[Senate Hearing 114-325]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 114-325

                     EXAMINING AGENCY DISCRETION IN
          SETTING AND ENFORCING REGULATORY FINES AND PENALTIES

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
               REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 11, 2016

                               __________

                   Available via http://www.fdsys.gov

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs


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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska

                    Keith B. Ashdown, Staff Director
              Gabrielle A. Batkin, Minority Staff Director
           John P. Kilvington, Minority Deputy Staff Director
                     Laura W. Kilbride, Chief Clerk
                   Benjamin C. Grazda, Hearing Clerk


       SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                   JAMES LANKFORD, Oklahoma, Chairman
JOHN MCCAIN, Arizona                 HEIDI HEITKAMP, North Dakota
ROB PORTMAN, Ohio                    JON TESTER, Montana
MICHAEL B. ENZI, Wyoming             CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska
                     John Cuaderess, Staff Director
                  Eric Bursch, Minority Staff Director
                      Rachel Nitsche, Chief Clerk
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Lankford.............................................     1
    Senator Heitkamp.............................................     2
    Senator Peters...............................................     7
    Senator Portman..............................................    10
    Senator Ernst................................................    12
Prepared statement:
    Senator Heitkamp.............................................    27

                               WITNESSES
                      Thursday, February 11, 2016

Jordan Barab, Deputy Assistant Secretary, Occupational Safety and 
  Health Administration, U.S. Department of Labor................     4
Susan Shinkman, Director, Office of Civil Enforcement, Office of 
  Enforcement and Compliance Assurance, U.S. Environmental 
  Protection Agency..............................................     6

                     Alphabetical List of Witnesses

Barab, Jordan:
    Testimony....................................................     4
    Prepared statement...........................................    28
Shinkman, Susan:
    Testimony....................................................     6
    Prepared statement...........................................    39

                                APPENDIX

Responses to post-hearing questions for the Record:
    Mr. Barab....................................................    45
    Ms. Shinkman.................................................    54
 
                 EXAMINING AGENCY DISCRETION IN SETTING
              AND ENFORCING REGULATORY FINES AND PENALTIES

                              ----------                              


                      THURSDAY, FEBRUARY 11, 2016

                                 U.S. Senate,      
                        Subcommittee on Regulatory,        
                      Affairs and Federal Management,      
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:33 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. James 
Lankford, Chairman of the Subcommittee, presiding.
    Present: Senators Lankford, Portman, Ernst, Heitkamp, and 
Peters.

             OPENING STATEMENT OF SENATOR LANKFORD

    Senator Lankford. Good morning, everyone. I am glad that 
everyone is here for this Subcommittee hearing.
    The Subcommittee has held a series of hearings examining 
the regulatory process. We determined over the course of these 
hearings that a robust, efficient process will lead to better 
regulations and better regulatory outcomes. We have not had a 
lot of dissent on that. It is a matter of just working on the 
process.
    Today's hearing focuses on the proper role of regulatory 
enforcement. It goes without saying that writing a law or 
developing a regulation is easier than actually enforcing it 
across the 50 States and our Territories in a fair, 
predictable, and consistent manner. But doing so is essential. 
Fair, predictable, consistent regulatory enforcement procedures 
must be understandable for all stakeholders.
    I believe that most Federal agencies agree that 
transparency is important and that providing accessible 
compliance assistance services is essential to any 
comprehensive enforcement regime. Safety, fairness, fighting 
discrimination are all great goals of our regulators and of 
enforcement. I think that is a reasonable thing.
    But, as we have learned from previous hearings, the sheer 
magnitude of the Code of Federal Regulations (CFR) means that 
understanding and complying with regulations is a gargantuan 
task for most individuals and businesses. The complexity of the 
regulatory system, coupled with the fear that failure to 
comply, even if complying is completely accidental, will result 
in a fine or penalty, that means that a business will feel they 
are targeted for arbitrary violations that they do not fully 
understand.
    As a result, regulated parties often feel confused. They 
deal with conflicting compliance information and it leaves them 
vulnerable to the whims of any regulator. In fact, one small 
business owner from one of the States mentioned back to us that 
when faced with the overwhelming number of regulatory 
requirements, ``what chance does a business have? ''
    Indeed, many individuals and businesses believe that agency 
officials enforce regulations in an unfair, unpredictable, and 
arbitrary manner. Because businesses often feel they are 
targeted arbitrarily, they are understandably fearful at times 
of Federal regulators.
    I hear stories from businesses that their only interaction 
with agency enforcement issues is to inspect and issue fines. 
As a result, my constituents tell me that their relationship 
with agencies have deteriorated and that instead of inspectors 
working with businesses to identify and solve compliance 
problems, government regulators show up, issue a fine and 
punishment.
    When businesses choose to avoid interaction with Federal 
agencies and dread inspections, our shared regulatory goals are 
not achieved and we have a breakdown between the government 
that is designed to serve people and the people that they 
serve.
    Agencies should play an active role in changing this 
culture. Agency officials, starting at the top, can set the 
tone by emphasizing compliance assistance, prevention through 
education, so that finable offenses, not to mention larger 
tragedies, do not occur in the first place. If businesses are 
no longer apprehensive in approaching an agency when they need 
clarification, they will likely find regulatory compliance 
easier and it will be more successful in compliance goals. In 
turn, all of us will enjoy safer workplaces and a cleaner 
environment.
    I look forward today to discussing our shared goals and 
feasible solutions. It is my hope we can start setting a tone 
in all of our agencies that helps engage with people and helps 
the people that are designed to serve the Nation and the people 
that we serve to actually have a better relationship in the 
days ahead.
    With that, I would recognize Ranking Member Senator 
Heitkamp for her opening remarks.

             OPENING STATEMENT OF SENATOR HEITKAMP

    Senator Heitkamp. Thank you, Chairman Lankford, for holding 
this hearing today and, giving us all an opportunity to explore 
this topic in our regulatory process.
    I am interested in hearing from our witnesses today as we 
examine how regulatory enforcement is working on the ground to 
improve compliance as we identify ways in which Congress and 
the administration can work together to improve compliance with 
our regulations.
    For our Nation to be successful and safe, for our citizens 
to be able to work hard and provide for their families, we need 
a regulatory process that works for American business and 
American families. That means we need to have enforcement 
mechanisms to ensure everyone is playing by the same set of 
rules.
    To that end, fines, penalties, restitution orders, and 
other sanctions are critical tools that the government has at 
its disposal to achieve compliance and deter wrongdoers from 
violating Federal laws and regulations. Without such tools, 
agencies have very little leverage in which to ensure the 
safety and health of our citizens and our environment.
    However, on the other side of the same coin, I believe that 
ensuring regulated agencies and entities have the necessary 
resources and information to successfully comply with 
regulations should also be our top priority. In fact, we have 
these mechanisms to ensure compliance and no one should feel 
like they are living in a ``gotcha'' world, where they are 
unaware of what the requirements are and only fearful that the 
sheriff will show up and slap a big fine on when they did not 
even know that they had an obligation to comply with a 
regulation.
    So, therefore, I am also interested in learning how your 
agencies focus their energy and resources on compliance 
assistance programs and ensure that entities are aware of what 
those requirements are. Specifically, I would like to know how 
both of your agencies work with small business to ensure that 
regulatory requirements are clear, transparent, and accessible. 
I know that both of your agencies work very closely with the 
Small Business Administration (SBA) and their office to ensure 
that small business concerns are appropriately addressed and 
quickly addressed.
    So, I look forward to hearing from both of you and hearing 
your insights as part of this all-important job that we have to 
do, which is to keep our citizens safe.
    Senator Lankford. At this time, we will proceed with 
testimony from our witnesses.
    Jordan Barab is the current Deputy Assistant Secretary of 
Labor at Occupational Safety and Health Administration (OSHA), 
a post he has held since April 2009. Prior to his current 
position, Mr. Barab served as Special Assistant to the 
Assistant Secretary of Labor for OSHA. Mr. Barab has also 
worked with the U.S. Chemical Safety and Hazard Investigation 
Board and for the House Education and Labor Committee. Thank 
you for being here, Mr. Barab.
    Susan Shinkman is the Director of the Office of Civil 
Enforcement (OCE) at the Environmental Protection Agency (EPA), 
a post that she has held since August 2012. Prior to this post, 
she served as the Chief Counsel to the Pennsylvania Department 
of Environmental Protection. She also served as Chief Counsel 
to Pennsylvania's Inspector General (IG) and the Pennsylvania 
Department of Labor and Industry. Ms. Shinkman also served as 
Assistant United States Attorney in the U.S. Attorney's Office 
for the Eastern District of Pennsylvania.
    I would like to thank you both for appearing here as 
witnesses. It is the tradition and custom of this Subcommittee 
to swear in all witnesses, so if you would please stand and 
raise your right hand.
    Do you swear that the testimony you will give before this 
Subcommittee will be the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Barab. I do.
    Ms. Shinkman. I do.
    Senator Lankford. Thank you. You may be seated. Let the 
record reflect the witnesses have answered in the affirmative.
    We will use a timing system. You will see a countdown clock 
in front of you. We are not strict on time except that we have 
10:30 votes that are being called today, and so be very 
attentive to time to make sure that we get plenty of time for 
your testimony as well as the questions of those that are here 
at the dais today. Your written testimony will already be a 
part of the permanent record, so anything in your oral 
testimony that you would like to share beyond your written 
testimony is acceptable, whatever may be.
    Mr. Barab, typically, we go ladies first, but today, we are 
making an exception to be able to have you go first, if you are 
OK with that, and have you be able to kick off today. So, we 
will receive your testimony now.

   TESTIMONY OF JORDAN BARAB,\1\ DEPUTY ASSISTANT SECRETARY, 
OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION, U.S. DEPARTMENT 
                            OF LABOR

    Mr. Barab. Thank you very much. Good morning, Chairman 
Lankford, Ranking Member Heitkamp, and distinguished Members of 
the Subcommittee. Thank you for inviting me here today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Barab appears in the Appendix on 
page 28.
---------------------------------------------------------------------------
    As Deputy Assistant Secretary of Labor for the Occupational 
Safety and Health Administration, I am honored to testify about 
the important work we are doing. As you know, OSHA's mission is 
to ensure the safety and health of roughly 130 million workers. 
Over the last 45 years since OSHA was created, we have made 
dramatic progress in reducing work-related deaths and injuries, 
but there is still a great deal more to do.
    I would like to begin today by briefly discussing OSHA's 
investigation and citation process. OSHA recognizes that most 
employers want to keep their employees safe, but there are 
still far too many employers who cut corners and fail to 
protect their employees. For these employers, avoiding OSHA 
penalties remains an effective incentive.
    Under the OSH Act, the Department is authorized to conduct 
inspections and issue penalties for health and safety hazards. 
The OSH Act also sets forth the types and amounts of potential 
penalties. For instance, OSHA penalties for willful or repeat 
violations have a maximum of $70,000 for each violation. 
Penalties for serious violations have a maximum of $7,000 per 
violation. Until recently, these figures have remained static. 
However, the 2015 bipartisan budget bill passed by Congress 
raised penalties and provided an opportunity for penalties to 
be indexed to inflation for the first time.
    The primary purpose of the penalties is deterrence. Any 
funds collected are deposited in the U.S. Treasury and are not 
used to support agency functions.
    OSHA carefully considers the impact of our penalties on 
small businesses. We take into account several factors. OSHA 
generally reduces penalties for small employers as well as 
those acting in good faith and employers with no recent 
citations. In fact, the average OSHA penalty for a serious 
violation is roughly $2,000. Sadly, these penalties can often 
seem too low. This is particularly true for incidents involving 
worker fatalities, where the penalty is often only a few 
thousand dollars.
    Workplace inspections and investigations are conducted by 
OSHA compliance officers. They are trained safety and health 
professionals who are given strict procedures that they must 
follow. OSHA conducts two general types of inspections, 
programmed and unprogrammed. Programmed inspections account for 
roughly 46 percent of inspections and specifically target the 
most dangerous workplaces and the most recalcitrant employers. 
Unprogrammed inspections account for 54 percent of inspections. 
They are initiated for several reasons, including worker 
complaints, referrals, employer reports, and followup 
inspections.
    OSHA's primary goal is correcting hazards, not issuing 
citations or collecting penalties. As a result, when OSHA 
issues a citation, we always offer the employer an informal 
conference with the area director. The agency and the employer 
may work out a settlement agreement. Last year, 65 percent of 
inspections with a citation resulted in informal settlements.
    Alternatively, employers can formally contest the alleged 
violations and/or penalties. Last year, this happened in 7.4 
percent of cases. These contests were sent to the Occupational 
Safety and Health Review Commission for independent review.
    At the same time, we recognize that most employers want to 
do the right thing and we are committed to ensuring that they 
have the tools and information they need. This is why we have 
made compliance assistance a priority. We work diligently to 
provide training, educational materials, and consultation 
services to employers and workers. New OSHA standards and 
enforcement initiatives are always accompanied by webpages, 
fact sheets, guidance documents, webinars, interactive training 
programs, and special products for small businesses.
    The cornerstone of this effort is our onsite consultation 
program for small and medium-sized businesses. Last year, close 
to 30,000 employers took advantage of this free, high-quality 
service. A full 87 percent of these visits were to businesses 
with fewer than 100 employees.
    OSHA also continues its strong support for recognizing 
employers who make safety and health a priority. Through the 
Safety and Health Achievement Recognition Program (SHARP) and 
the Voluntary Protection Program (VPP), we recognize employers 
who have developed outstanding injury and illness prevention 
programs. SHARP and VPP employers demonstrate that safety pays. 
They serve as models for other businesses to follow.
    Another critical piece of our strategy effort is the Susan 
Harwood Training Grant Program. This program provides funding 
to nonprofit organizations for valuable training and technical 
assistance for vulnerable workers and workers in small 
businesses.
    OSHA also provides additional cooperative programs designed 
to encourage, assist, and recognize efforts to eliminate 
hazards and enhance workplace safety and health practices. For 
example, OSHA has an alliance with the National Service 
Transmission, Exploration, and Production Safety (STEPS) 
Network, along with the National Institute for Occupational 
Safety and Health (NIOSH), to help employers reduce injuries 
and fatalities in the oil and gas industry.
    Thank you again for the opportunity to testify about the 
work we are doing every day to improve the safety and health of 
American workers and how we put great effort into making sure 
employers have all the necessary tools they need to meet their 
responsibilities.
    I would be pleased to answer any questions you may have.
    Senator Lankford. Thank you. Ms. Shinkman.

   TESTIMONY OF SUSAN SHINKMAN,\1\ DIRECTOR, OFFICE OF CIVIL 
 ENFORCEMENT, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE, 
              U.S. ENVIRONMENTAL PROTECTION AGENCY

    Ms. Shinkman. Thank you, Mr. Chairman, Ranking Member 
Heitkamp, and Members of the Subcommittee. I am Susan Shinkman. 
I am the Director of the Office of Civil Enforcement, an office 
within EPA's Office of Enforcement and Compliance Assurance. We 
are responsible for developing and prosecuting civil, 
administrative, and judicial cases and providing legal support 
for cases and investigations initiated by EPA regional offices. 
Thank you for the opportunity to testify about how EPA meets 
the challenge of ensuring consistent implementation and 
enforcement of Federal environmental laws and regulations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Shinkman appears in the Appendix 
on page 39.
---------------------------------------------------------------------------
    Our mission is to protect both human health and the 
environment by ensuring compliance with environmental laws. EPA 
regions support the national programs while working to ensure 
that EPA's work complements State, Tribal, and local 
environmental priorities.
    To provide consistency across the regions and headquarters, 
the civil enforcement and compliance programs employ statute-
specific policies to address compliance monitoring, enforcement 
responses to violations, and penalty assessments.
    EPA recognizes the role of small businesses in the Nation's 
economy and has developed innovative compliance assistance 
tools to help the small business community understand and 
comply with environmental requirements. When a new rule 
implemented--impacting small entities EPA prepares Small Entity 
Compliance Guides, which explain the actions that a small 
entity must take to comply. When EPA conducts an inspection of 
a small business, we hand out information related to the rights 
of the small business. Under our small business compliance 
policy, EPA will eliminate or significantly reduce penalties 
for small businesses that discover violations and promptly 
disclose and correct them.
    In recognition of these efforts, the Small Business 
Administration has given EPA's enforcement and compliance 
program as it affects small businesses an A rating for every 
year since 2005.
    One of the ways that EPA's regional offices, together with 
their State, local, and Tribal partners, monitor compliance is 
through inspections of facilities. Inspectors record 
observations and identify areas of concern, and at the 
conclusion of the inspection, they will discuss their 
observations with the regulated entity. If followup is needed, 
EPA will work with the regulated entity to remedy the 
violations.
    The vast majority of our enforcement cases are resolved 
through a settlement. Approximately 90 percent are handled 
administratively, while larger, more complex matters are 
usually handled as civil judicial cases in conjunction with the 
Department of Justice (DOJ).
    In addition to injunctive relief to ensure compliance, EPA 
does seek penalties to achieve deterrence and remove any 
significant economic benefit resulting from noncompliance. This 
levels the playing field by preventing companies that break the 
law from having an unfair competitive advantage. EPA's penalty 
policies also provide for a reduction in penalty based on 
ability to pay.
    EPA has made tremendous progress toward achieving cleaner 
air, water, and land over the last four decades. We will 
continue to work with States, Tribes, and local governments to 
make smart choices about priorities, to take advantage of 
innovations, and to ensure that the most important work is done 
first.
    EPA's enforcement program is designed to produce consistent 
and fair results that achieve compliance, cure noncompliance, 
deter future violations, and benefit human health and the 
environment.
    Thank you for the opportunity to testify and I would be 
happy to answer any questions.
    Senator Lankford. Thank you. Thank you both.
    The Chairman and Ranking Member are going to defer our 
questions toward the end and I would recognize Senator Peters 
for the first question.

              OPENING STATEMENT OF SENATOR PETERS

    Senator Peters. Thank you, Mr. Chairman, and thank you for 
deferring. I do need to leave to speak on the floor, so I 
appreciate this opportunity. I will be on the floor talking 
about the situation we have in Flint, Michigan, and appreciate 
the opportunity to ask a question of Ms. Shinkman.
    Ms. Shinkman, on December 8, 2009, the EPA sent a 
memorandum to its regional administrators titled, ``Proposed 
Revisions to Enforcement Response Policy for the Public Water 
System Supervision Program.'' In this document, which is 
attributed to an Assistant Administrator in your office at the 
time, Cynthia Giles, the memo outlines a risk-based approach 
for enforcement of the Safe Drinking Water Act to target repeat 
violators by assigning points based on the number and severity 
of violations. Page six of this document outlines EPA's 
enforcement response policy model for repeat violators. This 
policy states, and I quote, ``Responses to violations should 
escalate in formality as the violation continues or occurs.''
    Additionally, I understand that in those States with 
primacy over enforcement, EPA is authorized after 30 days under 
the Safe Drinking Water Act to take certain actions to return a 
system to compliance. These authorities allow the EPA to issue 
administrative orders, impose fines, and pursue other civil and 
even criminal actions. The same EPA policy document explains 
that most enforcement actions are administrative in nature, 
but, I quote, ``judicial cases are also an important 
enforcement tool and the use of judicial authority is 
encouraged.''
    So, understanding your agency's wide discretion in 
decisions of whether to levy fines against violators of our 
Nation's environmental laws, in the case of the Safe Drinking 
Water Act, we have a document here that encourages the EPA to 
seek judicial remedies when formal enforcement actions are 
necessary, whether in the form of injunctive relief, civil 
penalties, or criminal action.
    With this in mind, I want to direct your attention, as I 
mentioned, to my home State, in the city of Flint, where we, as 
you know, have a very difficult situation, where there have 
been a series of bad decisions that now have subjected the 
entire city to toxic lead-tainted water. Nearly 2 years ago, an 
unelected emergency manager that was appointed by Governor 
Snyder changed Flint's water source to the Flint River in order 
to save some money, and we know the result of that State 
decision has been catastrophic.
    The water crisis in Flint is an immense failure of Michigan 
State Government, certainly. The Michigan Department of 
Environmental Quality (MDEQ) has admitted they failed to 
properly follow the Federal lead and copper rule and that they 
chose not to ensure optimal corrosion control treatment was in 
place going forward.
    Your agency's own emergency order invoked under authorities 
of the Safe Drinking Water Act on January 21 of this year 
states in its findings of fact, and I quote, ``The presence of 
lead in the city water supply is principally due to the lack of 
corrosion control treatment after the water source was switched 
and the city of Flint MDEQ and the State have failed to take 
adequate measures to protect public health.'' The emergency 
order also reserves EPA's right to commence civil action and 
assess civil penalties in order to ensure compliance with this 
order.
    However, the same document explains that EPA Region 5 staff 
first expressed concern about the lack of corrosion control 
back in May. That means the emergency order was issued at a 
minimum of 7 months after the EPA's concerns were first 
communicated to the State.
    So, if I am reading this law right, the EPA only has to 
wait 30 days before it can pursue enforcement actions on its 
own separate from the State, and at the very least, the EPA 
needs to have some authority to tell the public directly about 
this health crisis. That is why I have introduced legislation 
to require the EPA to notify the public after 15 days if a 
State has not done so. The House passed similar legislation 
just yesterday.
    So, my question to you is fairly simple. If your agency's 
own policy document encourages judicial action when a situation 
is escalating, why did the EPA wait so long to take action in 
Flint?
    Ms. Shinkman. Senator, I appreciate your question and 
certainly your concerns. This is a very tragic and catastrophic 
issue. The authority under the Safe Drinking Water Act is to 
give primacy to the States to try and do their enforcement and 
make sure that the Safe Drinking Water Act is properly 
administered. In this case, clearly, there was a falling down 
on the appropriate measures. The EPA Regional Office, Region 5, 
was monitoring what was going on with the State over a period 
of time. Obviously, a significant amount of time passed in 
which perhaps other action should have been taken.
    My office became aware of it in the fall of last year. We 
worked with the region. We were monitoring what was going on. 
And, at the time we became aware of it, there were steps that 
were being taken. We monitored them as well as we could. When 
we realized that the situation required emergency action, we 
took the action on January 21 and issued that order.
    The order is very specific. It is issued to the State, the 
MDEQ, and the city of Flint. It has very specific requirements 
over a short period of time. We are monitoring that order on a 
daily, almost hourly, basis to make sure that we try to bring 
the city back into compliance and improve the drinking water in 
the city of Flint.
    We have taken that action. The most immediate need was to 
do emergency action. If that does not work, we will obviously 
be following through with other enforcement actions, 
potentially judicial.
    Senator Peters. Well, and I know my time has expired, but I 
realize that you have taken action and have been much more 
focused on the Flint situation now, which I appreciate. But, 
why did that not happen months ago? As you know, every month 
that goes by with tainted water and children, in particular, 
who are consuming water with lead that creates irreparable 
damage to their brains, why was this not treated as a crisis 
immediately?
    Ms. Shinkman. I cannot answer for everyone who was involved 
in it. I can say from my office, as we became more aware of it, 
we moved and we took the most appropriate action we could in 
January. Other people's actions earlier, I cannot account for 
all of them. I recognize the fact that it is a very important 
issue. It is certainly being looked into by a lot of people.
    Senator Peters. So, what do we need to do going forward? 
How can we prevent this from ever happening again? What sort of 
actions do we need to take, or is there anything that we need 
to be doing working with you at the EPA?
    Ms. Shinkman. From the EPA's standpoint, we are very aware 
of what happened. We are going to try and make sure it does not 
happen again. We are looking back at what happened here, and 
looking forward, we are scouring to make sure that something 
like that does not ever happen again. The authority is there. 
The emergency existed. We issued the emergency order. In a 
similar case, we would certainly issue a similar emergency 
order as soon as we could.
    Senator Peters. Well, and I understand that there was some 
confusion within the EPA as to whether or not they should go 
public or whether or not you should go public with some of the 
tests that were coming forward, that is why I have introduced 
legislation with Senator Stabenow to require immediate public 
disclosure if a State does not take action, if a State is not 
making these tests available to the public that show elevated 
levels of lead or other toxins. I believe the House bill has 
even a quicker timeline of 24 hours that you have to report. 
Our bill has 15 days.
    But, we need to be very clear that if the EPA sees 
something, that you go public. There should be no ambiguity 
about that. It should be clear cut, straightforward, that the 
public has a right to know. Certainly, the State of Michigan 
bears primary responsibility for this crisis. There is no 
question about that. They need to step up. They broke it. They 
need to fix it. But, certainly, I am extremely disappointed 
with the EPA's response on this, as are so many people, and I 
think we can never tolerate the EPA not going public 
immediately when you have a building crisis of this magnitude.
    So, I will continue to work with you and your office and I 
look forward to working closely so that we can do whatever it 
takes to make sure that this never, ever happens again.
    Thank you.
    Senator Lankford. Senator Portman.

              OPENING STATEMENT OF SENATOR PORTMAN

    Senator Portman. Thank you, Mr. Chairman, and let me just 
start by saying, with regard to Senator Peter's comments on 
water quality, we are working with the EPA on some issues in my 
State of Ohio. I do not know if you know Bob Kaplan, your 
Assistant Administrator, but I have spoken to him directly 
about some of these same issues. In our case, it is a small 
community called Sebring, Ohio, and the mayor, Mayor Pinkerton, 
and I have talked on occasion about, over the last 2 or 3 
weeks, about EPA's role. We want to be sure EPA is providing 
the technical expertise and providing the kind of oversight 
that they are required to, but also providing transparency.
    So, I would ask you today, Ms. Shinkman, because you are 
here and because this topic is timely, if you could please 
ensure that, in fact, we are not having another case where the 
EPA is not providing the right kind of information to the 
people who are depending on the water supply. We think things 
are under control in Sebring right now, but in my conversations 
with Mr. Kaplan, I made it clear that we expect EPA to do its 
job and to provide the transparency to the people of that 
community.
    Ms. Shinkman. I appreciate that, Senator. I am aware of the 
situation. I believe EPA is directly involved at this point and 
will continue to monitor it.
    Senator Portman. And, I want to thank the Chairman and 
Ranking Member for holding this hearing. We once again are 
seeing this Subcommittee do good work, and this is a 
Subcommittee to look at regulations and, therefore, the 
regulatory process including regulatory fines and penalties. 
They roll up their sleeves and jump into this, the Chairman and 
Ranking Member, and I really appreciate that, because I think 
there is increasing power in the regulatory system that has not 
had the proper oversight and this is one area.
    If you are a small business person, it is intimidating. You 
do not have the compliance people to figure out what all these 
potential regulatory issues are, much less what the fines and 
penalties might be, and if there is not a consistency in terms 
of the application and transparency in terms of what the rules 
are, it makes it very difficult, one, to comply, and two, 
again, just intimidation of not being able to figure out what 
the rules are.
    Mr. Barab, I did not get to hear your whole testimony, but 
I got to read some of it just now, and I appreciate your being 
here today and talking about what OSHA is doing to try to make 
it easier for people to understand, particularly small 
businesses, what the rules are. You have a thousand inspectors 
out there, is that right? I saw that in your testimony.
    Mr. Barab. Yes, a thousand in the Federal level and 
probably another 1,100----
    Senator Portman. At the State level?
    Mr. Barab [continuing]. Among the 28 State plans.
    Senator Portman. Yes. So, you have 2,100 people, at least, 
but a thousand at the Federal level. That is a lot of people, 
and if you have the kind of flexibility I saw in your testimony 
and you have different applications depending on the situation, 
how do you have consistency, and what are you doing to ensure 
that there is a consistent application across the agency, 
understanding that flexibility is something you also want, 
because in some instances, that flexibility can be very helpful 
to a small business, to work more as a partner with them to 
resolve issues rather than an enforcement measure to punish 
them for something that they did not have the expertise to 
handle. So, talk about that.
    Mr. Barab. Yes. Thanks for the question. It is a good 
question, because that is one of our major challenges always, 
ensuring consistency among our inspectors around the country.
    We do train our inspectors very carefully when they first 
come on and continuously thereafter to ensure that they are 
complying with the procedures. We have what is known as our 
Field Operations Manual, which is a notebook about this size 
which contains all the procedures, all the enforcement 
procedures, the penalty procedures, the appeal procedures, 
everything that an inspector needs to make sure that they are 
doing their job, again, with that consistency, with the 
transparency that we value.
    We monitor that. I mean, we have a whole staff in 
Washington making sure that our inspectors do follow those 
procedures. We work very closely with our solicitors, again, 
when we run into difficult problems, again, to ensure that kind 
of consistency.
    Now, we also do, as you mentioned, have some flexibility 
there, and I think that is a good thing, because we are dealing 
with many employers who have a right to, and we listen to their 
defenses when that happens. We have a process where we have 
informal conferences after we issue the citations in order to 
discuss the problems that we found and to talk about possibly 
reducing fines or changing the citations. So, I think we do try 
to balance those procedures with some flexibility.
    Senator Portman. Thank you. I appreciate that. And, again, 
your testimony was helpful in that regard and this Subcommittee 
is going to be looking at ways to increase that transparency 
and to let people know what the issues are that they have to 
address, but also, how the fines and penalties work.
    And, Ms. Shinkman, my time has now expired, but I assume 
that you are going to answer this further, how the EPA could 
increase the transparency in terms of letting people know what 
is going on. I am going to turn it back to the Chairman and 
Ranking Member, but I look forward to hearing what your 
response is to that.
    Senator Lankford. Ms. Shinkman, if you want to go ahead and 
answer that, you are certainly welcome to.
    Ms. Shinkman. Thank you. Yes, we are very concerned about 
those issues, as well--consistency, transparency, and 
flexibility in all of our penalty policies and our regulatory 
actions. For transparency, we have all of our policies on the 
web. They are available for anyone and you can see them by 
statute or by program area. Any of our proposed settlement 
agreements are open for public comment.
    For consistency, we have actually a specific policy for 
each statute that are applicable across all ten regions and 
headquarters so we all have the same standards to apply. We 
have training for our inspectors that is also done across the 
ten regions and with headquarters.
    We are also very concerned about flexibility, because we 
face big industries and small businesses, and so we have built 
into all of our policies many standards that we can look to to 
make sure that we are applying them flexibly. For example, we 
look at the compliance history of the entity. We certainly look 
at the size of the entity. That is a big issue for us because 
of the disparities that we see. We look at the good faith 
efforts to comply as opposed to willfulness of noncompliance. 
We look at the duration of any violation. And we also look at 
the seriousness of it.
    And, finally, in any penalty situation, we look at the 
ability of the violator to pay so that we can be addressing 
that realistically before we settle on any final penalty.
    Senator Portman. Thank you, Mr. Chairman.
    Senator Portman. Senator Ernst.

               OPENING STATEMENT OF SENATOR ERNST

    Senator Ernst. Thank you, Mr. Chairman, and thank you both 
for your testimony today.
    Ms. Shinkman, we do not have to look any further than a lot 
of headlines out there today to see that the American public 
does not have a lot of faith nor trust in our government and 
government officials. That is quite evident with what we see 
going on in the primaries, the caucuses, and, of course, what 
we see with a number of agencies across the Federal Government. 
Could you please tell me the last time that Administrator 
McCarthy reviewed the procedures of the onsite inspectors.
    Ms. Shinkman. I am sorry, I cannot answer that. I will be 
happy to get back to you and look into that.
    Senator Ernst. If you would, please.
    Ms. Shinkman. Sure.
    Senator Ernst. And, do you know, has she ever participated 
in an inspection from start to finish to better understand what 
our small businesses must do to comply with their inspections?
    Ms. Shinkman. I will certainly look into that.
    Senator Ernst. OK. And, my point of this is that there are 
a lot of bureaucrats out there that will simply throw out rules 
and regulations without understanding the full impact from 
start to finish, both the labor intensity in any of these rules 
and regulations or the cost to the businesses. I think it is 
disregarded so many times.
    So, I would like to see leaders leading from the front and 
understanding what they are instructing our civilian 
population, our companies, our small businesses, to comply 
with. It is easy to sit in an office and push out rules and 
regulations, but we need leaders that are willing to go on the 
ground and actually walk through these situations with those 
business owners so they get it. Our American public feels that 
our bureaucrats do not get it. They have lost touch with what 
is going on out in the communities.
    As you know, EPA's Waters Rule is very concerning to many 
in my State, as well as many others out there, and I want to 
take a minute to get some clarity on the interim Clean Water 
Act settlement penalty policy, and I am going to quote here. It 
says that, ``it sets forth how the agency generally expects to 
exercise its enforcement discretion in deciding on an 
appropriate enforcement response and determining an appropriate 
settlement penalty.''
    And then I am going to walk you through the formula on how 
to calculate a penalty. Again, ``The settlement penalty is 
calculated based on this formula. Penalty equals economic 
benefit plus gravity, plus or minus gravity adjustment factors, 
minus litigation considerations, minus ability to pay, minus 
supplemental environmental projects.''
    My concern that I hope that you can address is that it 
seems you all have a tremendous amount of discretion when it 
comes to enforcing a penalty, that is No. 1. And, to be honest, 
I have never seen a formula with so many variables here. And 
not only do we have so many variables, it is EPA that decides 
what the gravity is, what the economic benefit is, what that 
litigation consideration is, and you also decide what the 
business's ability to pay is.
    This is very confusing, and how is this approach assisting 
business owners into compliance? It seems like we have the EPA 
against our businesses, and can you explain this policy.
    Ms. Shinkman. Thank you, Senator. I will attempt?
    Senator Ernst. Very frustrating.
    Ms. Shinkman. Well, I appreciate that, and those of us who 
work with it every day perhaps get a little more familiar with 
it and perhaps lose sight of how it might look to someone for 
the first time or the second time. So, maybe we need to look at 
our language a little bit better. But, I can explain a couple 
of those elements to you----
    Senator Ernst. Please.
    Ms. Shinkman [continuing]. In a way that I hope will be 
helpful.
    Starting from the back, the ability to pay, the only way 
EPA determines or makes any finding about ability to pay is 
based on what the violator submits. If we have a penalty amount 
that seems to be appropriate, and I will get to how that is 
derived in a minute, but if the entity says that they do not 
think they can pay, we ask them to explain that and give us 
some information about why, and we look into realistically 
whether that is true, based on tax returns or other economic 
financial statements that a business might provide.
    So, the EPA does not pick out from the air what the ability 
to pay is. We work with the information that is provided by the 
entity, and we give that opportunity to provide statements 
about pay, and very often it leads to a reduction in the 
penalty. So, that is how that determination is made toward the 
end.
    The economic benefit is a way of finding out whether a 
company that, if not in compliance, benefited by not having to, 
say, pay for controls that all of their competitors had to pay 
for. If there is some kind of equipment that costs maybe 
$10,000 a year to operate and the entity that was in 
noncompliance did not install it but all of their competitors 
did, they received an economic benefit of $10,000 every year 
that they operated without that control. So, that would be an 
economic benefit that would be part of the penalty calculation.
    Senator Ernst. But, all of this is decided by the EPA, 
correct?
    Ms. Shinkman. In discussions with the company. We would not 
have the information without talking to the company. But, we 
would ask, if we saw that they did not have the control, we 
would talk perhaps to the competitors, perhaps we would know 
what that control cost, and if it was not there, it is an 
iterative process, coming up with a penalty. Those are two 
elements that are distinct that you mentioned. That is how the 
ability to pay works. That is how the economic benefit works.
    And then the other considerations that some, I think, were 
listed as part of what we call the gravity component, that is 
where the willfulness as opposed to the unknowingness comes in, 
and the length of the violation--if it was a spill, whether it 
went on for a month or a day, what the harm was from it. Those 
are the kinds of considerations that come in, and sometimes in 
a matrix way that we work with the company on to try to 
determine what the appropriate penalty is.
    And, we resolve most of our cases through settlements by 
having this discussion. And, rather than just having a free-
wheeling, what do you think is appropriate, we set out these 
guidelines. The economic benefit is one and then the gravity 
component is built--consists of these other considerations, 
like damage, length of time, the prior history of the violator.
    Senator Ernst. OK. And, I know I am going way over. I am 
going to make one final point, because we have cases like 
Senator Peters was just discussing with the Flint water 
situation, where the EPA did know something. We do not know the 
full extent of this, but the EPA knew. We have a mine spill 
that affected a river. Who decides if the EPA is at fault and 
how much they should be fined for incidents like this?
    And, I know you cannot answer that. That is just one of 
those questions out there that, it seems like the EPA has got 
so much power and control over so many situations. You try and 
gain more control through expanded definition of Waters of the 
United States, but you cannot honestly manage what you already 
have under your belt.
    So, I am going to stop right there, but I appreciate the 
extra time. Thank you very much.
    Senator Lankford. Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman.
    As someone who once upon a time, when I was tax 
commissioner, had to write a penalty policy, I sympathize, 
because frequently, if you just leave it up to discretion 
without any kind of policy, what you get is the squeaky wheel 
gets the grease and everybody else who is in exactly the same 
situation is not treated fairly, if they say, well, I did it, 
so I am going to pay the penalty. We need to make sure that 
that does not happen, and so I would just suggest to you that 
people can be bitter if they find out, boy, I did not get my 
penalty waived or reduced, but he did simply because he asked. 
And, so, I just set that out as one of the concerns.
    But, my main reason for wanting to have this hearing and 
for how I look at this is penalties should be last resort. That 
should be the very end of enforcement. That should be the end 
of regulation. That should be reserved for those people who do 
not get it, who have done something that is, in my opinion, 
fairly blatant, knowing that they have not been in compliance 
with the regulation.
    I was intrigued by the stakeholder discussions, because I 
think compliance is why we have penalties, and you should all 
want, as agency heads, to walk in and never assess a penalty. 
It means that you are doing your work on the front end in terms 
of compliance.
    And, so, I was interested in the work that OSHA does with 
stakeholders that you discussed in your testimony. Can you 
elaborate how you reach out to safety organizations and how you 
collaborate with manufacturers and stakeholder groups.
    Mr. Barab. Yes. We have a number of means of doing that. 
First of all, we have a fairly large part of our budget that 
goes to compliance assistance. I think it is this year about 
$68 million.
    Senator Heitkamp. What percentage is that?
    Mr. Barab. Well, it is a little over 10 percent, probably 
12 percent----
    Senator Heitkamp. You may want to up that a little bit.
    Mr. Barab. Well, it has actually been cut back since--that 
is one of our budget items that has never really recovered from 
sequestration, which is rather upsetting, because what that 
money does largely is go to paying for what we call compliance 
assistance specialists, which we at one time had one in each 
one of our 85 area offices. Now, we are not able to quite 
afford that anymore. And, what these compliance assistance 
specialists do is they work with businesses to make sure that 
they are aware of their obligations under the law, that they 
are aware of best practices, that they are aware of basically 
how to keep their workplaces safe.
    Senator Heitkamp. North Dakota has a workforce safety 
program that is State run, and I think it might be one of the--
it used to be everybody had State-run systems and now we have 
transitioned. Can you talk about how you work with the State-
based systems? Could you not expand your outreach in terms of 
workforce safety by working with the insurance agencies?
    Mr. Barab. Yes, and we do try to work with everyone, not 
only with private sector stakeholders, but with the States. 
Now, North Dakota is not one of the States that has its own 
health and safety program, so we are directly responsible for 
enforcement of health and safety, workplace health and safety.
    Senator Heitkamp. And you have two inspectors in North 
Dakota.
    Mr. Barab. Yes. We are trying to up that.
    Senator Heitkamp. Yes.
    Mr. Barab. We know there is a major problem there. We are 
actually opening an office--and right now, we actually have an 
office that covers South Dakota and North Dakota. We are 
opening up a new office in South Dakota so that we can put more 
resources into North Dakota, because we realize, given the oil 
boom there, there is a major demand, and, the incidents and 
injuries and illnesses and fatalities that have come along with 
that. So, we do try to work very carefully with the States 
where they have those resources, again, as well as with the 
private sector in all States.
    Senator Heitkamp. When I served on the board of directors 
of a large chemical--that is what is was--gasification plant, I 
mean, we had a safety report before we did anything else, and I 
think the industry is very interested in workforce safety. It 
is expensive not to be focused on workforce safety. And, a lot 
of the programs like the ones that are run by the State of 
North Dakota encourage compliance and, so, I am trying to 
basically say, let us not get out there with a ``gotcha.'' Let 
us get out there and invest a lot of resources in meeting kind 
of compliance on the front end.
    The other thing that will be a bonus as a result of that is 
you will begin to understand how some of your regulations are 
perceived and that they do not add value to safety and the 
workforce. Those are regulations that have been written in 
Washington, D.C., that, as Senator Ernst talked about, when 
they are applied, do not necessarily achieve a result that in 
any way adds value to workforce safety.
    And, so, I just really think 10 percent of the compliance 
budget, or enforcement budget, going to educating and getting 
people into compliance is an inadequate balance.
    I am kind of running out of time, but I would like to know 
what that split is at EPA.
    Ms. Shinkman. I do not know offhand what it is. We could 
certainly get that information for you. We do have compliance 
programs, particularly for small businesses and for 
agriculture----
    Senator Heitkamp. Why do you think everybody is so afraid 
of EPA? No, I mean, I think, you sit here, and I think 
sometimes EPA feels under siege, but we hear it when we are 
there. We hear the concerns. We hear the fear. That is not 
exaggerated and it is not an over-focus of ours. So, what is it 
about your agency that strikes the fear in the heart of the 
people you regulate?
    Ms. Shinkman. I do not think I can answer that directly. I 
appreciate----
    Senator Heitkamp. I am just making my point. You do not 
need to try and answer that question. But, I think it is a 
legitimate point and I think it should cause some soul 
searching within your agency on why that is and how you can do 
a better job working with those people.
    You can only look at what happened in Flint and realize how 
critically important it is, what you do. I mean, and that you 
do what you do well. Flint is a reminder to all of us that we 
need these agencies. But the question becomes, how do we 
prevent this from happening, as Senator Peters talked about, 
but also, how do we develop a better relationship long-term.
    Mr. Barab. Senator, if I could correct one thing I said, I 
mentioned our $68 million for compliance assistance.
    Senator Heitkamp. Yes.
    Mr. Barab. That is our Federal compliance assistance budget 
for the services that I mentioned. We also have what I 
mentioned in my testimony----
    Senator Heitkamp. Right, the State----
    Mr. Barab [continuing]. Which is our consultation budget, 
which goes totally to small employers, and that is about $50--I 
think it was $57 million, so that is added to the $68 million 
that I mentioned before.
    Senator Heitkamp. I will followup with some questions.
    Mr. Barab. OK.
    Senator Heitkamp. And, I am interested in what your plans 
are for the Dakotas, so----
    Mr. Barab. Sure.
    Senator Lankford. Let me just give you a couple quotes. As 
we asked the question, and we let people know that we had this 
hearing and were trying to gather information and background 
sources, and I have several stories and things that I can share 
on it, let me just pull a couple quotes here, just about the 
fines and the mindset of when inspectors come.
    One person told us that they were told that when an 
inspector came, they said to them, ``if it takes all day, we 
will stay until we find a violation''.
    One person said, ``the EPA views businesses as an ATM to be 
fined, regardless of the determinations of an investigation''.
    Another one said, ``the determination of whether there is a 
fine and the amount depended on the mood of the investigator''.
    Said this one, ``there has been a culture change from one 
of compliance assistance to one of scaring people into 
compliance''.
    And then this one, ``more stick than carrot''. I thought it 
was interesting.
    Now, I would tell you, just interacting with the two of you 
and hearing your mindset and your view on this, I think if most 
business folks were sitting across the table from you and 
talking back and forth, they could work a lot of things out. 
But, there is a real sense, and what Senator Heitkamp had 
mentioned before, I have heard from numerous employers saying, 
if I went back--and people that own small businesses--if I went 
back 10 years ago, when someone showed up for an inspection, 
they were extremely helpful to me and they were helping me find 
safety issues. Now, they show up and they are just a fine.
    And something seems to have shifted, and now it has gone 
from ``I am grateful to have the help to walk around the 
facility with fresh eyes,'' to, ``oh no, they are coming. I am 
going to have to pay a fine for something, no matter what it 
is''. So, I do not know if you could say what has occurred, but 
that real life sense is out there, and so this perception that 
for many is reality, of I do not want an inspector to come help 
me to find safety violations because I know I am going to have 
a fine. Even if it costs them all day to stay here, they are 
going to find something.
    Some of this goes back to the training you all talked about 
before. I know EPA had the wonderful experience of several 
years ago having someone in Region 6 say, ``the way we do this 
is like the Turks used to do it, to go into town and grab five 
guys and crucify them. Then there are no problems after that''. 
Obviously, that is not the EPA's attitude as a whole. And, when 
you talk about trying to train people in regions and making 
sure it is consistent, that comes to mind immediately when you 
think there was a region that was most certainly not consistent 
with the EPA national value.
    I am actually going to get to one--my question is, how do 
you balance out the issue of compliance and the real deterrence 
that a fine is and being helpful to someone in being able to 
walk through? We want any business to have a fresh set of eyes 
to look around for health and safety issues. We do not want 
them to be able to push us away. How are we currently trying to 
balance that out to reengage with business, to say, we want to 
be able to help in the process? And, I will have just both of 
you mention that.
    Ms. Shinkman. Thank you. First, I would like to address the 
disconnect that you have described. Clearly, that is what it 
is, I hope. Certainly, from EPA's perspective, we really 
believe in our mission to reduce pollution and protect the 
health of the communities that we all serve. That really is the 
mission. That is how we feel about it. I understand that there 
is a perception out there as you have well described. And, so, 
we need to work at getting around that disconnect.
    I believe there are a couple ways that we have tried. We do 
have compliance assistance available for small businesses. We 
have tried to improve on that and making it available.
    We have also focused on some of our penalty and enforcement 
methods to look at ways to deal with small entities, with small 
violations. We have expanded our--we call them Expedited 
Settlement Agreements (ESA). These are ways that we can, when 
there is a small violation seen in the field, we can address it 
rather quickly. We use this for things like underground storage 
tanks where there might be a leak, some recordkeeping in some 
of our chemical violations, things that we see that are small, 
can be remedied quickly. We try to have what is really a non-
negotiable agreement. It is small. These are the facts. We can 
all agree to them quickly. And we have tried to expand our use 
of those so that when there is a small violation that can be 
dealt with quickly, we can use that.
    Senator Lankford. Can you walk me through the settlement 
process? And this will be one, Mr. Barab, I want to get a 
chance to visit with you, as well. You both mentioned the 
settlement. There is a very clear process, and as Senator Ernst 
had mentioned before, I get it as far as the benefit and the 
cost and the risk and all those things. I get the process and 
going into that.
    Ms. Shinkman. Sure.
    Senator Lankford. The challenge is, once you go through 
that, you set a fine and then there is a process to have a 
conversation on the settlement. Here is the fine. Now, let us 
talk about if we are going to settle on it. How does that part 
of the process work? What is the mechanics of that?
    Ms. Shinkman. OK. Let me start maybe a little earlier. It 
really is an incremental process. An inspector goes out and 
sees that there is a problem.
    Senator Lankford. Right.
    Ms. Shinkman. Unless it is an emergency that needs to be 
addressed immediately, there is usually a discussion about it 
and then they come back to the office and discuss what, if 
anything, needs to be done about it from an enforcement 
perspective.
    After that determination is--if there is a violation that 
actually merits taking enforcement action, then there is a 
discussion about what level of enforcement to take. Is this 
something that can be dealt with administratively by going back 
and talking about it and seeing whether it is a small, quick 
resolution or whether it is something that is going to require 
changes at the facility that would require some investment and 
some monitoring. An awful lot of them do not, but if they do, 
there is a further discussion about that.
    Senator Lankford. Can I ask you a quick question on that? 
When you find a violation, does that warrant a fine every time?
    Ms. Shinkman. It depends----
    Senator Lankford. As far as, do you feel an obligation 
coming at you either legislatively or from a guidance that if 
there is a violation, that is a fine?
    Ms. Shinkman. We have enforcement discretion and we can----
    Senator Lankford. OK. Mr. Barab, do you all have 
enforcement discretion, as well? Do you feel that----
    Mr. Barab. I would say, generally, we are required to issue 
a fine of some sort when we find a violation.
    Senator Lankford. Every time.
    Mr. Barab. There is some discretion there, but, yes, that 
is the----
    Senator Lankford. OK. I want to talk about that. I hate to 
interrupt you, but I wanted to get some clarity on that to make 
sure we are heading in the same direction. Go ahead and you can 
finish, Ms. Shinkman.
    Ms. Shinkman. So, there is enforcement discretion. We 
decide whether it is something that within our policies merits 
further action. That further action may be an administrative 
order or an agreement that we talk about, we reach agreement 
that the first thing we want to do is abate whatever the 
problem is.
    Senator Lankford. Right.
    Ms. Shinkman. And, so, that is what is addressed first, 
whether it is going to require additional action, stopping 
something, starting something, try to resolve it that way. If 
we reach that resolution, in most cases, there will be at least 
some penalty because there was noncompliance, and then we go 
through the factors to decide how large the penalty is.
    In a bigger case, what would happen, generally, is there 
would be further discussions and there may even be a referral 
to the Department of Justice, and then there are further 
discussions within EPA, with the Department of Justice, and 
with the entity that is out of compliance. So, it is an 
incremental process, an iterative.
    I think a lot of the things that you are hearing about tend 
to be the small ones. But, the reality is, there is usually a 
process and there is a lot of dialogue back and forth before 
there is an ultimate resolution about what injunctive relief or 
change needs to be made in the processes to make sure that the 
company is in compliance going forward, what mitigation needs 
to be done for any damage that might have--like a spill or 
something like that that needs to be cleaned up, and then, what 
penalty do we need under the standards that we have.
    Senator Lankford. We are still back to the settlement 
thing. The process, how to get there. Once the fine has been--
the settlement that you are describing, is that typically a 
judicial settlement? We are in a court and we are trying to 
work through that? Or----
    Ms. Shinkman. It could be both.
    Senator Lankford [continuing]. What is the other 
settlement?
    Ms. Shinkman. The other is administrative, in which case we 
would have either an order that is appealable or a signed 
agreement, and that goes through our administrative process to 
the Environmental Appeals Board.
    Senator Lankford. And that is a more fluid conversation 
that is happening----
    Ms. Shinkman. Yes, it is.
    Senator Lankford [continuing]. Across the table. We agree 
on the facts, now, what is a reasonable fine, and you are 
discussing that process.
    Ms. Shinkman. We certainly try to reach agreement on all of 
those. Obviously, we do not always.
    Senator Lankford. Mr. Barab, is the settlement process 
pretty similar for you all? Again, I understand once you get to 
the spot of a fine, an assignment, you had mentioned very well 
about the exact numbers and the changes that have happened in 
the Budget Act and such from there. But, I am talking about the 
settlement process at the end.
    Mr. Barab. Yes. Our process is slightly different than 
EPA's. Once we finish the inspection, the inspector then goes 
back to the office. The area director actually has authority 
over what the penalty will be, assuming any kind of violations 
have been found.
    At that point, the employer has 15 days to contest the 
citation, if the employer wants to do that. During that 15-day 
period, there is a chance, and we strongly encourage employers 
to engage in what we call our informal settlement process. So, 
the employer comes into the office, the area office, and sits 
down with our area director and they try to work out some kind 
of settlement, if possible. And, again, looking at the 
violations there were, looking at the employer's defenses, 
looking at the abatement period. All of those things are 
discussed during that informal period. And, again, in about 
two-thirds of the cases that we have, we do reach some kind of 
settlement at that point with the employer.
    Now, if no settlement is reached, then within that 15-day 
period, the employer can contest, legally contest, the 
citation. That then goes to the Occupational Safety and Health 
Review Commission. There are Administrative Law Judges (ALJ) 
that decide that, and that case then moves up that ladder.
    Senator Lankford. OK. Let me ask the question about the 
flexibility that you have or do not have on fines. Is it a 
guidance or is it statutory that if you see a violation, there 
has to be a fine?
    Mr. Barab. That is statutory, and our maximum penalties are 
set also by law.
    Senator Lankford. OK----
    Mr. Barab. But we are also----
    Senator Lankford [continuing]. But as far as a minimum 
penalty, that is statutory that it requires----
    Mr. Barab. The only place there is a minimum penalty is 
with willful violations, and that is a $5,000 minimum, $70,000 
maximum. As I mentioned, there are also--by statute, we also 
have to consider, as EPA does, size, history, and good faith. 
So, there are almost always reductions there.
    Senator Lankford. So, at the end of this, as you all both 
mentioned that the goal of the penalty is always deterrence, 
and I get that. But, the goal of the regulation and of the 
statute is usually health and safety and environmental 
protection and such, and the fine, the penalty here, becomes a 
vehicle to help accomplish some of that. But, I do not know of 
anyone that has written a statute to make sure that we fine 
some entity, as well. That is the worst case scenario for us.
    I give you the easy example we have all experienced. My 
daughter when she was in high school was pulled over by a 
police officer because her dad, me, was not helping her watch 
for things like a headlight that was out. Now, she is also a 
teenager and she can watch for that herself, but as the dad and 
the 16-year-old gets pulled over with a headlight out, she was 
given a warning by the police officer and said, ``hey, did you 
know? '' She said, ``I did not know, did not catch it.'' He 
gave her a warning.
    We got back home and spent $125 rearranging the front of 
her car to do a new headlight. Joy, OK. She got a warning. We 
fixed it. The health and safety issue of getting both 
headlights working was accomplished.
    What I am trying to figure out is, how much flexibility do 
your compliance folks have to be able to walk in and say, you 
know what? That trash can is in the wrong spot, and someone to 
say, I did not realize. When I walk through manufacturing 
locations, as you all do all the time, as well, on the wall 
somewhere, there is a library of four-inch plastic binders that 
are sitting up there with all the regs and all the requirements 
and most of the people that run the manufacturing locations 
live in dread that they have missed a page somewhere from those 
six four-inch binders that are up there on the wall somewhere 
trying to make sure that they miss it.
    How much flexibility do you feel like you have to be able 
to help people, to say, you missed one, and it is not 
necessarily a fine, and it is not necessarily, a leak that is 
going to damage a lot of folks or was not necessarily health 
and safety, but they missed one.
    Mr. Barab. There are certainly small things that we correct 
as we walk around, or ask the employers to correct. There is no 
doubt about that. But, again, our concern is saving lives, 
and----
    Senator Lankford. Sure.
    Mr. Barab [continuing]. Our serious violation, which is 
only the maximum of $7,000, there is a requirement the way a 
serious violation is defined in that it has to be likely to 
cause death or serious physical harm. So, those are, again, 
fairly serious, as the term is, when we find those, and----
    Senator Lankford. I have no issue with that. I am talking 
about minor fines.
    Mr. Barab. Yes.
    Senator Lankford. One of my manufacturers was fined because 
he had a shelf in his workspace for one of his workers that was 
six inches too low. Now, I do not know all the story on that, 
but I stood on the floor with him and I said, ``that shelf 
right there? '' And he said, ``Yes, that shelf right there, we 
had to raise by six inches and we got a fine for it.''
    Mr. Barab. Yes. I mean, we hear stories like that, and 
generally, when we look into them, usually, there is something 
else accompanying that with it that is of a more serious 
nature. But, when we have situations like that, we are always 
happy to look into them, but it sounds unlikely that there 
would be any kind of fines----
    Senator Heitkamp. But, I think what we are asking is, let 
us say you see an extension cord that is located in a location 
where somebody could trip. That is obviously a hazard. You note 
it. Are you telling me, because that is a violation, you have 
to assess a fine?
    Mr. Barab. We also have various means. We have other than 
serious fines, where they can be very low. We have a quick fix, 
where we can--if the employer fixes it right away, we can 
either minimize or, in some cases, eliminate the fine, so----
    Senator Heitkamp. Yes, right there. Stop.
    Mr. Barab [continuing]. OK.
    Senator Heitkamp. You said, ``eliminate the fine.'' So, you 
do have discretion to not impose any fine----
    Mr. Barab. In exceptional cases----
    Senator Heitkamp [continuing]. Based on----
    Mr. Barab. In general, our law requires us to issue a fine 
when we find a violation, especially if it is a serious 
violation. But there are other than serious violations. Now, an 
extension cord, I mean, that is something that it can cause 
fires, electrocutions----
    Senator Heitkamp. No, I know.
    Mr. Barab. It is not necessarily--I mean, people throw some 
things out, but they actually, when you look at them, when we 
look at the past history----
    Senator Heitkamp. No, I thought it was a good example, 
because it can be, in the wrong place, incredibly dangerous. 
But, my point is, I would have to go back and take a look, 
because I am shocked that you could not waive a fine or a 
penalty in its entirety given kind of the relationship and 
compliance and what do they know and lack of knowledge and 
severity.
    So, we will followup. I have to go vote.
    Senator Lankford. Thank you. We will finish up in just a 
couple of minutes, because I am going to have to go follow and 
vote, as well.
    This is one of the areas that we want to examine. It is the 
reason we have this type of hearing and debate. We will dig 
into it and find out from you all what you need, because I 
would hope that you are in the same position that we are 
working on health and safety and making sure we are protecting 
lives and this is not all about fines. As you mentioned before, 
the fines are not coming back to the entity themselves, anyway, 
so this is not a, quote-unquote, ``money maker'' for the 
agency. It is a deterrent, but we have to find a way to be able 
to balance this out.
    One of the things that I had noticed was in 2011, the 
President issued a memorandum for the heads of the executive 
departments on regulatory compliance. OSHA and EPA were 
specifically noted in that for being good actors in it and 
highlighted some of the compliance and enforcement information 
and how you are making that publicly available. So, that is a 
positive thing to say. Your agencies both are building in 
transparency on the basic issue of compliance and enforcement 
information.
    Not every agency is dealing with this. I am not going to 
ask you to answer for everyone else. But, the Department of 
Transportation (DOT) updated their stuff in 2011, and then 
since 2012, there has been no change at all on their website on 
the information on compliance and enforcement information.
    So, one of the things that we are asking of the 
administration is to help us, when the information gets out 
there and is helpful, to make sure all agencies are actually 
fulfilling that, are getting that information out, which both 
of your agencies are, but the Department of Transportation is 
not. So, that kind of consistency is extremely important.
    We do need to work with your entities on things like minor 
violations. Was a poster missing? Was a piece of paperwork 
missing? Again, I had another agency and another entity that I 
dealt with as a manufacturer in my State that had not turned in 
paperwork a particular year saying they had nothing to turn in, 
and their wrong assumption was, I had nothing to report and so 
I did not have to turn in that report this year because there 
was nothing to report. They ended up having a huge fine come 
down on them for not turning in paperwork saying they had 
nothing to turn in.
    Well, again, that just begs this question of how is that 
helping health and safety? That is a paperwork violation issue. 
There should be a, hey, you did not turn that in. You are 
right, we did not turn it in. But, instead, they had a fairly 
significant fine that came down on them for that. That is the 
kind of stuff that we need to figure out, to say, if you feel 
bound, or if agencies feel bound to be able to do a fine in 
that type of situation, then we have a problem.
    One of our businesses said that they were hesitant to 
voluntarily invite OSHA into the workplace to do the onsite 
consultation programs because of their concern over that. Now, 
I heard from both of you, you want to work especially with 
small businesses to do the onsite consultation, to be able to 
help them through that. What is something that can be done to 
encourage more businesses to say, invite us to come in. We are 
not coming in to fine you. We are coming in to be able to help, 
to do almost a pre-inspection inspection.
    Mr. Barab. Yes. I often call our consultation program our 
best kept secret. It is a wonderful program. We try everything 
we can to really promote it, not only ourselves, but through 
associations. And, I want to emphasize, and we try to emphasize 
this with employers, we fund at least 90 percent of the 
consultation program. We do not run it, though. We give that 
money to the States and they run it. So, it is totally separate 
from OSHA, and that is what we try to emphasize to employers, 
that this is totally separate from OSHA. It is a free visit, 
basically, that small employers can receive and everybody 
should be taking advantage of it.
    Senator Lankford. But, some are concerned that they should 
not because they are, for whatever reason--what I am telling 
you is, it is a good program----
    Mr. Barab. Yes.
    Senator Lankford [continuing]. And it does focus on health 
and safety and on compliance on issues and thinking outside the 
box and some things. There has to be a way to be able to 
communicate this so that individuals know, hey, this is a 
neutral spot. Unless there is some major gross something that 
is here, this is a good spot.
    Mr. Barab. Well, we would love to work with you on ways to 
do that.
    Senator Lankford. OK.
    Mr. Barab. There are a lot of myths out there that we would 
love to be able to combat and we would love to work with you to 
do that.
    Senator Lankford. Well, this is something, I am saying, 
perception and reality. This is a business owner that said it 
to me directly. Yes, I know there is that type of a 
consultation. There is no way I would take that. Ms. Shinkman.
    Ms. Shinkman. And, I would just briefly like to say, 
particularly for small businesses, we have an audit policy 
where, if they voluntarily disclose and fix what it is, there 
is minimal, if any, penalty at all. So, we encourage it. The 
sooner it is disclosed, the more voluntary audit of themselves 
to determine what the problems are----
    Senator Lankford. Is that the eDisclosure program?
    Ms. Shinkman. Yes, it is.
    Senator Lankford. OK. Tell me a little bit about how that 
works, and what I would like to know is, how do you evaluate 
its effectiveness on how it is actually accomplishing the 
mission? How do you evaluate that?
    Ms. Shinkman. Well, it is about 2 months old, so I am not 
too sure----
    Senator Lankford. OK. It is a little early, then, yet.
    Ms. Shinkman. I do not think we can give you any kind of an 
evaluation. But, it was formed so that we could quickly see 
these audit disclosures for a number of cases, particularly 
smaller ones like you have described, and for small businesses 
where they, through a web portal, give us notice of what they 
have disclosed--what they are disclosing----
    Senator Lankford. So, give me an example of some of this, 
because this is their own safety systems, right, their own 
safety checks that they are doing. They find something, know it 
is a violation. Give me an example of something they would turn 
in and say, hey, we found something. We are going to report it.
    Ms. Shinkman. We have determined that we do not have the 
number of containers that we are supposed to for a certain 
thing, or they have not been updated at a certain time. So, we 
are going to do that. We discovered it at X date. We did 
whatever it is to remedy it. It will be done by Y date. And, we 
are disclosing it to you now and we have a policy for making 
sure that it is not going to happen again. And, this is all 
disclosed electronically, and if all of the criteria are met, 
they will receive a notice that it has been disclosed and their 
issue would be closed out.
    Senator Lankford. And, including the benefit? Penalty, as 
you mentioned before, part of the penalty is did they receive 
some sort of benefit by delaying that. Would that be waived, as 
well, or would that be something you guys would look at and go, 
hey, you did not change this. You got an arbitrary benefit that 
other companies did not get.
    Ms. Shinkman. I think that would not apply here, because 
part of the criteria is the early disclosure.
    Senator Lankford. OK.
    Ms. Shinkman. So, the criteria themselves eliminate those 
problems.
    Senator Lankford. OK. That will be one that we want to 
watch, to be able to see how that works, because that gives a 
clear set of guidelines out there that people can find and note 
and to be able to help self-manage. I just want you to know 
from our Committee, we are going to watch and figure out how 
that is being evaluated to see if that is something that can be 
shared with other agencies and entities.
    I would also share, as well, and this is just in our 
ongoing conversation about fees and fines and penalties, we are 
watching some entities like Fish and Wildlife Service. Fish and 
Wildlife Service has the opportunity for a penalty or to be 
able to make a contribution to a third-party organization that 
is a nonprofit. We are trying to figure out who sets that, who 
guides that, where does that money go. That is money that would 
have been to the General Treasury now that is to certain 
outside third-party entities for mitigation or whatever 
purposes, and, so, we are asking, I think, a fair question for 
the taxpayers' behalf.
    If it is a fine that goes to the General Treasury or that 
you donate to a third-party organization, we want to know who 
picks that and where does that go and what is the long-term 
benefit of that.
    EPA uses Supplemental Environmental Projects (SEPs), but my 
understanding is that is you can have a penalty or you can 
basically fix it and here is what we would encourage you to do 
in some ways. How are those SEPs decided?
    Ms. Shinkman. Those SEPs are voluntary by the company if 
they--to set off part of the penalty by doing a project. Let me 
make it clear that they are never cash donations.
    Senator Lankford. Right.
    Ms. Shinkman. They are always voluntary projects to help 
the environment. There needs to be a nexus between what that 
project is and what the violation was. There will also always 
be some cash penalty. It is not 100 percent mitigation against 
the penalty and----
    Senator Lankford. Is it typically 80 percent? Because the 
goal, again, is to deal with health and safety and environment 
at that point. So, you are saying it could be a control project 
or monitoring project or something else around them or around 
the city or around the community----
    Ms. Shinkman. It could be----
    Senator Lankford. What does it typically look like?
    Ms. Shinkman. Typically, it looks like something like a 
decision to do monitoring for children for asthma or for lead 
in a certain school district for a certain period of time. The 
asthma might be the result of a clean air violation. The lead, 
for a different kind of--the lead monitoring, those sorts of 
things, purchase of emergency equipment if there has been a 
violation that is similar to that.
    So, here is a policy. We have redone our entire policy so 
that it is much clearer. We did that last year, so the 
standards that are necessary to meet--we have strict standards 
and they are more clearly set out. A small business can get up 
to 100 percent set off of their penalty. Others, usually, it is 
around 80 percent. It really depends on the quality and the 
type of the project. But, it is never money that is just handed 
to somebody. It is never a project that EPA itself controls.
    Senator Lankford. Right. EPA is different than other 
entities on that. There are other entities that are doing 
mitigation separately to an outside third party rather than a 
fee or fine, and that is one of the questions we will ask. 
Obviously, I am not going to ask you to answer for another 
entity on that.
    We are quickly running out of time, and I know you are 
thoroughly enjoying this conversation, but we do have votes 
that are happening currently. I have to head over to that. I am 
not going to hold you over to be able to come back and forth.
    I do want to maintain this conversation. What we would ask 
of you is I am sure that there are ideas that you or your 
entities would be interested to be able to share ways they can 
improve this process, whether that be process changes, issues 
in statute that had become a problem or that create a barrier 
between the people we serve and those of us who serve them, as 
you do, as well. That should be fixed and could be fixed. I 
want you to know, those are the type of things we are also 
looking for, as well. This is not a one-way conversation.
    And for this Committee, we hope to be able to put products 
out in the days ahead to say, let us help fix some of the 
broken relationships that we have there and still be able to 
work on health and safety and environmental protection that 
need to be done. So, as you have thoughts on that, we are free 
to hear those and we are interested in those, as well.
    I appreciate you being here and for the work that you put 
into this conversation and we will do some followup with some 
questions for the record in the days ahead on that.
    I would like to make a statement to all that on February 
24, this Subcommittee will also hold a hearing examining the 
burden of Federal statutes and regulations placed on State and 
local governments, what we have learned since the passage of 
the Unfunded Mandates Reform Act of 1995, and how the Unfunded 
Mandates Information and Transparency Act can improve upon 
those efforts.
    This will conclude today's hearing. The hearing record will 
remain open for 15 days, until the close of business on 
February 26, for the submission of statements or questions for 
the record.
    With that, thank you very much to our witnesses. This 
hearing is adjourned.
    [Whereupon, at 10:48 a.m., the Subcommittee was adjourned.]

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