Progressive Audio Presentation 042010
- 1. EPA Internal Auditing Policies: Guarding Against Violations & Penalties David Quigley, Esq., Akin Gump Strauss Hauer & Feld, LLP Daniel Spandau, Senior Consultant, DJS Consulting Inc. April 20, 2010
- 2. David Quigley David H. Quigley is a partner in the law firm Akin Gump Strauss Hauer & Feld. David’s practice covers an array of environmental matters, including transactional, enforcement litigation, regulatory compliance, lobbying and legislative development. David’s transactional experience itself covers a broad spectrum. He has managed environmental due diligence in connection with acquisitions totaling over $1 billion in assets. He drafts the environmental representations, warranties and indemnities provisions in complex mergers and acquisitions and has negotiated the scope of those provisions. David’s regulatory compliance practice focuses on issues arising under the solid and hazardous waste regulations. More specifically, he counsels major gasoline distribution companies with respect to the requirements governing releases from under- and above- ground storage tanks, as well as providing day-to-day compliance assistance. In addition, Mr. Quigley counsels private and public entities with respect to cost recovery actions under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Mr. Quigley advises clients on policy issues associated with the Clean Air Act's emission regulations and ozone depletion provisions, global climate change, and related greenhouse gas issues. He represents clients regarding these issues before members of Congress, the Environmental Protection Agency, and the Department of Energy. Mr. Quigley received his B.S. with distinction in natural resources from Cornell University in 1995 and his J.D. in 1998 from Harvard Law School, where he served as a line editor of the Harvard Environmental Law Review. He is a member of the District of Columbia, New York and New Jersey bars. Mr. Quigley presents on compliance issues typically three to four times per year. He recently authored “From Red to Black by Way of Green: The Use of Risk Transfer Strategies to Turn Environmental Liability into Opportunity,” Inside the Minds, Environmental Deal Law Strategies, Aspatore Books.
- 3. Daniel Spandau Dan Spandau is President and Senior Consulting Partner with DJS Consulting, Inc. He has been working in the environmental field for over 30 years and has worked specifically with Petroleum Retail Marketers since the late 80’s. His work has been focused in the storage of petroleum products, regulatory representation, evaluation of insurance risk transfer instruments, environmental remediation, audits, training, and the design and implementation of management systems to help monitor regulatory compliance practices. Dan has a degree in Chemistry and an MBA with a focus in Information Management. He spent 10 years working with the EPA and the Department of Energy developing instruments to monitor Environmental Pollutants. In 1988, Dan started a commercial environmental laboratory for a Pump and Tank contractor in the Northeast. As an executive member of the staff, he helped expand the business into a national firm that offered Engineering, Permitting, Construction, Maintenance, and Environmental services to Petroleum Retail Marketers and Distributors. Dan has been an independent consultant since 2000. Dan’s focus over the last 5 years has been assisting Petroleum Marketers and Distributors, Environmental Law Firms and Real Estate Investment Firms deal with regulatory changes by helping them evaluate, design and implement programs to streamline regulatory compliance.
- 4. Environmental Compliance as Risk Avoidance New Properties Due Diligence Phase I and II Assessments Addresses Environmental Conditions New or Existing Properties Environmental Audits EPA’s Approach to New Owners Addresses Environmental Compliance
- 5. Environmental Audits “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violation” (60 Fed. Reg. 66,706). Originally published on December 22, 1995. Incentives for detection, prompt disclosure, and expeditious correction of violations of Federal environmental requirements. Remove or reduce gravity-based element of civil penalties. No recommendation for criminal prosecution.
- 6. Self-Disclosure Policy What do the incentives mean? Gravity Matrix (RCRA) EPA civil penalties typically have two components. Gravity of violation. Economic benefit from violation. Extent of reduction based upon how many of policies “conditions” met. 100 % reduction if meet all conditions. 75% reduction if meet all but first condition.
- 7. Self-Disclosure Policy What are the conditions? Systematic audit or management system. Voluntary discovery. Prompt disclosure. Independent discovery and disclosure. Expeditious correction and remediation. Prevent recurrence. Not a repeat violation. No imminent / substantial endangerment. Cooperation with regulator.
- 8. Self-Disclosure Policy Who do you disclose to? Who has approved programs (EPA)? 36 states District of Columbia Commonwealth of Puerto Rico What if you are somewhere else? NY NJ Etc.
- 9. Self-Disclosure Policy History 2000 revisions (following 2007 FAQ guidance 2-year evaluation) FY 2011: increase Lengthened period for number of facilities “prompt disclosure.” conducting audits. Clarified rules with FY 2008: eliminate respect to newly- 400,000 pounds of acquired facilities. pollutants through Eased repeat audits. violation Focus on new prohibition. owners, audit Set rules for agreements. disclosing violations discovered during acquisition.
- 10. Self-Disclosure Policy Approach to new owners “encourage owners of newly acquired facilities to undertake a comprehensive examination of and improvements to a facility’s environmental compliance.” Relaxes Audit Policy requirements Offers additional flexibility Audits by agreement Extends reporting deadlines
- 11. Maintaining Compliance Program to address Federal, State and Local regulatory requirements Program that can be easily applied to newly acquired properties Standardize program throughout company Paperless, centralized compliance document management system Information system to allow management to have real- time compliance snapshot Information flow and reporting that is proactive
- 12. Proactive Compliance Program Plan and Identify Management Training Refresher Training Process Management Operating Procedures Redundant Processes Development Solution Full Scale Deployment Information Systems Small Scale Testing Management Reports Document Management Trend Analysis Operator Training Auto-Notification Refine Solution Subcontractor Training Near Real-time reporting Identify Additional Opportunities Step 1 Step 2 Step 3 Create Implement Refine and Improve
- 13. Responsibility and Accountability Identify who is responsible and Training accountable for completing a task (liable Leak Processes to be called on to answer Detection Procedures / has the ultimate ownership) Compliance Every program needs checks and balances Quality Assurance and Risk Information Management Systems Quality Control Set of procedures to follow Maintenance Clear set of standards
- 14. Process Steps Data collected to Programs are designed to determine 1st steps incorporate manual Key areas of concern are systems used to track identified, tracked compliance Service provider Core programming is information and services built around audits are reviewed and Small scale field modified to be more test informative Data collection are run Company positions are for 4-6 months and reviewed to incorporate a reports are designed compliance scope to extract and analyze data
- 15. Process Steps User input modules allow Service providers work audit information to be tasks are modified as uploaded from remote / required home offices Feedback systems are Each item assigned a shortened Management responsible party. Emails reports are designed auto-notify on non- All in Drilldown design compliance Training programs for Reports document open Management, Supervisors items by responsible and Service Providers party, aging, region, territory, etc.
- 17. Process in Practice • Perform field audit (preprinted form) • List of previous open items and pre-printed historical information • Verifies data • Web entry • Data System verification • Identifies responsible party • Auto-notification • Electronic receipt received by auditor • Data System follow-up • Management reports updated • Real-time compliance analysis • Tracking reports and trend reports by Company, Region, Location, personnel or sub
- 18. Can We Be 100% Compliant? Exposure to many variables not controllable Mechanical failures Electronic failures Exposure to many variables are controllable Paperwork filings Required Daily, Weekly and Monthly inspections Delivery issues Proper maintenance, Subcontractor performance Regulatory Violations
- 19. How to eliminate 85% of violations 15 to 30 minutes per day Operator inspection fill out required forms and logs Repair, replace or request maintenance 2 hours per month Company compliance audit Review of operator responsible items Make sure documents are available Monthly review Company management Trends, performance, regulatory changes Annual wrap-up
- 20. Where should we spend our money? Technology is primary Productivity enhancements Evaluate Locations Cost for upgrade or divestment Training – Management and Operator Document Management Understanding of Regulatory Environment
- 21. Compliance Investment Returns Design systems and programs that have: Owner and management support Long term – scalable Flexible – incorporate change Ability maximizes current technology Ability to collect, organize and analyze data Ability to target current expenses that can be internalized or eliminated Excellent information on current status, trends and target/prioritize expense initiatives Convert Man-Year efforts into technology based solutions Document Management System