Voluntary Disclosure of Environmental Violations: Is Mea Culpa a Good Idea or a Bad Move?

Channing J. Martin

The author is a partner in the Richmond, Virginia, office of Williams Mullen, where he is chair of the firm's environmental law group. His practice focuses on civil and criminal enforcement of environmental laws with an emphasis on hazardous substances and solid and hazardous waste. He received his J.D. degree from the Washington and Lee University School of Law in 1979.

[32 ELR 10692]

You are in your office one afternoon when the phone rings. It's the vice president of environmental affairs for one of your clients. He tells you the company just discovered a major violation of an environmental law. The good news is that it has been corrected. "Do we have to report it?," he asks. Your quick review of the law and regulations shows there is no requirement to report. "O.K.," he says, "but should we report it anyway?"

Welcome to The Twilight Zone of environmental law, a dimension where there are no easy answers. Deciding whether to report when there is no obligation to do so is not just a legal decision; it also involves considerations of corporate philosophy and ethics. Some clients may decide to report all major violations regardless of a legal requirement to do so. In that situation, your job is relatively straightforward: find the best way to disclose the violation with the least onerous consequences. The question is no longer whether to report, but how to do it.

More than likely, though, your client will want to weigh a number of factors before making a decision. The client's thought process will probably be something like this:

We do not have a legal obligation to report, so I'm not breaking any laws if I decide not to report. On the other hand, if I do report, the company faces the prospect of substantial penalties, increased governmental scrutiny, and adverse publicity. Besides, if I lay low, it's possible nothing will ever happen—since the problem has now been corrected.

Invariably, the client will then ask these questions: "How likely is it someone will find out?" and "What is likely to happen if they do?" Again, hard questions with no easy answers.

This Dialogue discusses incentives provided by the U.S. Environmental Protection Agency (EPA) and state environmental agencies designed to encourage prompt reporting and correction of environmental violations. Chief among these incentives is EPA's Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations (the Audit Policy).¹ The elements of the Audit Policy are described herein, as are incentives and immunities provided under various state laws. Finally, strategies and pitfalls are discussed that you should consider before advising your client whether and how to disclose.

At the outset, it's worth noting that some may view a decision not to report as unethical, underhanded, or a cover-up. But it's none of those things. The government has decided that some violations must be reported and some need not be. As long as companies comply with their reporting obligations under applicable law and regulations, they can and should carefully consider if and under what circumstances they will voluntarily disclose other violations. This is especially so considering the consequences that may flow from that decision.²

EPA Disclosure Incentives

EPA has long endorsed incentives for voluntary disclosures. The civil penalty policies it has in place for media-specific environmental programs provide varying degrees of penalty mitigation for disclosure. Concerning premanufacturing under the Toxic Substances Control Act (TSCA), EPA's TSCA Section 5 Enforcement Response Policy³ is among the most generous of these policies. This policy allows for a 25% reduction in gravity-based penalties⁴ for voluntary disclosure, an additional 25% reduction for disclosure within 30 days of discovery, and an additional 15% reduction if the violator takes "all steps reasonably expected" to correct the [32 ELR 10693] violation. Thus, up to 65% of the gravity-based penalty may be reduced for voluntary disclosure and correction.

Most of EPA's penalty policies are not so generous. For example, the penalty policies dealing with the Resource Conservation and Recovery Act (RCRA) can be found in RCRA Civil Penalty Policy.⁵ This policy allows the agency to reduce gravity-based penalties for hazardous waste violations up to 25% in usual cases and 49% in unusual cases based on "adjustment factors," including good faith. A violator can manifest good faith under the policy by, among other things, "promptly identifying and reporting noncompliance . . . before the Agency detects the violation."

In most instances, voluntary disclosure alone will not result in a sizeable penalty reduction under EPA's civil penalty policies; other adjustment factors have to come into play to gain significant relief.⁶ But things changed in 1995.

The Agency first offered a 100% waiver of gravity-based penalties for self-disclosure in its April 1995, interim audit policy.⁷ In doing so, it recognized that maximizing compliance with environmental laws "can be achieved only with the voluntary cooperation of thousands of businesses and other regulated entities subject to these requirements."⁸ Incentives in this interim policy included eliminating or substantially reducing the gravity-based component of civil penalties and not recommending criminal prosecution of the violation if certain conditions were met. The Agency substantially incorporated the interim policy into a December 1995, final policy.⁹

When it issued the December 1995, final policy, EPA said it would review the policy's effectiveness after three years and revise it as necessary.¹⁰ It began that evaluation in the spring of 1998 and published its conclusions in May 1999.¹¹ The Agency concluded the policy was working well but needed some fine-tuning. That led to issuance of a revised policy on April 11, 2000.¹² The revised policy became effective on May 11, 2000.

Summary of the Audit Policy

The Audit Policy offers a big carrot to those who can qualify: a complete waiver of gravity-based penalties. In instances where the regulated entity has not obtained an economic benefit by its failure to comply, a waiver of gravity-based penalties means it may be able to avoid penalties entirely.

However, there is a big "if" here. To obtain a complete waiver of gravity-based penalties, the regulated entity must meet nine criteria—that's not always easy. The criteria are:

(1) The violation was discovered through either an "environmental audit" or a "compliance management system" that reflects due diligence in preventing, detecting, and correcting violations.¹³ To meet this element, EPA may require that a description of the regulated entity's compliance management system be made available to the public.

(2) The violation must have been discovered voluntarily and not through a process or procedure that is required by statute, regulation, permit, judicial or administrative order, or consent agreement. Thus, if the company's permit requires reporting of the violation that has been discovered, the company is not eligible under the policy.

(3) The violation must be disclosed in writing to EPA within 21 calendar days after discovery or within the time period provided by other applicable requirements, if shorter.¹⁴ The 1995 policy required disclosure within 10 days, but this period was lengthened because failure to meet the 10-day requirement was the most prevalent reason why companies could not qualify for the policy. It is also important to note that discovery is based on when a facility's employee or agent has an objectively reasonable basis for believing that a violation has, or may have, occurred.¹⁵ EPA changed this element from the 1995 version of the policy so that the clock starts when an outside auditor or contractor discovers the violation, even if they don't get around to telling the company until later.

(4) The violation must be discovered independently of any governmental or third-party investigation. In other words, the policy will not apply if EPA is already investigating a facility or if the facility has received a notice of intent to sue from a citizen group. For multifacility entities, a facility can still meet this element even though a "sister" facility is subject to investigation or has received a citizen suit notice. This represents a change from the 1995 policy.

(5) The facility must remedy the violation and certify the correction in an expeditious manner. Generally, a 60-day correction period applies, although lengthier periods may be negotiated under certain circumstances. For example, if a cleanup [32 ELR 10694] will take a longer period of time, the Agency may agree to an extension beyond 60 days.

(6) The regulated entity must take steps to prevent the violation from recurring.

(7) The same or a closely related violation must not have occurred at the same facility within thepast three years. In addition, relief is not available if the same or a closely related violation occurred at one or more facilities in a multifacility organization within the past five years. Note, however, that the existence of a violation before a new facility is acquired does not cause an entity to fail that requirement.

(8) The violation does not result in serious actual harm to the environment or present an imminent and substantial endangerment to public health or the environment. EPA reports that it has invoked this exclusion in only two instances to date. One instance resulted in the death of an employee and the other in the evacuation of a town.¹⁶

(9) The regulated entity must cooperate with EPA to provide the information necessary to determine the Audit Policy's applicability.

For entities that can meet all but the first condition, the Audit Policy still allows for a reduction of up to 75% of the gravity-based penalties associated with the violation. Other incentives under the policy include (1) declining to recommend criminal prosecution for entities that meet the policy's criteria and (2) refraining from routine requests for environmental audit reports.

State Disclosure Incentives

In addition to EPA's disclosure incentives, more than 40 states have enacted or are considering legislation that offers incentives for voluntary disclosure and correction of violations.¹⁷ These laws are generally designed to encourage voluntary environmental audits by shielding information in those audits from disclosure to the public and environmental agencies. Many of the laws also offer immunity from civil penalties for violations discovered and disclosed.

If the violation is discovered outside of a formal audit, does that mean these state laws cannot be used? It depends. Most states require that the violation be discovered during a formal audit. Texas, for example, does not accord immunity unless the facility (prior to seeking immunity) gives notice to the appropriate regulatory agency that it is planning an audit, specifying what portions of the facility will be audited, when the audit is anticipated to begin, and the general scope of the audit.¹⁸ The laws in other states are written more broadly so that discovery during a formal audit is not necessary. New Jersey, South Carolina, and Virginia fall intothis category. The law, applicable in the state in which the facility is located, must be examined to make this determination.

EPA has strongly opposed passage of state audit laws on the ground that they run "counter to efforts to open up environmental decisionmaking" and "could be misused to shield bad actors or to frustrate access to crucial factual information."¹⁹ Still, many state legislatures have enacted these laws in spite of EPA's misgivings. EPA's response has been to say that "it will scrutinize enforcement more closely in states with audit privilege and/or penalty immunity laws."²⁰ The Agency has strongly suggested that it may increase its enforcement efforts in any state where one of these laws prevents a state from obtaining facts concerning violations and/or it may withdraw federal program approval.²¹

The idea that EPA is prepared to increase enforcement or withdraw program approval is not something any state wants to hear. That threat has been enough to cause some states to back down. Virginia is a prime example. Its environmental privilege/immunity law was enacted in 1995.²² In 1997, EPA inquired whether this law deprived the commonwealth of adequate authority to enforce Virginia's federally authorized environmental programs.²³ In a January 12, 1998 response, Virginia's Attorney General interpreted the law such that none of Virginia's federally authorized environmental programs are subject to the protections afforded by the law.²⁴

The Attorney General's opinion "guts" Virginia's environmental privilege/immunity law. Although no court has yet considered whether to adopt that opinion, it's disconcerting to know that the state's chief legal officer contends there is no immunity available for violations of Virginia's air, waste, and water laws unless the law or regulation is purely a state law, e.g., Virginia's Chesapeake Bay Preservation Act. Would you know this by reading the statute? No, because the law is still on the books and has not been amended. The lesson to be learned is that you should never rely on the law itself in evaluating the immunity and protections your client will receive if it voluntarily discloses a violation. Further research is absolutely necessary.

What Downside Could I Have With Using EPA's Audit Policy?

The biggest "downside" is that EPA will decide the company has not met the eight criteria (nine to get 100% gravity-based penalty mitigation). The risk here relates to the subjective nature of some of the criteria. These include:

The Date the "21-Day Clock" Began to Run

The clock starts when any employee or agent, including an outside auditor or contractor, has knowledge of the facts giving rise to the violation. Your view of when such a person first had knowledge may be different than EPA's.

[32 ELR 10695]

Whether the Company Has Cooperated With EPA

EPA says this criteria means that the "entity must not hide, destroy[,] or tamper with possible evidence" and must make the audit report available to EPA in the "rare instance" where it is requested.²⁵ If there is the potential that criminal proceedings could be instituted growing out of the violation—and these days that potential seems to be increasing—EPA says that the entity must provide, at a minimum, access to all requested documents; access to all employees of the disclosing entity; access to assistance in investigating the violation, any noncompliance problems related to the disclosure, and any environmental consequences related to the violations; access to all information relevant to the violations disclosed, including that portion of the environmental audit report or documentation from the compliance management system that revealed the violation; and access to the individuals who conducted the audit or review.²⁶ Even if the company meets all of these requirements, EPA says the "no recommendation for criminal prosecution" is not available if: (1) "corporate officials are consciously involved in or [are] willfully blind to violations, or conceal or condone noncompliance" or (2) the violations "cause serious harm or . . . may pose imminent and substantial endangerment to human health or the environment . . . ."²⁷

The subjective nature of whether your company has cooperated to EPA's satisfaction, whether EPA believes your company has turned a blind eye to compliance, and whether the violation may pose an endangerment to human health and the environment ought to give any company pause in this situation. In addition, there is a substantial question about whether cooperating to the degree EPA demands will result in waiving legal rights or privileges, e.g., attorney-client privilege.

A better course of action may be to disclose potential criminal violations directly to the local U.S. Attorney since the U.S. Department of Justice (DOJ), not EPA, will make the final call on whether to institute criminal proceedings.²⁸ You may have a better chance of influencing the outcome by having an attorney who knows the U.S. Attorney and staff, make the contact, and provide the disclosure on behalf of the company than if disclosure is made to EPA.

Whether EPA Decides to Apply the Audit Policy

The Audit Policy is guidance, not a regulation. It creates no legal rights and is not enforceable against the United States. Further, EPA notes that "EPA may decide to follow guidance provided in [the Audit Policy] or to act at variance with it based on its analysis of the specific facts presented."²⁹ This means that there is no guarantee you will receive the benefits of the policy even if you meet all the criteria.³⁰

In addition to the subjective nature of the criteria, a major downside of disclosing to EPA under the Audit Policy is that EPA will notify your state agency of the violation.³¹ EPA's Audit Policy, of course, has no effect on the state's right to enforce its own environmental laws and regulations, most of which will be federal programs delegated to the state. In fact, states will be the primary enforcer for most violations of air, waste, and water laws; EPA will play only a secondary, back-up role and generally will not get involved unless it believes the state is not handling the violation properly or is being too lenient.³² It is for this reason that reporting to EPA under the Audit Policy will do you little good for violations of federally delegated laws. Instead, disclosing to the state under a state audit/immunity law (if it has one) is preferable since the state is likely to be the enforcement entity that will address the violation.³³

When Does It Make Sense to Use EPA's Audit Policy?

As of January 2002, EPA reports that approximately 1,500 entities have voluntarily disclosed violations at 6,065 facilities using the Audit Policy.³⁴ One of the first companies to disclose a large number of violations at multiple facilities was General Telephone and Electric (GTE) Corporation in 1998. It disclosed 511 violations of the Emergency Planning and Community Right-To-Know Act (EPCRA)³⁵ growing [32 ELR 10696] out of its failure to notify state agencies and local fire departments of sulfuric acid-filled batteries at 229 GTE telecommunications sites across the country. GTE also disclosed 89 violations of the Clean Water Act (CWA)³⁶ growing out of its failure to develop required spill prevention countermeasures and control plans for diesel fuel storage.

GTE promptly corrected the violations and paid EPA a penalty of $ 52,264, equal to the amount of money saved by the company by its noncompliance. EPA says it waived another $ 2.38 million in penalties because the company met the criteria of the Audit Policy.³⁷

GTE's disclosures highlight how the Audit Policy has been used most often to date. All of the violations GTE disclosed were of federal regulations that have not been delegated to the states—meaning that EPA alone is the sole enforcer. In addition, these violations related primarily to recordkeeping obligations.³⁸ Disclosure of these types of violations under the Audit Policy present relatively low riskbecause:

. State agencies do not have authority to impose penalties for these violations, so there is no prospect of state enforcement;

. It is quick and easy to come into compliance; and

. There has been no harm to the environment, e.g., no release of hazardous substances.

A growing, although still limited, use of the Audit Policy relates to corporatewide audits. Several companies have negotiated up-front agreements with EPA to audit and voluntarily disclose and correct violations.³⁹ These agreements identify the facilities to be audited, establish a schedule to be followed, and define the parameters of any penalties that might be imposed. Among other things, these agreements can be used to quantify in advance what the economic benefit will be deemed to be for certain types of violations.

The chief advantage of such an agreement is that it allows a company to achieve a nationwide settlement of all violations at the conclusion of the audit. Still, many companies are hesitant to enter into such agreements with EPA for myriad reasons.

When Does It Make Sense to Use State Audit/Immunity Laws?

State laws vary in the extent to which they offer immunity. At one extreme, immunity may extend to violations committed under any state environmental program, including federal programs that have been delegated to the state by EPA. A disclosing entity negotiating for immunity with the state in this circumstance needs to do so with a full understanding of EPA's role. While EPA says it "will generally defer to state penalty mitigation for self-disclosures as long as the state policy meets minimum requirements . . .,"⁴⁰ the problem is in predicting whether EPA believes the state audit/immunity law at issue "meets minimum requirements." State laws which are detailed and whose requirements are similar to the requirements of the Audit Policy have the best chance of being acceptable to EPA.⁴¹

The risk is that EPA might seek to take enforcement action if it believes the state's grant of immunity is inappropriate.⁴² That means the use of state law to provide immunity for violations of federally delegated programs is far from a safe bet. The only safe harbor for use of state audit/immunity laws is for violations of "state only" laws and regulations. Such requirements might relate to such matters as environmental siting, some solid waste program provisions, and aboveground storage tanks. Because EPA does not have authority to enforce these laws, there is no concern that EPA will second guess the state and take enforcement action on its own.

If You Decide to Disclose, Should You Always Use the Audit Policy?

If you have made the decision to disclose, one school of thought says you should do so every time using the Audit Policy and any applicable state audit/immunity law. Even if it's questionable whether you meet the criteria, disclosure under the policy presents the company as a good corporate citizen that is voluntarily correcting and reporting a violation. Besides, you may be able to meet the criteria or at least get close enough that some concession is made by EPA in assessing penalties.

A second school of thought is that use of the Audit Policy may not be appropriate for all voluntary disclosures, especially if it's a close call whether the policy applies. The following three factors may militate against its use.

Heightened Scrutiny of the Violation

EPA has established interagency procedures that must be followed once a disclosure is made using the Audit Policy. In 1995, the Agency created the Audit Policy Quick Response [32 ELR 10697] Team (QRT) comprised of representatives from each EPA region, from EPA headquarters, and from the DOJ. The QRT addresses issues of interpretation and issues guidance to regional offices to ensure consistency. Each regional office has a regional audit policy coordinator that sits on the QRT and heads up the Audit Policy team in the regional office.⁴³

A disclosure under the Audit Policy is reviewed by one or more special teams at the applicable EPA regional office and/or at EPA headquarters.⁴⁴ If they determine your disclosure does not qualify, how likely is it they will say: "Never mind?" By elevating the violation to the higher echelons within EPA, a company that does not qualify for the Audit Policy lessens its chances for an outcome other than the imposition of civil penalties. Civil penalties do not automatically flow from every violation; EPA has lesser alternatives, such as warning letters and notices of violation, which are particularly appropriate for certain types of violations. In addition, even if penalties cannot be avoided, "front line" enforcement personnel who might be persuaded to accept a lesser amount lose some of the discretion they might otherwise have once the Audit Policy is invoked. Considerations of "uniformity" and "consistency" may receive greater scrutiny once the matter is elevated within EPA, and can decrease the chances of resolving the matter with minimal sanctions.

The bottom line is that experienced counsel should be consulted to assess the likely outcome of any disclosure. It's possible that voluntary disclosure without using the Audit Policy is a better option.

Asserting, Documenting, and Proving Coverage

There is time and expense associated with asserting, documenting, and proving coverage. It may not be worth it for certain violations. Obviously, this concern is less of a factor the greater the number or magnitude of the violations at issue.

Pandora's Box

What must be done to cooperate with EPA is not well defined. Companies that assert coverage under the Audit Policy run the risk that the cooperation EPA requires is more than they want to give. EPA may then sense that greater scrutiny of the company is required because the company is hiding something.

It is important to remember that the Audit Policy is not the sole means of obtaining a reduction in penalties from EPA for voluntary disclosures. Reductions are still available under various EPA penalty policies without invoking the Audit Policy. Although you can't "double dip" by using both the Audit Policy and one of EPA's penalty policies, companies that have one of the concerns mentioned above can still obtain a reduction in penalties for their voluntary disclosure.

Conclusion

Voluntary disclosure can be a good thing for your client's company, but it presents traps and pitfalls for the unwary. The federal-state system in place for the administration and enforcement of most environmental laws means EPA's Audit Policy and state audit/immunity laws cannot be applied in a vacuum but rather must be considered as a whole. Those who do not identify and address all the possible outcomes when they enter The Twilight Zone of environmental law may be in for a very unpleasant surprise.

1. 65 Fed. Reg. 19618 (Apr. 11, 2000). See William L. Thomas et al., Using Auditing, Pollution Prevention, and Management Systems to Craft Superior Environmental Enforcement Solutions, 30 ELR 10299 (May 2000); FRANK B. FRIEDMAN, PRACTICAL GUIDE TO ENVIRONMENTAL MANAGEMENT (8th ed., Environmental Law Inst. 2000). See also Clifford Rechtschaffen, Competing Visions: EPA and the States Battle for the Future of Environmental Enforcement, 30 ELR 10803 (Oct. 2000).

2. For an informative discussion of the possible legal consequences of producing formal voluntary environmental compliance reports, see David W. Case, Legal Considerations in Voluntary Corporate Environmental Reporting, 30 ELR 10375 (May 2000).

3. The policy is posted on the Internet at http://es.epa.gov/oeca/ore/tped/tsca5erp.pdf (last visited Apr. 3, 2002).

4. Gravity-based penalties are designed to punish the defendant for its wrongdoing. The gravity-based component of a civil penalty is that portion of the penalty over and above the portion designed to recoup the defendants' economic gain from noncompliance.

5. The policy is posted on the Internet at http://es.epa.gov/oeca/ore/rcra/cmp/100090.pdf (last visited Apr. 3, 2002).

6. These policies have not been superceded by the Audit Policy, but a regulated entity that has received penalty mitigation under a media-specific policy may not receive additional mitigation under the Audit Policy, and vice versa. 60 Fed. Reg. 19626 (Apr. 19, 1995).

7. 60 Fed. Reg. 16875 (Apr. 3, 1995). See Nancy K. Stoner & Amanda A. Gibson, EPA's Audit Policy Spells Success for Corporate Users, EPA, the Public, and Most Importantly, the Environment, 29 ELR 10705 (Nov. 1999); E. Lynn Grayson & Christina M. Riewer, EPA's Audit Policy and State Audit-Privilege Laws: Moving Beyond Command-and-Control?, 27 ELR 10243 (May 1997); and James T. Banks, EPA's New Enforcement Policy: At Last, a Reliable Roadmap to Civil Penalty Mitigation for Self-Disclosed Violations, 26 ELR 10227 (May 1996).

8. 60 Fed. Reg. at 16875.

9. Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations, 60 Fed. Reg. 66706 (Dec. 22, 1995).

10. Id. at 66712.

11. 64 Fed. Reg. 26745(May 17, 1999).

12. 65 Fed. Reg. at 19618. On the same date, EPA issued its Small Business Compliance Policy, a similar policy tailored to businesses with 100 or fewer employees and local governments. See 65 Fed. Reg. 19630 (Apr. 11, 2000). The Small Business Compliance Policy is more lenient in its requirements than the Audit Policy.

13. An "environmental audit" is a "systematic, documented, periodic, and objective review by regulated entities of facility operations and practices related to meeting environmental requirements." In contrast, a "compliance management system" is "the regulated entity's documented systematic efforts . . . to prevent, detect, and correct violations" through the use of such things as compliance policies, internal procedures, and employee training. 65 Fed. Reg. at 19625.

14. EPA encourages companies to use its Optional Form for Disclosure. The form is posted on the Internet at http://www.epa.gov/oeca/ore/checklist.pdf (last visited Apr. 4, 2002).

15. 65 Fed. Reg. at 19621.

16. Telephone Interview by Channing Martin with Leslie Jones, National Audit Policy Coordinator, U.S. EPA Office of Regulatory Enforcement (Dec. 19, 2001).

17. For a listing of those statutes, see Thomas et al., supra note 1, at 10303 n.33.

18. TEX. REV. CIV. STAT. ANN. art. 4447cc, § 10(g) (Vernon 2001).

19. 60 Fed. Reg. at 16878.

20. Id.

21. For example, EPA said in 1995 that if Colorado's "self-audit privilege impedes Colorado's ability to implement and enforce its Program consistent with Title V and Part 70 [of the Clean Air Act (CAA)], EPA may find it necessary to withdraw its approval of the Colorado Program." 60 Fed. Reg. 4563, 4564-65 (Jan. 24, 1995).

22. VA. CODE ANN. §§ 10.1-1198, 1199 (Michie 2001).

23. Most of Virginia's environmental programs related to air, water, and hazardous waste are federal programs that have been delegated to the state. This holds true in other states as well.

24. Correspondence from Richard Cullen, Attorney General of Virginia, to Michael McCabe, Regional Administrator, U.S. EPA Region III (Jan. 12, 1998).

25. 65 Fed. Reg. at 19623. Providing the report to EPA may result in its disclosure pursuant to the Freedom of Information Act. See Memorandum from Steven A. Herman, Ass't Administrator, Enforcement and Compliance Assurance (OECA), U.S. EPA, to OECA Office Directors et al., U.S. EPA (Jan. 1997), at http://www.epa.gov/oeca/oppa (last visited Apr. 5, 2002).

26. 65 Fed. Reg. at 19623.

27. Id. at 19620.

(NEWLINE)n28 The DOJ has its own guidance on voluntary disclosure. See U.S. DOJ, FACTORS IN DECISIONS ON CRIMINAL PROSECUTIONS FOR ENVIRONMENTAL VIOLATIONS IN THE CONTEXT OF SIGNIFICANT VOLUNTARY COMPLIANCE OR DISCLOSURE EFFORTS BY THE VIOLATOR (1991). The guidance was issued to provide the regulated community with insight on the factors the DOJ considers in exercising enforcement discretion. Although the DOJ said it will consider each case on its own facts, these factors are listed in the policy: whether the disclosure was purely voluntary or was made because the company anticipated the violation would be discovered, the degree of cooperation, the extent to which the company has compliance programs in place to prevent violations, pervasiveness of noncompliance, and whether the company has mechanisms in place to discipline employees who violate company environmental policies. The DOJ's guidance provides examples of best and worst cases for leniency and is a "must read" for any company making a voluntary disclosure.

29. 65 Fed. Reg. at 19627.

30. In fairness to EPA, however, it does not appear the Agency has ever denied benefits to a company that otherwise qualified.

31. Id. at 19624.

32. The issue of whether EPA can "overfile," meaning take enforcement action even though enforcement authority has been delegated to the state, is the subject of great debate in the courts. Compare, e.g., United States v. Elias, 269 F.3d 1003, 32 ELR 20218 (9th Cir. 2001) (the United States may seek criminal penalties under RCRA despite delegation of hazardous waste program to state); United States v. Smithfield Foods, Inc., 191 F.3d 516, 30 ELR 20076 (4th Cir. 1999) (the CWA did not bar EPA enforcement action because Virginia's enforcement remedies were not sufficiently comparable to federal enforcement remedies); United States v. Flanagan, 126 F. Supp. 2d 1284, 1287-88 (C.D. Cal. 2000) (RCRA allows EPA to exercise enforcement powers "even when a state program is in effect") with Harmon Indus., Inc. v. Browner, 191 F.3d 894, 29 ELR 21412 (8th Cir. 1999) (EPA cannot overfile under RCRA when a state with a federally delegated hazardous waste program has already settled the violation with the violator). See also Jerry Organ, Environmental Federalism Part I: The History of Overfiling Under RCRA, the CWA, and the CAA Prior to Harmon, Smithfield, and CLEAN, 30 ELR 10615 (Aug. 2000); Jerry Organ, Environmental Federalism Part II: The Impact of Harmon, Smithfield, and CLEAN on Overfiling Under RCRA, the CWA, and the CAA, 30 ELR 10732 (Sept. 2000).

33. Thought should be given to whether disclosure under both state law and the Audit Policy should be made. That determination may depend upon the magnitude of the violation and the likelihood of EPA's involvement even though the state is the primary enforcer.

34. E-mail to Channing Martin from Leslie Jones, U.S. EPA (Feb. 4, 2002).

35. 42 U.S.C. §§ 11001-11050, ELR STAT. EPCRA §§ 301-330.

36. 33 U.S.C. §§ 1251-1387, ELR STAT. FWPCA §§ 101-607.

37. See OECA's Audit Policy newsletter, GTE Corrects 600 Violations Through EPA's Self-Disclosure Policy, AUDIT POL'Y UPDATE, Mar. 1998, at 1. Twenty-four other telecommunications companies have disclosed more than 6,200 violations at more than 2,200 facilities since GTE's disclosures in 1998. Outreach Programs Expand Use of EPA's Audit Policy, AUDIT POL'Y UPDATE, Spring 2001, at 5.

38. EPA statistics from 1999 showed that the vast majority of disclosures made using the Audit Policy related to recordkeeping and notification obligations under EPCRA and the CWA. Nancy K. Stoner, NCSL Report Shows No Increase in Environmental Audits Due to State Privilege, Immunity Laws, AUDIT POL'Y UPDATE, Spring 1999, at 8. That has changed to a degree as more violations of the CAA and RCRA are being disclosed. Nevertheless, the majority of all disclosures continue to be recordkeeping and notification violations under EPCRA and the CWA. Telephone Interview by Channing Martin, supra note 16.

39. Special Issue, Corporate-Wide Audit Agreements: An Effective Approach for Companies to Improve Environmental Compliance, AUDIT POL'Y UPDATE, Sept. 2000, at 1.

40. 65 Fed. Reg. at 19624.

41. Unfortunately, many states' laws do not have a detailed list of requirements that must be met before immunity will be granted. This provides EPA with an easy argument that the state's law is not equivalent to the Audit Policy. For a description of minimum requirements EPA believes must be in any state audit/immunity law, see Memorandum from Steven A. Herman, Ass't Administrator, OECA, U.S. EPA, Statement of Principles: Effect of State Audit/Immunity Privilege Laws on Enforcement Authority for Federal Programs (Feb. 14, 1997), available at http://www.epa.gov/oeca/oppa (last visited Apr. 5, 2002).

42. Whether it can do so after a state has settled with a violator is not clear. See supra note 32.

43. Outreach Programs Expand Use of EPA's Audit Policy, supra note 37, at 5.

44. Disclosures involving potential criminal violations are also considered by the Voluntary Disclosure Board at EPA's Office of Criminal Enforcement, Forensics, and Training (OCEFT). The board dockets, monitors, and reviews all requests for treatment under the Audit Policy, determines whether all conditions of the Audit Policy have been met, and then makes a recommendation to the OCEFT director. The director makes the final decision on whether to recommend that the disclosing entity not be prosecuted. See OCEFT, U.S. EPA, IMPLEMENTATION OF THE EPA'S SELF-POLICING POLICY FOR DISCLOSURES INVOLVING POTENTIAL CRIMINAL VIOLATIONS (1997).