80 FR 76476 - Notice of eDisclosure Portal Launch: Modernizing Implementation of EPA's Self-Policing Incentive Policies

ENVIRONMENTAL PROTECTION AGENCY

Federal Register Volume 80, Issue 236 (December 9, 2015)

The Environmental Protection Agency (EPA) is modernizing implementation of its self-disclosure policies by creating a centralized web-based ``eDisclosure'' portal to receive and automatically process self-disclosed civil violations of environmental law. Under the automated eDisclosure system, large and small businesses will quickly be able to get some of their more routine types of disclosures resolved. EPA is launching the eDisclosure system because it continues to believe strongly in the benefits of its self-disclosure policies: To provide penalty mitigation and other incentives for companies that self-police, disclose, correct and prevent violations. EPA believes that the implementation changes announced today will make the processing of disclosures faster and more efficient, and will save time and resources for regulated entities and EPA.

[Federal Register Volume 80, Number 236 (Wednesday, December 9, 2015)]
[Notices]
[Pages 76476-76481]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-30928]


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ENVIRONMENTAL PROTECTION AGENCY

[FRL-9939-69-OECA]


Notice of eDisclosure Portal Launch: Modernizing Implementation 
of EPA's Self-Policing Incentive Policies

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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SUMMARY: The Environmental Protection Agency (EPA) is modernizing 
implementation of its self-disclosure policies by creating a 
centralized web-based ``eDisclosure'' portal to receive and 
automatically process self-disclosed civil violations of environmental 
law. Under the automated eDisclosure system, large and small businesses 
will quickly be able to get some of their more routine types of 
disclosures resolved.
    EPA is launching the eDisclosure system because it continues to 
believe strongly in the benefits of its self-disclosure policies: To 
provide penalty mitigation and other incentives for companies that 
self-police, disclose, correct and prevent violations. EPA believes 
that the implementation changes announced today will make the 
processing of disclosures faster and more efficient, and will save time 
and resources for regulated entities and EPA.

DATES: These modifications to the implementation of EPA's Audit Policy 
and Small Business Compliance Policy, and the launch of the eDisclosure 
portal, are effective immediately, December 9, 2015.

FOR FURTHER INFORMATION CONTACT: Philip Milton of EPA's Office of 
Enforcement and Compliance Assurance, Office of Civil Enforcement, at 
[email protected] or (202) 564-5029. For general information on the 
eDisclosure portal please visit http://www2.epa.gov/compliance/epas-edisclosure.

SUPPLEMENTARY INFORMATION: Over the past several years, EPA has been 
evaluating how best to realize the benefits of the self-disclosure 
policies. Most recently, EPA held two webinars in June 2015 to share 
its plan for eDisclosure and allow the nearly 350 people who 
participated to share their views and ask questions.
    Companies have suggested that EPA could streamline implementation 
of the self-disclosure policies for more routine disclosures to make 
the process faster, more efficient, and to save time and resources for 
regulated entities and EPA, while still retaining the incentives to 
self-police environmental problems. The regulated community also 
emphasized that a key time to encourage self-auditing and self-
disclosure is when companies are purchased or acquired, because that is 
a point in time when companies typically are assessing operations and 
management systems. EPA agrees with those suggestions from the 
regulated community and welcomes input, on an ongoing basis, as to how 
the eDisclosure system is working.

I. Explanation of Modification to the Implementation of the Policies

A. Introduction

    On April 11, 2000, EPA issued its policy on ``Incentives for Self-
Policing: Discovery, Disclosure, Correction and Prevention of 
Violations'' (Audit Policy). 65 FR 19618. The purpose of the Audit 
Policy is to enhance protection of human health and the environment by 
encouraging regulated entities to voluntarily discover, promptly 
disclose, expeditiously correct and prevent the recurrence of 
violations of federal environmental law. Benefits available to entities 
that make disclosures under the terms of the Audit Policy include 
reductions in, and in some cases the elimination of, civil penalties, 
and an EPA determination not to recommend criminal prosecution of 
disclosing entities. (Ultimate prosecutorial discretion resides with 
the U.S. Department of Justice.) More information on the Audit Policy 
is available at http://www2.epa.gov/compliance/epas-audit-policy.
    On August 1, 2008, EPA issued the ``Interim Approach to Applying 
the Audit Policy to New Owners'' (New Owner Policy). 73 FR 44991. The 
purpose of the New Owner Policy is to tailor Audit Policy incentives 
for new owners that want to make a ``clean start'' at recently acquired 
facilities by addressing environmental noncompliance that began prior 
to acquisition. The New Owner Policy is designed to motivate new owners 
to audit newly acquired facilities and to encourage self-disclosures of 
violations that will, once corrected, yield significant pollutant 
reductions and benefits to the environment. The incentives tailored for 
new owners include clearly defined penalty mitigation beyond what is 
offered by the Audit Policy, as well as the modification of certain 
Audit Policy conditions that will allow more violations to be eligible 
for penalty mitigation under the Audit Policy. More information on the 
New Owner Policy is available at http://www2.epa.gov/compliance/epas-interim-approach-applying-audit-policy-new-owners.
    EPA's Small Business Compliance Policy (65 FR 19630, April 11, 
2000) is an additional voluntary disclosure policy that provides 
incentives for small businesses (with 100 or fewer employees) that 
voluntarily discover, promptly disclose, and expeditiously correct 
environmental violations. More information on the Small Business 
Compliance Policy is available at http://www2.epa.gov/compliance/small-business-compliance.

B. Background on Today's Modifications

    The penalty mitigation available under EPA's self-disclosure 
policies has provided an incentive for regulated entities to detect, 
promptly disclose, expeditiously correct and prevent violations of 
federal environmental requirements. Since 1995, the regulated community 
has increasingly adopted environmental auditing and environmental 
management practices as key components of sound business practices. 
Thousands of entities have disclosed violations to EPA pursuant to the 
Agency's voluntary disclosure policies, and EPA continues to receive 
hundreds of new disclosures every year. Enforcement also has 
contributed to the dramatic expansion of environmental auditing, as 
many regulated entities who conducted audits have told EPA that one of 
the primary reasons for doing so

[[Page 76477]]

was to identify and correct violations before government inspectors 
discover noncompliance. Regulated entities have realized cost savings 
through auditing, not only by limiting their enforcement liability but 
also by reducing the amount of pollutants that they generate (e.g., by 
adopting lower-cost production methods or energy-saving process 
changes).

C. Summary of Modifications to Audit Policy and Small Business Policy 
Implementation

    The large number of violations self-disclosed to EPA has taxed the 
Agency's ability to promptly resolve all pending disclosures. Although 
EPA is not modifying the substantive conditions in its Audit Policy or 
Small Business Compliance Policy, the eDisclosure portal launched today 
streamlines and modernizes EPA's approach to handling disclosures under 
these two policies. Today's changes will result in faster and more 
efficient resolution of self-disclosures, while saving considerable 
time and resources for regulated entities and EPA. At the same time, 
EPA will continue to accept and process outside the automated 
eDisclosure system any new owner self-disclosures and any potential 
criminal violations disclosed to the Voluntary Disclosure Board (VDB).
    In summary, entities that disclose potential violations through the 
new eDisclosure portal may qualify for one of two types of automated 
treatment, Category 1 or Category 2. In the June 2015 webinars and 
Information Sheet summarizing its plan for eDisclosure, EPA referred to 
these two types of treatment as Tier 1 and Tier 2. Because commenters 
expressed concern about possible confusion with Tier II Reports under 
the Emergency Planning and Community Right-to-Know Act (EPCRA), EPA has 
changed these description to Category 1 and Category 2.
    Category 1. Category 1 disclosures include: (1) EPCRA violations 
that meet all Audit Policy conditions; and (2) EPCRA violations that 
meet all Small Business Compliance Policy conditions. It does not, 
however, include Comprehensive Environmental Response, Compensation, 
and Liability Act (CERCLA) section 103/EPCRA section 304 chemical 
release reporting violations or EPCRA violations with significant 
economic benefit as defined by EPA.
    For disclosures that qualify for Category 1 treatment, the 
eDisclosure system automatically will issue an electronic Notice of 
Determination (eNOD) confirming that the violations are resolved with 
no assessment of civil penalties, conditioned on the accuracy and 
completeness of the submitter's disclosure. EPA will spot check 
Category 1 disclosures to ensure conformance with EPCRA, the Audit 
Policy, the Small Business Compliance Policy, and eDisclosure 
requirements.
    EPA is currently limiting Category 1 resolutions to the above-
described violations because: (a) The Agency has significant experience 
with providing NODs for these self-disclosed EPCRA violations (about 
half the disclosures EPA receives involve EPCRA reporting violations); 
(b) it is easy to confirm compliance with EPCRA reporting requirements; 
and (c) the regulated community suggested such violations for 
streamlined Audit Policy treatment. As the Agency gains experience with 
the eDisclosure system, it will evaluate whether to expand the types of 
violations that can qualify for Category 1 treatment.
    Category 2. Category 2 disclosures include: (1) All non-EPCRA 
violations; (2) EPCRA violations where the discloser can only certify 
compliance with Audit Policy Conditions 2-9 (i.e., discovery was not 
systematic); and (3) EPCRA/CERCLA violations excluded from Category 1 
above.
    For disclosures that qualify for Category 2 treatment, the 
eDisclosure system automatically will issue an Acknowledgement Letter 
(AL) noting EPA's receipt of the disclosure and promising that EPA will 
make a determination as to eligibility for penalty mitigation if and 
when it considers taking enforcement action for environmental 
violations. EPA will screen Category 2 disclosures for significant 
concerns such as criminal conduct and potential imminent hazards.

D. Summary of the eDisclosure Process

    Entities wishing to disclose potential violations through the 
eDisclosure system must follow a three-step process:
    1. Register to File with the Centralized Web-Based Portal. This 
step requires entities to register with EPA's Central Data Exchange 
(CDX) system. See http://www.epa.gov/cdx/. Existing CDX registrants who 
are already identity-proofed under the Cross Media Electronic Reporting 
and Recordkeeping Rule (CROMERR) would not be required to re-register 
with CDX. Also, paper identity proofing is available if electronic ID-
proofing fails.
    2. Submit a Violation Disclosure. In order to be considered 
``prompt'' under both the Audit Policy and Small Business Compliance 
Policy, potential violations must be disclosed online within 21 
calendar days of the entity's discovery that such potential violations 
may have occurred. If the 21st day after discovery falls on a weekend 
or federal holiday, the eDisclosure system will treat the disclosure as 
prompt if it is submitted on the next business day. Regulated entities 
may submit disclosures of potential (but not confirmed) violations to 
give them time to determine whether a violation actually occurred and 
to more specifically identify the particular violation(s).
    eDisclosure is not designed to receive or process any information 
claimed as Confidential Business Information (CBI), so disclosers must 
submit sanitized (non-CBI) information through the online system. Any 
follow-up CBI required to be submitted must be done manually according 
to EPA procedures and the requirements of 40 CFR part 2.
    3. Certify Compliance. Within 60 days of submitting an Audit Policy 
disclosure (or within 90 days of submitting a Small Business Compliance 
Policy disclosure), the discloser must submit a Compliance 
Certification in the eDisclosure system. Such Compliance Certifications 
must identify the specific violations, and certify that the violations 
have been corrected and that the Audit Policy or Small Business 
Compliance Policy conditions have been met. The 60-day and 90-day 
Compliance Certification deadlines are subject to limited extensions, 
as discussed further in this Notice.
    Disclosed violations will be considered withdrawn from Audit Policy 
or Small Business Compliance Policy consideration where the disclosing 
entity: (1) Voluntarily withdraws its disclosure before submitting its 
Compliance Certification (e.g., where it determines after disclosure 
that no violations actually occurred); (2) does not timely submit its 
Compliance Certification; or (3) submits a Compliance Certification 
that does not meet the conditions of the Audit Policy or Small Business 
Compliance Policy.
    Whenever there is a withdrawal, the eDisclosure system 
automatically will record the entity's attempt to disclose potential 
violations, notify it that EPA will retain such records, and send the 
discloser a notice that the disclosure does not qualify for Audit 
Policy or Small Business Compliance Policy penalty mitigation through 
the eDisclosure system.

E. Implementation Details

    1. Violation Correction and Compliance Certification Deadlines. 
Under the Audit Policy and Small Business Compliance Policy, disclosed

[[Page 76478]]

violations must be corrected as expeditiously as feasible and 
ordinarily within 60 or 90 days, respectively, from the date that the 
potential violations are discovered. Prior to today's launch of the 
automated eDisclosure system, EPA and regulated entities would 
communicate directly with regulated entities or their counsel to 
resolve their requests to extend the deadlines for correcting disclosed 
violations. Today's adoption of an automated eDisclosure system 
includes an automated process for handling requests for extension of 
such deadlines. Below is a discussion of the possible extensions in 
eDisclosure and how the eDisclosure system will process extension 
requests, followed by a timeline that summarizes the violation 
correction deadlines for new disclosures submitted after today's 
launch.
    a. Category 1 Disclosures. To obtain an electronic Notice of 
Determination (eNOD), disclosers must correct their violations: (a) 
Within 60 days of the date of discovery for those seeking penalty 
mitigation under the Audit Policy; or (b) within 90 days of the date of 
discovery for those seeking penalty mitigation under the Small Business 
Compliance Policy. Since all self-disclosures must be made within 21 
days of discovery in order to be prompt, a Category 1 Audit Policy 
Compliance Certification, therefore, will be due no later than 81 
(i.e., 60+21) days after violation discovery and a Category 1 Small 
Business Compliance Policy Compliance Certification will be due no 
later than 111 (i.e., 90+21) days after violation discovery.
    Extensions of the violation correction deadline and corresponding 
compliance certification deadline are not allowed for Category 1 
disclosures. If an entity requests an extension of the violation 
correction deadline for an EPCRA disclosure that is potentially 
eligible for Category 1 treatment (i.e., it meets all of the Audit 
Policy or Small Business Compliance Policy conditions and does not 
involve EPCRA section 304 chemical release reporting violations or 
EPCRA violations with significant economic benefit as defined by EPA), 
the disclosure will be potentially eligible only for Category 2 
(Acknowledgement Letter) treatment.
    b. Category 2 Disclosures Pursuant to the Audit Policy. Category 2 
disclosers seeking penalty mitigation under the Audit Policy can make 
an online request for up to 30 additional days (beyond the 60 days 
already allowed under the policy) to correct their violations, with no 
explanation required. Such extensions will be considered granted at the 
time of the request, and the eDisclosure system automatically will 
extend the Compliance Certification due date by an amount equal to the 
violation correction period extension (e.g., an entity that gets 30 
extra days to correct violations also gets 30 extra days to certify 
compliance).
    Category 2 disclosers seeking penalty mitigation under the Audit 
Policy can make an online request for more than 30 additional days to 
correct their violations, provided the violation correction date does 
not extend beyond 180 days after the date of discovery. To make such a 
request for an extension of more than 30 days, disclosers must include 
in the eDisclosure system a justification for such extension. Upon such 
request, the eDisclosure system automatically will extend the 
Compliance Certification due date by an amount equal to the correction 
period extension, but the request is not considered granted or denied 
at the time of the request. Note also that EPA is more likely to 
scrutinize requests for extension beyond 30 additional days and 
ultimately may decide that correction was not prompt, if and when it 
considers taking an enforcement action for environmental violations.
    c. Category 2 Disclosures Pursuant to the Small Business Compliance 
Policy. Category 2 disclosers seeking penalty mitigation under the 
Small Business Compliance Policy can make an online request for up to 
90 additional days (beyond the 90 days already allowed under the 
policy) to correct their violations, with no explanation required. Such 
extensions are considered granted at the time of the request and the 
eDisclosure system automatically will extend the Compliance 
Certification due date by an amount equal to the correction period 
extension (e.g., an entity that gets 90 extra days to correct 
violations also gets 90 extra days to certify compliance).
    Category 2 disclosers seeking penalty mitigation under the Small 
Business Compliance Policy can make an online request for more than 90 
additional days to correct their violations, provided the violation 
correction date does not extend beyond 360 days after the date of 
discovery. To make such a request for an extension of more than 90 
days, disclosers must include in the eDisclosure system a justification 
for such extension. Extensions of more than 180 days after discovery 
must be based on the time needed to correct the violation(s) by putting 
into place pollution prevention measures. Upon such request, the 
eDisclosure system automatically will extend the Compliance 
Certification due date by an amount equal to the correction period 
extension, but the request is not considered granted or denied at the 
time of the request. Note also that EPA is more likely to scrutinize 
requests for extension beyond 90 additional days and ultimately may 
decide that correction was not prompt, if and when it considers taking 
an enforcement action for environmental violations.
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    2. Processing Unresolved Disclosures That Were Submitted Prior to 
Today's Launch. In the June 2015 webinars and Information Sheet, EPA 
stated its

[[Page 76480]]

intention to allow regulated entities with pre-existing unresolved 
EPCRA disclosures to resubmit such disclosures through the eDisclosure 
system within 90 days of its launch date. In order to provide for a 
more orderly transition, EPA is extending this resubmittal opportunity 
to 120 days after today's launch. If such pre-existing unresolved EPCRA 
disclosures qualify for Category 1 treatment as outlined in today's 
Notice, the eDisclosure system automatically will issue an eNOD for 
such disclosures.
    Note that for any such re-submitted disclosure, regulated entities 
must certify in eDisclosure within 30 days of their re-submittal that 
they timely corrected their violations. Timely correction is within 60 
days of violation discovery for disclosures submitted under the Audit 
Policy and within 90 days of violation discovery for disclosures 
submitted pursuant to the Small Business Compliance Policy. No 
extensions of the 60-day or 90-day violation correction periods are 
available for such pre-existing EPCRA disclosures.
    For pre-existing disclosures subject to an audit agreement or 
significant settlement negotiations, EPA will resolve such disclosures 
with a Notice of Determination (NOD), Consent Agreement and Final Order 
(CAFO), or Consent Decree (CD). All other pre-existing disclosures 
(i.e., non-EPCRA disclosures and pre-existing EPCRA disclosures that 
are not resubmitted within 120 days of today's eDisclosure launch) are 
hereby treated as Category 2 disclosures and this Federal Register 
Notice serves as the Acknowledgement Letter for such disclosures. If 
and when EPA considers taking enforcement action for environmental 
violations, it will make a determination as to eligibility for penalty 
mitigation.

II. Unchanged Aspects of EPA's Self-Disclosure Policies

A. No Changes to Conditions in the Audit Policy and Small Business 
Compliance Policy

    The launch of the eDisclosure system does not modify the 
substantive conditions in EPA's Audit Policy or Small Business 
Compliance Policy. Instead, eDisclosure automates implementation of 
these policies to allow for faster and more efficient processing of 
self-disclosed civil violations. Moreover, disclosures of criminal 
violations will continue to be handled by the Voluntary Disclosure 
Board (VDB), outside the eDisclosure system, pursuant to the process 
outlined in EPA's Audit Policy at 65 FR 19624.

B. No Changes to EPA New Owner Policy Implementation

    This Notice does not change EPA's approach to resolving New Owner 
disclosures as outlined in the New Owner Policy (73 FR 44991, August 1, 
2008). Pre-existing New Owner disclosures will not be resolved through 
the eDisclosure system, but instead EPA will resolve these manually. 
New owners may elect to use the eDisclosure system to disclose future 
violations, but doing so will not provide New Owner treatment. To 
provide New Owner consideration, EPA will continue to accept and 
manually process new owner disclosures outside of the eDisclosure 
system pursuant to EPA's New Owner Policy, and EPA will enter into 
audit agreements as appropriate with new owners.

C. No Routine Requests for Audit Reports

    As discussed in the revised Audit Policy at 65 FR 19620, EPA 
reaffirms its policy, in effect since 1986, to refrain from routine 
requests for audit reports. EPA has not requested, and will not 
routinely request, copies of audit reports to trigger enforcement 
investigations. In general, an audit that results in expeditious 
correction will reduce liability, not expand it. If, however, the 
Agency has independent evidence that there may be violations, it may 
seek the information it needs to establish the extent and nature of the 
violation and the degree of culpability.

D. Opposition to Audit Privilege and Immunity

    As discussed in the revised Audit Policy at 65 FR 19623, EPA 
reaffirms its opposition to audit privilege and immunity. EPA remains 
opposed to state legislation that does not reserve the right to bring 
independent action against regulated entities for violations of federal 
law that threaten human health or the environment, reflect criminal 
conduct, or show repeated noncompliance. EPA also opposes legislation 
that bars enforcement in a way that allows one company to profit at the 
expense of its law-abiding competitors. See ``Statement of Principles, 
Effect of State Audit Immunity/Privilege Laws on Enforcement Authority 
for Federal Programs,'' dated February 14, 1997. The Agency opposes 
statutory immunity because it diminishes law enforcement's ability to 
discourage wrongful behavior and interferes with a regulator's ability 
to enforce against individuals who disregard the law and place others 
in danger.

III. EPA Approach to FOIA Requests Seeking Disclosures

    EPA has always considered resolved Audit Policy disclosures to be 
publicly releasable under the Freedom of Information Act (FOIA) (see 
1997 Memo from Steven A. Herman, ``Confidentiality of Information 
Received Under Agency's Self-Disclosure Policy,'' available at http://www2.epa.gov/sites/production/files/documents/sahmemo.pdf). EPA is 
continuing such approach. This means that FOIA requests for eNODs 
generally will be granted, particularly since the eDisclosure system 
warns users that it is inappropriate to submit in the online portal any 
confidential business information (CBI) or information that would 
constitute an unwarranted invasion of any person's privacy (e.g., 
social security numbers, birth dates, medical records, personal 
financial information, or other private information).
    The 1997 memo also states that EPA generally will withhold 
unresolved disclosures pursuant to the FOIA ``law enforcement 
proceeding'' exemption, Exemption 7(A). By this Notice, EPA is 
effectively revising the 1997 Steve Herman memorandum to eliminate the 
presumption in favor of withholding unresolved disclosures and to 
replace it with a presumption in favor of disclosure. This change is 
consistent with the 2009 open government and transparency memoranda 
from President Obama and Attorney General Eric Holder. See http://www.justice.gov/sites/default/files/oip/legacy/2014/07/23/foia-memorandum.pdf. Therefore, in response to any FOIA requests for 
individual unresolved disclosures, EPA instead will determine on a 
case-by-case basis whether it reasonably foresees that release would 
harm an interest protected by a FOIA exemption. In doing so, EPA will 
endeavor to be as accommodating as possible in responding to such 
requests, and EPA generally expects to make Category 1 and Category 2 
disclosures publicly available within a relatively short period of time 
after their receipt.
    EPA believes that this change is appropriate in part because it 
generally expects to spot check Category 1 disclosures and screen 
Category 2 disclosures within a few months after their submission and 
will determine at that time whether further investigation or other 
action is warranted. It is possible that disclosures involving longer 
requests for a violation correction extension could cause EPA to 
withhold such disclosures under FOIA, but that would be determined on a 
case-by-case

[[Page 76481]]

basis as noted above. EPA also notes that entities with wholly past 
violations and no outstanding noncompliance likely face little, if any, 
risk of citizen suit exposure. Accordingly, regardless whether the 
disclosed violations are resolved, EPA is optimistic that responsible 
disclosing entities will not be dissuaded from disclosing violations.

IV. Applicability

    The Audit Policy, Small Business Compliance Policy, and New Owner 
Policy are policies that guide the Agency in the exercise of its 
enforcement discretion. They are not rules or regulations, and they are 
not intended, nor can they be relied upon, to create any rights 
enforceable by any party in litigation with the United States. The 
policies and how they are implemented may be revised without public 
notice to reflect changes in EPA's approach to providing incentives for 
self-policing by regulated entities, or to clarify and update the 
policies as necessary.

IV. Effective Date

    These modifications to the implementation of EPA's Audit Policy and 
Small Business Compliance Policy are effective on December 9, 2015.

    Dated: November 30, 2015.
Cynthia Giles,
Assistant Administrator for Enforcement and Compliance Assurance.
[FR Doc. 2015-30928 Filed 12-8-15; 8:45 am]
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