of roughly 300 disclosures annually in recent years.
  •  116 acknowledgment letters generated.
  •  393 electronic notices of disclosure generated automatically, which resolve Emergency Planning and Community Right-to-Know Act violations with no assessment of civil penalties.
  •  EPCRA violations are about 65 percent of all violations disclosed. Rest are violations of Toxic Substance Control Act, Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act and Federal Insecticide, Fungicide and Rodenticide Act.

Saving Time, Money

The automatic processing eliminates “back-and-forth communications with the agency and sometimes lengthy delays in resolution,” the EPA said.

“The eDisclosure system is fundamentally about saving the agency resources,” said Andrew Stewart, who led the division that designed the system as former acting director of the EPA's Special Litigation and Projects Division in the Office of Civil Enforcement.

“The genesis for this was EPA looking across its enforcement programs and really looking for areas to make cuts. The EPA concluded it could save FTEs, or full-time equivalent resources, by changing the way it implements the audit policy,” Stewart told Bloomberg BNA.

What Will EPA Do?

Stewart, who left the agency last year and joined Vinson & Elkins LLP’s environmental and natural resources group, said he has heard concerns both about FOIA releases and about uncertainty about penalties.

“Although it gives you an automatic response, and you could say you get good government because EPA responds, you may not get a resolution for your disclosure unless or until EPA decides to independently investigate you,” he said. In the past, companies in some cases had an opportunity to work with an EPA enforcement officer to get a complete resolution of violations disclosed.

But it was also true that in the past some companies made disclosures and didn't hear back from the EPA because the agency had such a backlog, Stewart said.

Category 2 Disclosures

Thompson Hine's Eagle said things hadn't changed much in terms of certainty for clients.

“At least in the early stages of the new process, the level of certainty when submitting a Category 2 disclosure doesn’t appear to be very different from the days when we sent in hard copy letters, in that you generally don’t know how or even if EPA might respond,” he said. “In fact, over the past several years, we’ve seen fewer and fewer instances where EPA responds to a disclosure, either by pursuing enforcement or issuing requests for more information.”

The EPA said the modernized audit policy provided quicker and more efficient automated responses to self-disclosures. “Still, we have heard back from EPA in some cases, such as with multiregion disclosures that we submitted to EPA headquarters rather than a specific region.”

There also have been some problems using the system, such as having it time out while a person is trying to file a more complicated disclosure, Stewart said.

“The system may have some glitches right now,” Eagle said, “such as the limited amount of space given to fill in narrative responses, ensuring that electronic notices of determination (eNOD) or acknowledgment letters (AL) are automatically issued in each case, and general system problems like receiving error messages when filling out fields.”

To contact the reporter on this story: Renee Schoof in Washington at rschoof@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

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