[Federal Register Volume 60, Number 121 (Friday, June 23, 1995)]
[Notices]
[Pages 32675-32678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15435]



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ENVIRONMENTAL PROTECTION AGENCY
[FRL-5225-5]


Interim Policy on Compliance Incentives for Small Businesses

AGENCY: Office of Enforcement and Compliance Assurance, EPA.

ACTION: Notice.

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SUMMARY: The Office of Enforcement and Compliance Assurance (EPA) is 
issuing this Interim Policy on Compliance Incentives for Small 
Businesses. This interim Policy is intended to promote environmental 
compliance among small businesses by providing incentives for 
participation in compliance assistance programs, and encouraging the 
prompt correction of violations. The Policy accomplishes this in two 
ways: by setting forth guidelines for the Agency to reduce or waive 
penalties for small businesses that make good faith efforts to correct 
violations, and by providing guidance for States and local governments 
to offer these incentives.

DATES: Comments must be received on or before July 31, 1995.

ADDRESSES: Comments may be mailed to: Small Business Policy, Mail Code 
2224-A, United States Environmental Protection Agency, 401 M Street, 
S.W., Washington D.C. 20460.

FOR FURTHER INFORMATION CONTACT: Elliott Gilberg, 202-564-2310, Office 
of Compliance, Mail Code 2224-A, or [[Page 32676]] David A. Hindin, 
202-564-2230, Office of Regulatory Enforcement, Mail Code 2248-A, 
United States Environmental Protection Agency, 401 M Street, S.W., 
Washington D.C. 20460.

SUPPLEMENTARY INFORMATION: Pursuant to this Interim Policy, EPA will 
exercise its discretion, under applicable media-specific policies, to 
refrain from initiating an enforcement action seeking civil penalties, 
or to mitigate civil penalties, whenever a small business makes a good 
faith effort to comply with environmental requirements and where there 
is no criminal behavior and no significant health, safety or 
environmental threat. In addition, EPA is creating special incentives 
for small businesses who take the initiative to identify and correct 
environmental violations by requesting compliance assistance from the 
government. In such circumstances, and provided the small business 
meets certain criteria set forth in the Policy, EPA will exercise its 
discretion to waive the entire penalty for environmental violations. 
Moreover, EPA will defer to state actions that are consistent with this 
Policy.

    Dated: June 13, 1995.
Steven A. Herman,
Assistant Administrator, Office of Enforcement and Compliance 
Assurance, United States Environmental Protection Agency.

A. Introduction

    This document sets forth the Environmental Protection Agency's 
Interim Policy on compliance incentives for small businesses. This 
Policy is one of the 25 regulatory reform initiatives announced by 
President Clinton on March 16, 1995, and implements, in part, the 
Executive Memorandum on Regulatory Reform, 60 FR 20621 (April 26, 
1995).
    The Executive Memorandum provides in pertinent part:

    To the extent permitted by law, each agency shall use its 
discretion to modify the penalties for small businesses in the 
following situations. Agencies shall exercise their enforcement 
discretion to waive the imposition of all or a portion of a penalty 
when the violation is corrected within a time period appropriate to 
the violation in question. For those violations that may take longer 
to correct than the period set by the agency, the agency shall use 
its enforcement discretion to waive up to 100 percent of the 
financial penalties if the amounts waived are used to bring the 
entity into compliance. The provisions [of this paragraph] shall 
apply only where there has been a good faith effort to comply with 
applicable regulations and the violation does not involve criminal 
wrongdoing or significant threat to health, safety, or the 
environment.

    Pursuant to this Interim Policy, EPA will exercise its discretion, 
under applicable media-specific policies, to refrain from initiating an 
enforcement action seeking civil penalties, or to mitigate civil 
penalties, whenever a small business makes a good faith effort to 
comply with environmental requirements and where there is no criminal 
behavior and no significant health, safety or environmental threat. In 
addition, as announced in the package of regulatory reform initiatives, 
EPA is creating special incentives for small businesses who take the 
initiative to identify and correct environmental violations by 
requesting compliance assistance from the government. In such 
circumstances, and provided the small business meets certain other 
criteria set forth below, EPA will exercise its discretion to waive the 
entire penalty. Moreover, EPA will defer to state actions that are 
consistent with this Policy.

B. Background

    The Clean Air Act (CAA) Amendments of 1990 require that states 
establish Small Business Assistance Programs (SBAPs) to provide 
technical and environmental compliance assistance to stationary 
sources. On August 12, 1994, EPA issued an enforcement response policy 
which provided that an authorized or delegated state program may, 
consistent with federal requirements, either:
    (1) assess no penalties against small businesses that voluntarily 
seek compliance assistance and correct violations revealed as a result 
of compliance assistance within a limited period of time; or
    (2) keep confidential information that identifies the names and 
locations of specific small businesses with violations revealed through 
compliance assistance, where the SBAP is independent of the state 
enforcement program.
    In a further effort to assist small businesses to comply with 
environmental regulations, and to achieve health, safety, and 
environmental benefits, the Agency is adopting a similar policy for 
water, toxics, hazardous waste, and other media programs. This interim 
Policy sets forth the Agency's implementation of the Executive 
Memorandum.

C. Purpose

    This interim Policy is intended to promote environmental compliance 
among small businesses by providing incentives for participation in 
compliance assistance programs, and encouraging the prompt correction 
of violations. The Policy accomplishes this in two ways: by setting 
forth a settlement penalty Policy that rewards such behavior, and by 
providing guidance for States and local governments to offer these 
incentives.
    EPA is committed to a strong enforcement and compliance assurance 
program as a means to protect human health and the environment. We 
expect this Policy to encourage greater participation in compliance 
assistance programs that offer services to small businesses (referred 
to generically as SBAPs in this Policy). The Policy will allow greater 
openness among SBAPs and specific facilities, the small business 
community in general, and other federal and state officials. It will 
promote the sharing of information on pollution prevention measures, 
cost effective means of compliance and other valuable compliance-
related activities with and among the regulated community. Application 
of the policy to all media programs should encourage small businesses 
to look for ``whole facility'' approaches to environmental compliance. 
Ultimately, by bringing many small businesses into compliance, this 
Policy will enhance the quality of our air, water, and land. '
    Measuring the success of compliance assistance programs is a 
critical component of EPA's ability to assess the results of compliance 
and enforcement activities. EPA will work with States to evaluate the 
effectiveness of this Policy and, in 1997, EPA will consider whether 
this Policy should be continued, modified or discontinued.

D. Applicability

    This Policy applies to facilities owned by small businesses as 
defined here. A small business is a person, corporation, partnership, 
or other entity who employs 100 or fewer individuals (on a companywide 
basis). This definition is a simplified version of the CAA Sec. 507 
definition of small business. On balance, EPA determined that a single 
definition would make implementation of this Policy simple and would 
allow for consistent application of the Policy in a multimedia context.
    This interim policy is effective immediately. This Policy applies 
to all civil judicial and administrative enforcement actions taken 
under the authority of the environmental statutes and regulations that 
EPA administers, except for corrective action programs and the Public 
Water System Supervision Program under the Safe Drinking Water 
Act.1 This Policy [[Page 32677]] applies to all such actions filed 
after the effective date of this Policy, and to all pending cases in 
which the government has not reached agreement in principle with the 
alleged violator on the amount of the civil penalty.

    \1\ This Policy does not apply to corrective action programs 
(such as CERCLA, RCRA Sec. 7003, and SDWA Sec. 1431) because these 
programs are primarily remedial in nature and generally do not seek 
penalties. This Policy does not apply to the Public Water System 
Supervision Program because EPA is developing another policy which 
addresses compliance by small communities.
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    This Policy sets forth how the Agency expects to exercise its 
enforcement discretion in deciding on an appropriate enforcement 
response and determining an appropriate civil settlement penalty for 
violations by small businesses. This Policy is to be used for 
settlement purposes and is not intended for use in pleading, or at 
hearing or trial. To the extent that this Policy may differ from the 
terms of applicable enforcement response policies under media-specific 
programs, this document supersedes those policies. This Policy 
supplements, but does not supplant the August 12, 1994 Enforcement 
Response Policy for Treatment of Information Obtained Through Clean Air 
Act Section 507 Small Business Assistance Programs.

E. Criteria for Civil Penalty Mitigation

    EPA will eliminate or mitigate its settlement penalty demands 
against small businesses based on the following criteria:
    (1) For purposes of sections F(1) and F(2), the small business has 
made a good faith effort to comply with applicable environmental 
requirements as demonstrated by receiving compliance assistance from a 
non-confidential government or government supported program that offers 
services to small businesses (such as a SBAP or state university), and 
the violations are detected during the compliance assistance.2

    \2\ If the compliance or technical assistance program keeps the 
information obtained confidential (i.e., does not share or disclose 
facility specific information on compliance status with a regulatory 
agency), this Policy does not apply. However, if a small business 
wishes to obtain a corrections period after receiving compliance 
assistance from a confidential program, the business need only 
disclose the violations to the appropriate regulatory agency 
pursuant to criterion 1 and comply with the other provisions of this 
Policy.
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    Good faith does not exist if an agency specifically offered a 
compliance assistance program concerning the relevant regulated 
activities to the business and it failed to participate in such 
program.
    (2) This is the small business's first violation of this 
requirement. This Policy applies to businesses that have not previously 
been subject to a warning letter, notice of violation, field citation, 
or other enforcement action by a government agency for a violation of 
that requirement within the past five years. If a business has been 
subject to multiple enforcement actions for violations of environmental 
requirements in the past five years, this Policy does not apply even if 
this is the first violation of this particular requirement.
    (3) The policy does not apply if:
    (a) The violation has caused actual serious harm to public health, 
safety, or the environment; or
    (b) The violation may present an imminent and substantial 
endangerment to public health or the environment; or
    (c) The violation presents a significant health, safety or 
environmental threat (e.g., violations involving hazardous or toxic 
substances may present such threats).
    (4) The violation does not involve criminal conduct.
    (5) The business corrects the violation within the corrections 
period set forth below.
    Small businesses are expected to remedy the violations within the 
shortest practicable period of time. Small businesses may take up to 90 
days following detection of the violation to correct the violation, or 
to take substantial steps to correct the violations (e.g., apply for 
necessary permits, secure financing, order equipment). For violations 
that cannot be corrected within 90 days, the correction period may be 
extended for an additional period not to exceed 90 days, so long as the 
business enters into a written agreement that sets forth the additional 
correction period and any additional steps to be undertaken by the 
business to achieve compliance. The schedule may extend for an 
additional period of 180 days, i.e., up to a period of one year from 
the date the violation is detected, only if necessary where the small 
business corrects the violation by implementing pollution prevention 
measures. Correcting the violation includes remediating any 
environmental harm associated with the violation.3 Any corrections 
period longer than 180 days should be incorporated into an enforceable 
order. The requirements of the correction period should be made clear 
to the small business prior to offering compliance assistance.

    \3\ If significant efforts will be required to remediate the 
harm, criterion 3 is likely not to have been satisfied.
F. Penalty Mitigation Guidelines

    EPA will exercise its enforcement discretion to eliminate or 
mitigate civil settlement penalties as follows.
    1. EPA will eliminate the civil settlement penalty in any 
enforcement action if a small business satisfies all of the criteria in 
section E.
    2. If the small business meets all of the criteria, except it needs 
a longer corrections period than provided by criterion 5 (i.e., more 
than 180 days for non-pollution prevention remedies, or 360 days for 
pollution prevention remedies), EPA will waive up to 100% of the 
gravity component of the penalty, but may seek the full amount of any 
economic benefit associated with the violations.4

    \4\ In determining how much of the gravity component of the 
penalty is appropriate, EPA should consider the nature of the 
violations, the duration of the violations, the environmental or 
public health impacts of the violations, good faith efforts by the 
small business to promptly remedy the violation, and the facility's 
overall record of compliance with environmental requirements.
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    3. If a small business has not met all the criteria above, but has 
otherwise made a good faith effort to comply, EPA has discretion, 
pursuant to its applicable policies, to refrain from filing an 
enforcement action seeking civil penalties or to mitigate its demand 
for penalties to the maximum extent appropriate. These policies 
generally recognize good faith efforts to comply and allow for 
mitigation of the penalty where there is a documented inability to pay 
all or a portion of the penalty, thereby placing emphasis on enabling 
the small business to finance compliance.

G. Other Factors

    To ensure that this Policy enhances and does not compromise public 
health and the environment, the following conditions apply:
    1. Violations detected through federal, state, or local enforcement 
inspections or reported to an agency as required by applicable 
regulations or permits remain fully enforceable.
    2. A business is subject to all applicable enforcement response 
policies (which may include discretion whether or not to take formal 
enforcement action) for all violations that had been detected through 
compliance assistance and were not remedied within the corrections 
period. The penalty in such action may include the time period before 
and during the correction period.
    3. A business's good faith efforts to correct violations detected 
during compliance assistance should be considered as a mitigating 
factor in determining an appropriate enforcement response or penalty in 
a subsequent enforcement action. However, a State's or EPA's actions in 
providing [[Page 32678]] compliance assistance is not a legal defense 
in any enforcement action. This Policy does not limit EPA or a state's 
discretion to use information on violations revealed through compliance 
assistance as evidence in subsequent enforcement actions.

H. Applicability To States

    EPA recognizes that states are partners in enforcement and 
compliance assurance. Therefore, EPA will defer to state actions in 
delegated or approved programs that are generally consistent with the 
guidelines set forth in this Policy.
    This Policy does not require SBAPs to provide to EPA information 
that identifies the names or locations of specific businesses that are 
found to be in violation through compliance assistance. EPA recommends, 
however, that whenever an agency provides a correction period to a 
small business, the agency notify the appropriate EPA Region or state 
of its action, to assure that federal and state enforcement responses 
to the identified violations are consistent. A state program that 
offers confidentiality may not also offer a corrections period for the 
same violations (see footnote 2).5

    \5\ The CAA Sec. 507 policy establishes criteria for EPA 
approval of SBAPs in State Implementation Plans to satisfy the 
mandate in the CAA, and addresses confidential assistance in that 
context.
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    In developing this Policy, EPA balanced three primary 
considerations. First, the Agency is seeking to provide States with 
ample opportunity to adopt innovative approaches to environmental 
compliance. Thus, the Policy provides the parameters within which 
States have flexibility to tailor SBAPs to their needs.
    Second, EPA recognizes that participation in SBAPs by individual 
businesses is typically voluntary. Assistance is provided generally 
upon request. Thus, the Agency is seeking to assure states of the 
ability to provide incentives that will encourage many small businesses 
to participate in SBAPs.
    Third, the environmental statutes covered by this Policy generally 
require, as a condition of delegation or authorization, that programs 
be consistent with Federal requirements and that states have the 
authority to take appropriate enforcement action with respect to 
violations.6 Thus, EPA has an obligation to ensure that state 
SBAPs are structured so as to maintain an appropriate level of 
enforcement authority within delegated or authorized state programs. 
The Agency believes this Policy will allow states sufficient latitude 
to use an appropriate combination of delegated state enforcement 
authority and compliance assistance activity to improve compliance in 
the small business community.

    \6\ For example, the Resource Conservation and Recovery Act 
provides that the Administrator may authorize any State to 
administer and enforce the Act unless he finds, among other things, 
that ``such program does not provide adequate enforcement of 
compliance with the requirements of'' the Act. 42 U.S.C. 6926(b).
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[FR Doc. 95-15435 Filed 6-22-95; 8:45 am]
BILLING CODE 6560-50-P