[Federal Register Volume 61, Number 107 (Monday, June 3, 1996)]
[Notices]
[Pages 27984-27987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13713]
[[Page 27983]]
_______________________________________________________________________
Part IV
Environmental Protection Agency
_______________________________________________________________________
Interim Policy on Compliance Incentives for Small Businesses; Notice
Federal Register / Vol. 61, No. 107 / Monday, June 3, 1996 /
Notices
[[Page 27984]]
ENVIRONMENTAL PROTECTION AGENCY
[FRL-5512-7]
Interim Policy on Compliance Incentives for Small Businesses
AGENCY: Office of Enforcement and Compliance Assurance, EPA.
ACTION: Notice of final policy.
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SUMMARY: The Office of Enforcement and Compliance Assurance (EPA) is
issuing this Final Policy on Compliance Incentives for Small
Businesses. This Final Policy is intended to promote environmental
compliance among small businesses by providing them with incentives to
participate in compliance assistance programs or to conduct
environmental audits and to then promptly correct 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.
EFFECTIVE DATE: This Policy is effective June 10, 1996.
FURTHER INFORMATION CONTACT: David Hindin, 202-564-2235, Office of
Regulatory Enforcement, Mail Code 2248-A, or Karin Leff, 202-564-7068,
Office of Compliance, Mail Code 2224-A, United States Environmental
Protection Agency, 401 M Street, S.W., Washington, D.C. 20460.
SUPPLEMENTARY INFORMATION: Pursuant to this Policy, EPA will refrain
from initiating an enforcement action seeking civil penalties, or will
mitigate civil penalties, whenever a small business makes a good faith
effort to comply with environmental requirements by receiving on-site
compliance assistance or promptly disclosing the findings of a
voluntarily conducted environmental audit, subject to certain
conditions. These conditions require that the violation: is the small
business's first violation of the particular requirement; does not
involve criminal conduct; has not and is not causing a significant
health, safety or environmental threat or harm; and is remedied within
the corrections period. Moreover, EPA will defer to State actions that
are consistent with the criteria set forth in this Policy.
This Final Policy supersedes the Interim version of the Policy
issued in June 1995. See 60 FR 32675, June 23, 1995. The Agency revised
the Interim version based on the comments we received from the public
in response to the Federal Register notice, as well as the comments we
received from EPA Regional offices and States. The major change in this
final version of the Policy is to allow small businesses to obtain the
penalty relief provided by this Policy not only by using on-site
compliance assistance, but also by conducting an environmental audit,
and promptly disclosing and correcting the violations. There are two
reasons for this change. First, this addresses the major criticism of
the Interim Policy that there are few on-site compliance assistance
programs sponsored or run by government agencies. Thus, this change
enables more small businesses to use the Policy. Second, fairness
suggests that if small businesses who seek tax-payer funded compliance
assistance from the government can get penalty relief, then businesses
who spend their own money to do an audit, should be able to get similar
relief.
We also have slightly modified the penalty relief guidelines in
section F of the Policy. Guidelines 1 and 2 remain the same as they
were in the June 1995 Interim version. We have added a new third
guideline which states:
3. If a small business meets all of the criteria, except it has
obtained a significant economic benefit from the violation(s) such
that it may have obtained an economic advantage over its
competitors, 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. EPA retains this discretion to
ensure that small businesses that comply with public health
protections are not put at serious marketplace disadvantage by those
who have not complied. EPA anticipates that this will occur very
infrequently.
This new guideline is necessary to ensure that we continue to
provide a national level playing field. Small businesses that make
significant expenditures to comply with the law should not be put at an
economic disadvantage by those who did not comply. Most of the other
changes in the final Policy are clarifications or editorial in nature.
The entire text of the Policy appears below.
Dated: May 10, 1996.
Steven A. Herman,
Assistant Administrator, Office of Enforcement and Compliance
Assurance, United States Environmental Protection Agency.
A. Introduction
This document sets forth the U.S. Environmental Protection Agency's
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.
This Policy also implements section 223 of the Small Business
Regulatory Enforcement Fairness Act of 1996, signed into law by the
President on March 29, 1996.
As set forth in this Policy, EPA will refrain from initiating an
enforcement action seeking civil penalties, or will mitigate civil
penalties, whenever a small business makes a good faith effort to
comply with environmental requirements by receiving compliance
assistance or promptly disclosing the findings of a voluntarily
conducted environmental audit, subject to certain conditions. These
conditions require that the violation: is the small business's first
violation of the particular requirement; does not involve criminal
conduct; has not and is not causing a significant health, safety or
environmental threat or harm; and is remedied within the corrections
period. Moreover, EPA will defer to State actions that are consistent
with the criteria set forth in 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
for stationary sources 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
[[Page 27985]]
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 broader policy for all
media programs, including water, air, toxics, and hazardous waste.
C. Purpose
This Policy is intended to promote environmental compliance among
small businesses by providing incentives for them to participate in on-
site compliance assistance programs and to conduct environmental
audits. Further, the Policy encourages small businesses to
expeditiously remedy all violations discovered through compliance
assistance and environmental audits. 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.
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 (across all
facilities and operations owned by the entity).1 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 straightforward and would allow for
consistent application of the Policy in a multimedia context.
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\1\ The number of employees should be considered as full-time
equivalents on an annual basis, including contract employees. Full-
time equivalents means 2,000 hours per year of employment. For
example, see 40 CFR Sec. 372.3.
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This Policy is effective June 10, 1996 and on that date supersedes
the Interim version of this Policy issued on June 13, 1995 and the
September 19, 1995 Qs and As guidance on the Interim version. 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 the Public Water System
Supervision Program under the Safe Drinking Water Act.2 This
Policy 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.
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\2\ This Policy does not apply to the Public Water System
Supervision (PWSS) Program because it already has an active
compliance assistance program and EPA has a policy to address the
special needs of small communities. See November 1995 Policy on
Flexible State Enforcement Response to Small Community Violations.
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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. It states the Agency's views as to the
proper allocation of enforcement resources. This Policy is not final
agency action and is intended as guidance. It does not create any
rights, duties, obligations, or defenses, implied or otherwise, in any
third parties. 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 (including penalty 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. The small business has made a good faith effort to comply with
applicable environmental requirements as demonstrated by satisfying
either a. or b. below.
a. Receiving on-site compliance assistance from a 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. If a small business wishes to obtain
a corrections period after receiving compliance assistance from a
confidential program, the business must promptly disclose the
violations to the appropriate regulatory agency.
b. conducting an environmental audit (either by itself or by using
an independent contractor) and promptly disclosing in writing to EPA or
the appropriate state regulatory agency all violations discovered as
part of the environmental audit pursuant to section H of this Policy.
For both a. and b. above, the disclosure of the violation must
occur before the violation was otherwise discovered by, or reported to
the regulatory agency. See section I.1 of the Policy below. Good faith
also requires that a small business cooperate with EPA and provide such
information as is necessary and requested to determine applicability of
this Policy.
2. This is the small business's first violation of this
requirement. This Policy does not apply to businesses that have
previously been subject to an information request, a warning letter,
notice of violation, field citation, citizen suit, or other enforcement
action by a government agency for a violation of that requirement
within the past three years. This Policy does not apply if the small
business received penalty mitigation pursuant to this Policy for a
violation of the same or a similar requirement within the past three
years. If a business has been subject to two or more 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 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, not to exceed 180 days following
detection of the violation. However, a small business may take 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 to allow a small
business to correct the violation by implementing pollution prevention
measures. For any violation that cannot be corrected within 90 days of
detection, the small business should submit a written schedule, or the
agency should issue a compliance order with a schedule, as appropriate.
Correcting the violation includes remediating any environmental harm
associated with the violation,3 as well as implementing steps to
prevent a recurrence of the violation.
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\3\ If significant efforts will be required to remediate the
harm, the Policy will not apply since criterion 4 is likely not to
have been satisfied.
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4. The Policy applies if:
a. The violation has not caused actual serious harm to public
health, safety, or the environment; and
b. The violation is not one that may present an imminent and
substantial endangerment to public health or the environment; and
c. The violation does not present a significant health, safety or
[[Page 27986]]
environmental threat (e.g., violations involving hazardous or toxic
substances may present such threats); and
d. The violation does not involve criminal conduct.
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 a small business meets all of the criteria, except it needs a
longer corrections period than provided by criterion 3 (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
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\4\ The ``gravity component'' of the penalty includes everything
except the economic benefit amount. In determining the appropriate
amount of the gravity component of the penalty to mitigate, 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 meets all of the criteria, except it has
obtained a significant economic benefit from the violation(s) such that
it may have obtained an economic advantage over its competitors, EPA
will waive up to 100% of the gravity component of the penalty, but may
seek the full amount of the significant economic benefit associated
with the violations. EPA retains this discretion to ensure that small
businesses that comply with public health protections are not put at a
serious marketplace disadvantage by those who have not complied. EPA
anticipates that this situation will occur very infrequently.
If a small business does not fit within guidelines 1, 2 or 3
immediately above, this Policy does not provide any special penalty
mitigation. However, if a small business has otherwise made a good
faith effort to comply, EPA has discretion, pursuant to its applicable
enforcement response or penalty policies, to refrain from filing an
enforcement action seeking civil penalties or to mitigate its demand
for penalties.5 Further, these policies 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. See Guidance on Determining a
Violator's Ability to Pay a Civil Penalty of December 1986. Penalties
also may be mitigated pursuant to the Interim Revised Supplemental
Environmental Projects Policy of May 1995 (60 F.R. 24856, 5/10/95) and
Incentives for Self-Policing: Discovery, Disclosure, Correction and
Prevention of Violations Policy of December 1995 (60 FR 66706, December
22, 1996).
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\5\ For example, in some media specific penalty policies, if
good faith efforts are undertaken, the penalty calculation
automatically factors in such efforts through a potentially smaller
economic benefit or gravity amount.
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G. Compliance Assistance
1. Definitions and Limitations
Compliance assistance 6 is information or assistance provided
by EPA, a State or another government agency or government supported
entity to help the regulated community comply with legally mandated
environmental requirements. Compliance assistance does not include
enforcement inspections or enforcement actions.7
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\6\ Compliance assistance is sometimes called compliance
assessments or technical assistance.
\7\ Of course, during an inspection or enforcement action, a
facility may receive suggestions and information from the regulatory
authority about how to correct and prevent violations.
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In its broadest sense, the content of compliance assistance can
vary greatly, ranging from basic information on the legal requirements
to specialized advice on what technology may be best suited to achieve
compliance at a particular facility. Compliance assistance also may be
delivered in a variety of ways, ranging from general outreach through
the Federal Register or other publications, to conferences and computer
bulletin boards, to on-site assistance provided in response to a
specific request for help.
The special penalty mitigation considerations provided by this
Policy only apply to civil violations which were identified as part of
an on-site compliance assistance visit to the facility. If a small
business wishes to obtain a corrections period after receiving
compliance assistance from a confidential program, the business must
promptly disclose the violations to the appropriate regulatory agency
and comply with the other provisions of this Policy. This Policy is
restricted to on-site compliance assistance because the other forms of
assistance (such as hotlines) do not expose a small business to an
increased risk of enforcement and do not provide the regulatory agency
with a simple way to determine when the violations were detected and
thus when the violations must be corrected. In short, small businesses
do not need protection from penalties as an incentive to use the other
types of compliance assistance.
2. Delivery of On-Site Compliance Assistance by Government Agency or
Government Supported Program
Before on-site compliance assistance is provided under this Policy
or a similar State policy, businesses should be informed of how the
program works and their obligations to promptly remedy any violations
discovered. Ideally, before on-site compliance assistance is provided
pursuant to this Policy or similar State policy, the agency should
provide the facility with a document (such as this Policy) explaining
how the program works and the responsibilities of each party. The
document should emphasize the responsibility of the facility to remedy
all violations discovered within the corrections period and the types
of violations that are excluded from penalty mitigation (e.g.,
violations that caused serious harm). The facility should sign a simple
form acknowledging that it understands the Policy. Documentation
explaining the nature of the compliance assistance visit and the
penalty mitigation guidelines is essential to ensure that the facility
understands the Policy.
At the end of the compliance assistance visit, the government agent
should provide the facility with a list of all violations observed and
report within 10 days any additional violations identified resulting
from the visit, but not directly observed, e.g., results from review
and analysis of data or information gathered during the visit. Any
violations that do not fit within the penalty mitigation guidelines in
the Policy--e.g., those that caused serious harm--should be identified.
If the violations cannot all be corrected within 90 days, the facility
should be requested to submit a schedule for remedying the violations
or a compliance order setting forth a schedule should be issued by the
agency.
3. Requests for On-Site Compliance Assistance
EPA, States and other government agencies do not have the resources
to provide on-site compliance assistance to all small businesses that
request such assistance. This Policy does not create any right or
entitlement to compliance assistance. A small business that requests
on-site compliance assistance will not necessarily receive such
assistance. If a small business requests on-site compliance assistance
(or any other type of assistance) and the
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assistance is not available, the government agency should provide a
prompt response indicating that such assistance is not available. The
small business should be referred to other public and private sources
of assistance that may be available, such as clearinghouses, hotlines,
and extension services provide by some universities. In addition, the
small business should be informed that it may obtain the benefits
offered by this Policy by conducting an environmental audit pursuant to
the provisions of this Policy.
H. Environmental Audits
For purposes of this Policy, an environmental audit is defined as
``a systematic, documented, periodic and objective review by regulated
entities of facility operations and practices related to meeting
environmental requirements.'' See EPA's new auditing policy, entitled
Incentives for Self-Policing, 60 FR 66706, 66711, December 22, 1995.
The violation must have been discovered as a result of a voluntary
environmental audit, and not through a legally mandated monitoring or
sampling requirement prescribed by statute, regulation, permit,
judicial or administrative order, or consent agreement. For example,
the Policy does not apply to:
(1) emissions violations detected through a continuous emissions
monitor (or alternative monitor established in a permit) where any such
monitoring is required;
(2) violations of National Pollutant Discharge Elimination System
(NPDES) discharge limits detected through required sampling or
monitoring; or
(3) violations discovered through an audit required to be performed
by the terms of a consent order or settlement agreement.
The small business must fully disclose a violation within 10 days
(or such shorter period provided by law) after it has discovered that
the violation has occurred, or may have occurred, in writing to EPA or
the appropriate state or local government agency.
I. Enforcement
To ensure that this Policy enhances and does not compromise public
health and the environment, the following conditions apply:
1. Violations detected through inspections, field citations,
reported to an agency by a member of the public or a ``whistleblower''
employee, identified in notices of citizen suits, or previously
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 State's or EPA's actions in providing 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.
4. If a field citation is issued to a small business (e.g., under
the Underground Storage Tank program 8), the small business may
provide information to the Agency to show that specific violations
cited in the field citation are being remedied under a corrections
schedule established pursuant to this Policy or similar State policy.
In such a situation, EPA would exercise its enforcement discretion not
to seek civil penalties for those violations.
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\8\ The Underground Storage Tank (UST) field citation program
provides for substantially reduced penalties in exchange for the
rapid correction of certain UST violations for first time violators.
See Guidance for Federal Field Citation Enforcement, OSWER Directive
9610.16, October 1993.
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J. Applicability to States \9\
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
criteria set forth in this Policy. Whenever a State agency provides a
correction period to a small business pursuant to this Policy or a
similar policy, the agency should notify the appropriate EPA Region.
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\9\ States includes tribes.
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This notification will assure that federal and state enforcement
responses are properly coordinated.
K. Public Accountability
Within three years of the effective date of this Policy, EPA will
conduct a study of the effectiveness of this Policy in promoting
compliance among small businesses. EPA will make the study available to
the public. EPA will make publicly available the terms of any EPA
agreements reached under this Policy, including the nature of the
violation(s), the remedy, and the schedule for returning to compliance.
[FR Doc. 96-13713 Filed 5-31-96; 8:45 am]
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