The Scarlet Letter, a book written over a century ago, is a tale in which public shaming was used to punish, modify behavior, and serve as a lesson for others. What is old is new again, as EPA has taken a page from Nathaniel Hawthorne to paint a regulatory scarlet “E” on otherwise law-abiding companies.
EPA claims that the number of inspections and enforcement actions will drop thirty to forty per cent over the next five years due to budgetary constraints. In response, and instead of relying on state environmental agencies, who EPA regarded as its ‘partners’ for years, to perform their traditional enforcement function, EPA seeks to radically change the federal inspection-enforcement paradigm. By making information about emissions public and readily accessible, it clearly seeks to induce a regulated entity to reduce its emissions (even if those emissions are within permitted levels) so that the entity will not be regarded in the community in which it operates as an excessive polluter. If a facility remains impervious to this ’emission-shaming’ tactic, the information in the hands of the public may also be used by environmental groups to file citizen suits or by plaintiff attorneys to support damage claims.
EPA makes no secret of its desire to provide information to citizens so that they can be informed and/or take action, even if risks from emissions are with health-based standards. For example, in the proposal to the recent petroleum refining rule, EPA stated that, even though “currently-available emissions and monitoring data do not indicate that risks to nearby populations are unacceptable,” the data from fenceline monitoring will “provide important information to communities concerned with potential risks associated with emissions from fugitive sources,” “ensure that communities have access to data on benzene levels near the facility, which is directly relevant to the potential health risks posed by the facility,” and “serve as an important backstop to protect the health of the populations surrounding the facility, including minority and low-income populations.” 79 Fed. Reg. 36938 (June 30, 2014).
As outlined below, EPA has taken steps to shift the paradigm in recent policy pronouncements, regulations, and settlements. The curve on this trend will only get steeper as more and more rules incorporate the ’emission-shaming’ tactic. The main question then is how to deal with this new reality.
The Trend to Emission-Shaming
The New Paradigm
EPA adopted its Next Generation Compliance: Strategic Plan 2014-2017 (Next Gen) in October, 2014. EPA described Next Gen as “an integrated strategy, designed to bring together the best thinking from inside and outside EPA on how to structure regulations and permits combined with new monitoring and information technology, expanded transparency, and innovative enforcement.” Next Gen, p. 1. It will “motivate the regulated community to comply with environmental laws and inform the public about their performance.” Next Gen, p. 1.
It consists of five interconnected components: More Effective Regulations and Permits, Advanced Monitoring, Electronic Reporting, Transparency, and Innovative Enforcement. Next Gen, p. 2. At its core, Next Gen is an effort to make compliance information available to the public so that the public can be informed and assist in enforcement efforts. EPA explained the Next Gen components as follows:
- More Effective Regulations and Permits will contain self-reinforcing “drivers for better performance to move us towards improved compliance as the ‘default’ option” with “real time information to communities … [to] help inspire facilities to improve compliance.” Next Gen, p. 3.
- Advanced Monitoring technologies will be identified and used to “help the public more easily find pollutant discharges, environmental conditions, and noncompliance.” Next Gen, p. 4.
- Electronic Reporting allows the user to upload information “with speed [and] convenience,” allows the government to “spot pollution and compliance issues and respond quickly to emerging problems,” and is the “the default assumption for new regulations.” Next Gen, p. 5.
- Transparency provides the public with better information about “the performance of regulated sources,” allowing the public to “act on this information to hold facilities accountable and advance environmental justice.” Next Gen, p. 6.
- Innovative Enforcement “strengthens enforcement,” assists in informing the public of serious violations, and “increases the power of individual cases to inspire improvements at other facilities.” Next Gen, p. 7.
EPA also seeks to incorporate Next Gen into enforcement settlements. Giles, Cynthia, EPA, Use of Next Generation Compliance Tools in Civil Enforcement Settlements, Jan. 7, 2015. EPA urged the use of advanced monitoring, third party verification of a settling party’s compliance, and electronic reporting in such a fashion as to make the data easily accessible to the public.
In its notice about the National Enforcement Initiatives for Fiscal Years 2017-2019, EPA made it clear that it “intends to incorporate [Next Gen] approaches into our work” and invited comments “on what some of these Next Gen opportunities might be for the continuing and potential new NEIs” 80 Fed. Reg. 55354 (September 15, 2105). EPA is considering adding the protection of communities for exposure to toxic air emissions as a distinct, new initiative, and as part of that initiative, using advanced monitoring techniques, such as optical remote sensing, on organic liquid storage tanks to identify emission from those tanks.
Recent Rules Incorporating Emission-Shaming
EPA has taken its own advice to heart, finalizing and/or proposing several rules that incorporate these Next Gen concepts. Generally, these rules require extensive record-keeping and mandate that some or all of that information be publicly accessible.
The Coal Combustion Residuals (CCR) Rule is a good example. 80 Fed. Reg. 21302 (April 17, 2015). The Rule requires CCR disposal units to maintain a written operating record that contains comprehensive documentation of compliance with the rule. There is a five year requirement for maintaining such information in the record. It is also required that the owner or operator of the CCR disposal unit submit comprehensive amounts of documentation and evidence of demonstrations to either the state or tribal authority.
The rule also requires each owner or operator of a CCR unit to maintain a publicly accessible Internet site or CCR Website, which contains copious amounts of information. The website must be titled “CCR Rule Compliance Data information.” In general, information must be posted to the CCR website within thirty days of the information being placed in the facility’s operating record.
Another example is the new rule relating to petroleum refineries. 80 Fed. Reg. 75178 (December 1, 2015). The rule creates the first-ever requirement for fenceline monitoring. A facility must have monitors encircling the facility (or at least all sources at a facility) to measure the facility’s benzene emissions. If the monitors detect benzene above the ‘action level,’ a root cause analysis must be performed and corrective action taken.
Notably, though, the rule requires that large amounts of data be maintained at the facility, including the coordinates of all monitors, meteorological data, sample results for each monitor, and documentation of all corrective actions taken. These records must be maintained in a format that is accessible within 24 hours of inquiry by a regulatory agency and must be maintained for five years.
Certain data must be uploaded to EPA. The rule specifies that individual sample results for each monitor for each sampling period be uploaded to EPA’s Compliance and Emissions Data Reporting Interface (CEDRI), accessed through its Central Data Exchange (CDX). Thus, the public will have information regarding the levels of benzene detected at the monitors.
EPA has also proposed to amend its 2012 regulation of the oil and gas production sector. 80 Fed. Reg. 56593 (September 18, 2015). Among other things, the proposed rule will require methane and VOC reductions from hydraulically fractured oil wells in order to, as EPA phrased it, “complement” the 2012 standards which imposed similar standards on hydraulically fractured natural gas wells. EPA included Next Gen concepts, such as a third-party verification requirement, electronic reporting, public access to information, and even web-site posting of data on a company maintained web site.
Recent Settlements Incorporating Emission-Shaming
EPA has also acted on the emission-shaming policy, incorporating Next Gen components into enforcement settlements. Two very recent cases establish that EPA is actively following this practice.
In United States v. Asarco, LLC, several advanced monitoring concepts which went well beyond the basic regulatory requirements were included in a Consent Decree. The company agreed to install continuous emission monitors for particulate matter at multiple points and install a continuous opacity monitoring system at certain sources. United States v. Asarco, LLC, No. CV-15-2206, US District Court for Arizona, filed November 3, 2015.
In United States v. Tonawanda Coke Corporation, third party audits for the Leak Detection and Repair program were included in the Consent Decree. Third party evaluations for the coke oven walls and wastewater discharges were also included. United States v. Tonawanda Coke Corporation, No. 15-00420, Western District of New York, entered October 28, 2015.
The information gleaned from advanced monitoring efforts, such as those contained in the Consent Decrees noted above, will also be subject to the Next Gen transparency requirements. They will be provided to EPA and made available in some fashion to the public.
A Proactive Response Is Needed
The compliance and emission data that is now, or which will soon be, available can be used by regulatory agencies to conduct regular enforcement actions. However, it can also be used by environmental groups to file citizen suits or by plaintiff lawyers in damage cases. As EPA has changed the paradigm, facilities must adapt and proactively address this shift.
Prior to discussing proactive measures, two cautionary notes regarding reporting are warranted. Like a Discharge Monitoring Report filed with a state agency (or uploaded via NetDMR), the information submitted to the agency and/or posted on the internet by the company will be difficult, if not impossible, to refute in a later enforcement action or judicial proceeding. The case is proven by the facility’s own information. Further, EPA’s position, stated in the CCR Rule, is that information provided “in compliance with these regulations remain subject to the penalties for providing false information under 18 U.S.C. 1001.” 80 Fed. Reg. 21339 (April 17, 2015). In other words, providing false information to a federal agency is a crime.
One affirmative step that facilities should consider is a community relations panel or board. Generally, these panels are comprised of facility personnel, local parish emergency response officials, and representatives of the communities living near the facility. The idea is to routinely meet, exchange information, and develop relationships. For example, a community relations panel may be established for a petroleum refinery. The facility may wish to educate the community representatives about its permits and allowable emissions, share monitoring data with the panel, and provide information about any corrective actions it has taken to minimize emissions. While the panel may not eliminate citizen suits or damage claims, it may create, over time, sufficient trust to minimize any such suits or claims.
The most important step a facility should take is to involve counsel to enhance the protection of communications, work product, and results under the attorney-client and/or work product privileges. To invoke the privileges, at the very least, counsel should be involved at the initiation of this effort and at every point in the process. The better practice, however, is for counsel to engage, commission, or hire any necessary personnel, experts, or auditors and ensure that all reports from any such efforts are sent only to counsel. Counsel will provide, in a confidential and privileged memo to the facility, the results and any necessary corrective actions. This practice maximizes the chance that communications, work product, and results will be deemed confidential. Most of the suggested practices noted below should be undertaken by counsel to maximize the protections offered by the potentially applicable privileges.
Agency Enforcement or Citizen Suits
To counter possible enforcement actions or citizen suits, the obvious best course of action is to comply with the underlying regulation and provide accurate and truthful reports. Facility personnel responsible for compliance need to be trained in and fully understand the rule. However, there are several additional actions that can be taken to minimize the possibility of non-compliance.
To enhance compliance with the underlying rule, an internal audit should be conducted prior to the effective date of the rule (if possible). This will provide valuable information regarding potential violations as well as systemic practices that lead to violations and which need to be changed. Any deficiencies should be corrected prior to the effective date of the rule.
A Standard Operating Procedure should be developed to govern compliance efforts. It should be detailed enough to provide facility personnel with explicit instructions on what is expected to achieve compliance. All facility personnel should be trained in the SOP. Once the SOP and/or compliance documents are prepared, facility management must actively ensure that adequate attention is given to actually carrying out the SOP and the various compliance tasks noted therein.
Additionally, documentation of compliance is necessary. Therefore, the SOP should contain a set of internal compliance documents, such as checklists or inspection reports, to be used by facility personnel. The documents should be prepared with an understanding that they may be reviewed by an agency and/or the public and should be written in such a way as to affirmatively establish compliance. In other words, thought should be given to preparing these documents so that they serve a dual purpose – letting facility personnel know what they must do and proving compliance if any enforcement action or citizen suit is filed.
If a citizen suit notice is received (which must be sent 60 days prior to suit), arrange to meet with the group and applicable state agency to go over all of the evidence in an attempt to establish that the standard has been met. Admittedly, this may be problematic for a number of reasons and may not dissuade the most ideological of groups, but the owner will have done what it can to avoid a suit.
To reduce the possibility of successful damage claims, a facility must understand the amount of pollutants leaving the site. For example, prior to the date fenceline monitoring is required under the new rule, a petroleum refinery should, under the attorney client privilege, conduct fenceline monitoring to determine whether the action level is exceeded. If so, a facility-wide root cause analysis should be performed and corrective actions taken. Then, when the fenceline monitoring is actually required under the new rule, the facility will be below the action level.
Additionally, advanced monitoring technology, such as infrared cameras or even more sophisticated open-path technologies, should be employed to ensure that there are no unknown sources of fugitive emissions, such as a faulty seal on a tank. Any such sources should be immediately repaired.
The EPA has very clearly signaled its intention that emissions information will be made available to the public for the public’s use. While tactics designed to shame facilities to lower emissions or enhance compliance may seem unwarranted, they nonetheless are upon us. Facilities that adapt to this new reality by taking proactive measures now will minimize the likelihood of getting embroiled in costly litigation in the future.