Environmental Audits New Jersey Hospital Association - May 2, 2005 Patrick T. Mottola, Esq. This presentation and materials do not constitute and are not legal advice Norris, McLaughlin & Marcus, P.A.

Self-Disclosure of Violations Environmental Protection Agency (“EPA”) Audit Policy New Jersey Department of Environmental Protection (“NJDEP”) Policy Norris, McLaughlin & Marcus, P.A.

United States Constitution – Bill of Rights Amendment V (1791) “No person … shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law.” Generally recognized as a right against self- incrimination Less latitude in the administrative, rather than criminal context Norris, McLaughlin & Marcus, P.A.

To Audit, or Not to Audit? That is the Question Self-audit without disclosure and await EPA inspection Benefit: no disclosure Risk: violations found later during an EPA inspection (especially documentation cases) EPA’s Audit Program does provide incentives to disclose Norris, McLaughlin & Marcus, P.A.

EPA – Key Topics Audit Policy Audit Agreements Norris, McLaughlin & Marcus, P.A.

EPA Audit Policy Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations (“Audit Policy”) Federal Register, April 11, 2000 (Fed. Reg. Vol. 65, No. 70) Updated EPA’s 1995 Policy Norris, McLaughlin & Marcus, P.A.

Incentives for Self-Reporting Under the Audit Policy Elimination of Gravity-Based Penalties when all 9 conditions of the Audit Policy are met Reduction of Gravity-Based penalties by 75% when all but the “systematic discovery” component is met No recommendation for criminal prosecution The audit will not trigger enforcement investigations Norris, McLaughlin & Marcus, P.A.

EPA Civil Penalty Assessments Economic Benefit –The economic advantage gained by the violators past competitive advantage through non-compliance with environmental laws Gravity-Based Component –The punitive portion of a penalty –Penalty above the economic benefit –Based on the behavior of the violator Norris, McLaughlin & Marcus, P.A.

Audit Policy – Conditions for Penalty Mitigation (Nine Total) (1) Systematic discovery of a violation –Environmental audit –Environmental compliance management system (2) Voluntary discovery –Not those discovered through a regularly-required monitoring program (e.g., NJPDES Permit, Air Permit) Norris, McLaughlin & Marcus, P.A.

Audit Policy – Conditions for Penalty Mitigation (Nine Total) (3) Prompt disclosure –In writing to EPA with 21 Days of DISCOVERY (but see exception with Audit Agreement) –When an officer, director, employee or agent of the facility has an objectively reasonable basis for belief a violation occurred (4) Independent discovery and disclosure –Before EPA would have identified the violation through its own investigation or report by a third party Norris, McLaughlin & Marcus, P.A.

Audit Policy – Conditions for Penalty Mitigation (Nine Total) (5) Correction within 60 days of discovery (6) Take steps to prevent recurrence of the violation (7) Repeat violations not eligible –If occurred within the past 3 years –If part of a pattern of violations within the past 5 years at other facilities Norris, McLaughlin & Marcus, P.A.

Audit Policy – Conditions for Penalty Mitigation (Nine Total) (8) Ineligible Violations –Result in serious actual harm –Present an imminent and substantial endangerment to human health or the environment –Violations of an administrative or judicial order or consent decree (9) Cooperation Norris, McLaughlin & Marcus, P.A.

Audit Agreements A mechanism for complying with the Audit Policy Key features: –allows entity to set a schedule with EPA –allows for disclosure of violations beyond the 21-day requirement Norris, McLaughlin & Marcus, P.A.

Benefits to an Audit Agreement Provides an opportunity to evaluate institutional environmental practices and SOPs outside the context of an enforcement action Provides comfort that disclosure over a mutually- agreeable schedule will meet EPA’s requirements for timely disclosure Norris, McLaughlin & Marcus, P.A.

Effect on State Law EPA developed the Audit Policy with consultation from the states EPA will share information from an audit with a state States are free to develop their own audit programs so long as they maintain the minimum requirements set forth by the federal government. Norris, McLaughlin & Marcus, P.A.

Audit Agreements for Hospitals and Universities As of last year, EPA had 14 agreements with colleges and universities EPA had at least 23 agreements with hospitals Norris, McLaughlin & Marcus, P.A.

Audit Policy Case Results 130 Audit Policy disclosures About $3.4 million in penalties waived Time from disclosure to resolution – 6 to 18 months Norris, McLaughlin & Marcus, P.A.

Audit Policy Case Results EPA issues a Notice of Determination (EPA’s resolution method) 75% to 100% reduction Many facilities are assessed $0.00 in penalties (100% reduction) Penalties, after a 75% reduction, range from $6,800 to $27,000 Norris, McLaughlin & Marcus, P.A.

Types of Audit Agreements Letter – simple, one page Formal – detailed, many pages Norris, McLaughlin & Marcus, P.A.

Formal Audit Agreement 8 Sections Appendices EPA will negotiate the Agreement to some degree, but the Agency is moving away from extremely tailored language Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Section I Introduction –Identifies parties –Recognizes the Audit Policy as the regulatory program governing the Agreement Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Section II Scope of the Audit –Air Programs –Water Programs –Pesticide Programs –Solid and Hazardous Waste –Hazardous Substances and Chemicals, Emergency Response, Emergency Planning and Community Right-to-Know Programs –Toxic Substances Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Section III Disclosure –Written disclosure reports in accordance with a schedule (Section IV) –EPA waives the 21-day disclosure requirement of the Policy in favor of the schedule in the Audit Agreement –Provides a 60-day period in which to correct violations discovered –Does NOT cover pre-Agreement activities Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Section IV Schedule –Notify EPA of the consultant within 14 days of the Audit Agreement –Commence the audit within 30 days –Submit Audit Reports within X days (this can be negotiated, 90 or 120 days is typical) Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Section V Corrective Action –Correct violations within 60 days of discovery –If correction cannot be achieved within 60 days, EPA may grant an extension –Requires expeditious correction for violations that “may present an imminent and substantial endangerment to human health or the environment” Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Section VI Civil Penalties for Disclosed Violations –No gravity-based penalties pursuant to the Policy –When assessing penalties for economic benefit from past non- compliance, EPA will consider the LEAST expensive means for coming into compliance –During the Audit period, EPA will not recommend civil enforcement to other agencies –EPA reserves the right to disclose and discuss a case with other regulatory agencies Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Section VII Regional Inspections - Compliance inspections will be assigned a low priority until after completion of the Audit, except: –Areas outside the scope of the audit; –When EPA receives a citizen complaint –If EPA has reason to believe there is a threat of danger to public health or the environment Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Section VIII Miscellaneous Provisions –Hospital identifies a “responsible official” who must certify that each disclosure report is true, accurate and complete –Hospital identifies a “contact person” who is typically the hospital’s attorney –EPA identifies a contact person –Provides that the hospital may make confidentiality claims Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Appendix A Covered Campuses and Off-Site Facilities –Hospital building –Auxiliary laboratories and medical service offices –Off-site storage –Vehicle garages –Offices –Doctors’ offices Norris, McLaughlin & Marcus, P.A.

Audit Agreement – Appendix B Scope of Audit Program –Documents to Review (3 years prior) –Facilities Operations and Maintenance –Fleet Maintenance –Hazardous Waste/Tanks/Wells –Laboratories –Patient Care –Pharmacy –Use and Disposal of Chemicals/Products of Concern –Photo processing –Morgue Norris, McLaughlin & Marcus, P.A.

Practical Issues Client can discuss legal issues under the attorney-client privilege Project Team: client, technical (consultant), and legal (attorney) Client departments –Environmental compliance manager –Facilities manager –Laboratory manager Norris, McLaughlin & Marcus, P.A.

Post-Audit Considerations Follow-up reports if required EPA may ask for information on the COST associated with coming into compliance as a result of the audit Implement an Environmental Management System (“EMS”) to ensure future compliance Norris, McLaughlin & Marcus, P.A.

EMS Create a general policy that expresses the institution’s commitment to comply with environmental laws Establish and maintain procedures to identify environmental compliance points Develop a compliance plan, including assignment of responsible personnel and employee training Implement mechanisms for detecting violations of law (self-audits) Provide for appropriate management review Norris, McLaughlin & Marcus, P.A.