Statement of Paul G. Wallach, Esq.
Senior Partner, Hale and Dorr, LLP
on behalf of the National Association of Manufacturers (NAM)
and the Corporate Environmental Enforcement Counsel (CEEC)
before the Committee on Environment and Public Works
United States Senate
October 30, 1997

Mr. Chairman and members of the Committee, my name is Paul Wallach. I have practiced environmental law for some twenty years and am a Senior Partner in the Washington, D.C. office of the law firm of Hale and Dorr, LLP. I have prepared a longer written statement and respectfully request that it be entered into the record.

I am here today on behalf of the National Association of Manufacturers (NAM) and the Corporate Environmental Enforcement Council, Inc. (CEEC). NAM is the nation's oldest and largest broad-based industrial trade association. Its more than 14,000 member companies and subsidiaries, including approximately 10,000 small manufacturers, are in every state and produce about 85 percent of U.S. manufactured goods. Through its member companies and affiliated associations, the NAM represents every industrial sector and more than 18 million employees.

CEEC is an organization of 22 diverse major companies with a strong commitment to the environment and environmental compliance programs. CEEC is comprised of senior environmental managers and corporate counsel from a wide range of industrial sectors. It focuses exclusively on civil and criminal environmental enforcement public policy issues, and the overall need to ensure that environmental enforcement serves the goal of environmental protection. I have also brought with me a copy of CEEC's recently issued Platform for Effective Environmental Compliance and Enforcement which includes a review of the importance of and the need to eliminate obstacles to auditing, and respectfully request that it also be entered into the record on behalf of CEEC.

NAM and CEEC appreciate the opportunity to testify today. Both organizations have carefully considered the issues relating to auditing and voluntary disclosure. Without question, the failure to have in place adequate and certain protections for voluntary audits has created strong disincentives and obstacles to auditing. In the face of these obstacles many regulated entities have chosen to audit, but the current lack of protection for these audits has a very real chilling effect, which often limits the utility, intensity and scope of audits that are undertaken. These obstacles impede our ability to achieve the overriding goals set by Congress in enacting our environmental laws -- the protection of human health and the environment.

Those environmental goals will not be realized, however, unless the environmental regulatory system is structured to promote voluntary compliance. Members of the regulated community must be able to fully implement voluntary programs to candidly assess, prevent, detect, and correct violations of a regulatory requirement, as well as situations which have the potential to threaten the environment or public health and safety. Yet, the system in place creates obstacles and disincentives for such programs, and for auditing in particular. Thus, we believe that properly-crafted federal legislation is long overdue and urgently needed. It is about moving into the future, or as some may say the bridge into the twenty-first century of environmental protection.

Mr. Chairman, let me pose the policy issue another way. A manufacturer, university, governmental entity, hospital, or any other responsible regulated entity that aggressively audits -- as well as their management and environmental personnel -- should not be placing themselves in a position of greater potential liability than those who do not. Yet, that is exactly what is happening today under our current system. Documents and information developed through voluntary self-evaluations can be and are used against regulated entities in a variety of contexts, including enforcement actions, citizen suits or third-party tort actions. The concerns are heightened by the massive potential civil penalties and the very real possibility of criminal convictions of regulated entities and individuals for inadvertent conduct. Indeed, overcriminalization of our environmental laws in a fashion not intended by Congress presents substantial policy issues which we believe Congress should separately consider.

Over the past decade we have witnessed tremendously proactive and environmentally positive actions by the regulated community, including the development and use of sophisticated voluntary environmental auditing programs and compliance management systems. This has resulted in substantially higher rates of compliance and improved environmental performance. In a bipartisan fashion Congress itself recognized the "substantial benefits" of voluntary auditing, for example, when it strongly encouraged the practice in the Conference Report for the Clean Air Act Amendments in 1990. Yet, because of the extraordinary potential liabilities, many regulated entities remain reluctant to proceed with aggressive auditing programs, and those who do take steps to protect themselves -- ranging from not putting specific findings in writing, to utilizing the attorney client-privilege -- which greatly reduce the utility and benefits of audits that are undertaken.

NAM and CEEC support federal legislation because they see a very important opportunity for the environment. We are here today with the hope that this opportunity is not lost in a cloud of rhetoric and skepticism. The regulated community wants to voluntarily audit their facilities, correct noncompliance and improve their operations. However, it is not fair, much less good policy, to expose those who do so to enhanced potential liability. Thus, it is important to consider carefully and parse the rhetoric of those who oppose even thoughtfully crafted legislation. Perhaps most puzzling is the position of EPA. Although the Agency has repeatedly emphasized that it "never" seeks to obtain audit reports, it claims that the failure to allow it to obtain these reports will create secrecy and impede its ability to enforce the environmental laws. EPA cannot have it both ways.

And upon analysis, it can be seen that the "parade of horribles" that opponents of federal legislation have identified cannot be substantiated, unless one exaggerates both the nature and scope of responsible federal audit legislation. There would not be "blanket immunity." Nor would intentionally "bad actors" receive any protections for criminal violations. Nor will environmental protection suffer. To the contrary, aggressive auditing will uncover previously unknown deficiencies which must then be quickly corrected. Nor would an audit law result in secrecy. Much of the underlying information contained in an audit is available elsewhere in the broad range of information that is required to be collected and disclosed under environmental laws. Information that would otherwise not have been known would be made routinely available as a result of the disclosure requirements.

Looked at from another perspective, EPA should be asked how legitimate a case is if the Agency can only pursue it because a regulated entity voluntarily reported a violation and promptly corrected it. What purpose does enforcement serve in that situation? Isn't the public policy issue of compliance better served by encouraging self-assessment and timely correction than by gratuitous enforcement? And, more importantly, isn't the environment better served by encouraging early detection of problems and immediate correction?

In a resounding recognition of the many benefits, twenty-three states have enacted legislation offering qualified protections for audit reports and/or voluntary disclosures, or both. Oregon enacted the first such statute in 1993. Rhode Island enacted its law in 1997.

While EPA has also repeatedly recognized the benefits of and need to remove obstacles to auditing and voluntary disclosure, it has to-date not been willing to support the legislative actions at the federal or state level necessary to do so. In fact, the Agency has vigorously opposed federal legislation and brought extreme pressure to bear on those states that have adopted or considered it -- by threatening withdrawal of delegated programs, as well as by extraordinary scrutiny of regulated entities that have utilized state laws. This EPA conduct is especially troubling because it so directly impedes the ability of these state laws to achieve their goals and because EPA has not pointed to an actual case where the legislation inhibited state enforcement in any fashion.

EPA did issue a Policy in December 1995, entitled "Incentives for Self-Policing; Discovery, Disclosure, Correction and Prevention of Violation" ("Policy"). EPA should be commended for this very positive step. The Policy, however, is only a long overdue penalty mitigation policy for voluntary disclosures. It does not eliminate the various disincentives and obstacles to auditing and voluntary disclosure that we previously discussed. Indeed, even if the Policy were perfect, EPA simply does not have the authority to eliminate the key obstacles and disincentives to auditing. Rather, only Congress has that power, and, thus, there is a need for federal legislation.


In recent years the use of environmental audits has grown both in terms of comprehensiveness and sophistication. Although there are many different types of "environmental audits," EPA has defined environmental auditing as the systematic, documented, periodic and objective reviews by regulated entities of facility operations and practices related to meeting environmental requirements.

Both EPA and the regulated community have long recognized that environmental auditing leads to significantly higher levels of overall compliance, improved environmental performance and reduced risk to human health and the environment. Auditing can also be used to review a company's environmental management structure and resources. By way of example, audits often are used to:

Assess and reduce environmental health and safety risks, both as required by regulation and on a voluntary basis that goes beyond compliance.

Anticipate upcoming regulatory requirements (which enables facilities to manage pollution control in a proactive manner).

Prioritize pollution prevention activities.

Help management understand new regulatory requirements and establish corporate policies.

Assess internal management and control systems.

Measure progress towards compliance.

Improve expeditious communication regarding environmental developments to facility personnel and, where appropriate, ensure effective communication with government agencies and the public.

Assure that capable and properly trained personnel are available at all times to perform emergency and other environmental functions.

Evaluate causes for environmental incidents and determine procedures to avoid recurrence.

Assure sufficient budgeting for environmental concerns.

Provide a means for employee training and performance evaluation.

Maximize resources through recycling, waste minimization, and other pollution prevention measures, including process changes, that may benefit the environment.

Fulfill various other obligations, such as providing appropriate disclosure to other agencies (e.g., the SEC), and evaluating the environmental aspects of corporate or real property transactions.

Industry and other members of the regulated community have been extremely progressive with respect to auditing and the establishment of environmental programs. Many commentators have predicted that the next generation of environmental compliance will rely on regulatory self-evaluation systems -- day-to-day management systems that include audits -- which will lead to enhanced compliance and improved environmental performance. We believe that voluntary Environmental Management Systems (EMS) are important for all entities because they establish a systematic mechanism to analyze environmental impacts of operations, set goals for improvement, monitor activities and make adjustments for continued improvement. EMS also provide for integration of environmental concerns into the daily business operations.

Environmental audits themselves are becoming more sophisticated. Audits have also been increasingly affected by the needs of multinational corporations and the desire for consistency among the environmental standards of different countries. Auditing techniques are constantly improving as well and are increasingly being included as part of value-added business programs. Companies are also utilizing "environmental life-cycle audits" to determine the totality of impact that products and services may have on the environment.


In recent years, we have witnessed an unfortunate and unintended, but very real, tension between enhanced auditing and other innovative environmental management programs and the significantly enhanced potential liability for regulated entities and individuals under our environmental laws. Today, the vast majority of regulated entities are managing themselves in an environmentally responsible manner, with only a handful operating "outside the system." Yet, given the unparalleled complexity and lack of clarity of the unique multi-statute environmental scheme and the myriad applicable regulations, 100 percent compliance is extremely difficult, if not impossible. The complexity, lack of clarity and vastness of the regulatory scheme cries out for aggressive auditing and the resulting candid discussions and self-critical analysis within a regulated entity by the very individuals responsible for environmental compliance. However, the very real potential that such auditing can lead to enhanced liability in specific situations has limited its use.

The primary concern with conducting an audit is the enhanced liability threat. Federal and state enforcement officials, citizens' groups, and third-party litigants (including plaintiffs in toxic tort actions) may seek, in the course of litigation, to discover environmental audits as a means of finding a road map for every environmental concern the company may have had and may then misuse the information to create claims against the company. Even this threat has a substantial chilling effect. It has led to a reluctance to aggressively audit by many members of the regulated community -- particularly small businesses. For others, we have seen extreme caution in the scope of audits that are undertaken, frequent use of attorney-client privilege to protect audits, the writing of non-specific reports and a variety of other practices that greatly reduce the value of audits to a company and, more importantly, the benefit to the environment.

I have seen companies using caution repeatedly in my practice, and it has been consistently underscored by the many representatives of the regulated community who spoke to EPA during the Audit Policy dialogue. It was also confirmed by Price-Waterhouse in a survey -- "The Voluntary Environmental Audit Survey of U.S. Business," 28 (March 1995). According to Price Waterhouse, 75 percent of the corporate respondents had some sort of environmental auditing program. Yet, the survey also indicated that "there is still a perceived reluctance to expand audit programs, in the face of possible enforcement." Price Waterhouse noted that "when these companies were asked what factors detract from their willingness to expand their environmental auditing program, more than 45 percent of the respondents stated that information could be used against them in citizen's suits, toxic tort litigation, civil enforcement actions or as a road map to establish knowledge in a criminal enforcement action." In addition, nearly two-thirds of the companies that perform environmental audits stated that they would expand their programs if penalties were eliminated for problems that the companies themselves identified, reported and corrected.

The Price Waterhouse survey also indicated that 81 percent of the companies that audit try to protect their audits from disclosure pursuant to some sort of privilege, usually the attorney-client privilege. This necessarily increases the cost and complexity of audits, making them less useful, and often undermining what could have been a truly constructive effort. It also means that the specific information obtained by auditing, as well as the attendant learning, is not making their way through the company, especially to the facility personnel who have the greatest need for the information, because wide-spread dissemination is not consistent with the attorney-client privilege.


Following careful review of the significant environmental benefits to be gained from auditing and voluntary disclosure, and with an understanding of the disincentives and obstacles, various states moved to enact legislation protective of audit reports or disclosures, or both. Oregon enacted the first audit protection statute in 1993. Since then, twenty-two other states have enacted legislation, including Alaska, Arkansas, Colorado, Idaho, Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Mississippi, Montana, Nevada, New Hampshire, Ohio, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia and Wyoming. Even in the face of EPA pressure, other state legislatures are or are expected soon to be considering similar legislation. As you have heard from other witnesses today, to the extent EPA has allowed them to function, these laws have had a strong and positive impact. But these state laws obviously do not reduce the need for action at the federal level, as only federal legislation can:

provide a qualified privilege under federal law;

provide limited protections under federal law for environmental violations disclosed to EPA and expeditiously corrected; and

prevent voluntarily disclosed information from being used as a road map for litigation against the disclosing entity in governmental enforcement actions, citizen suits, or toxic tort litigation.

NAM and CEEC have been and remain extremely concerned about EPA's continued critical and threatening position with respect to federal enforcement and the delegation of federal programs in those states whose legislatures have made the decision to foster environmental protection and improve compliance by enacting legislation that provides qualified protection for audits and/or voluntary disclosures. NAM and CEEC do not believe that EPA should be overriding state laws in this fashion, nor should EPA be compelling states into revoking or severely changing their audit laws (or intimidating regulated entities that chose to utilize these laws). Congress intended that the states take the lead and be responsible for implementing most of our environmental laws, and in doing so simply wanted to ensure that the states had adequate authority to take enforcement actions which they believed were appropriate. Congress did not -- as EPA suggests -- restrict the states by requiring them to impose a penalty every time a violation occurs. Nor did Congress intend for EPA to use its program approval authority to coerce state legislatures if they deviated at all from EPA's preferred approach.

Stated another way, the states are capable of enforcing environmental laws and applying legal accountability and compliance assurance in their policies and actions. The states have demonstrated their commitment to environmental compliance and enforcement and their innovative legislative programs must be allowed to go forward.


"The Policy is not final agency action, but is intended solely as guidance. It is not intended, nor can it be relied upon, to create any rights enforceable by any party." Office of Enforcement and Compliance Assurance.

Over the past several years, CEEC has worked closely with senior personnel from the Office of Enforcement and Compliance Assurance (OECA) on a number of key enforcement policy issues. We have appreciated the openness of senior officials in OECA, and especially Assistant Administrator Steve Herman, and the dialogue that we have developed on enforcement policies and issues. CEEC and NAM also recognize and appreciate the willingness of EPA to consider new and creative approaches to environmental compliance and enforcement, through its Policy, as well by other activities such as OECA's ongoing evaluation of its performance measures.

At the same time, NAM and CEEC have believed for several years that Federal audit protection and voluntary disclosure legislation is necessary because EPA's Policy cannot, by definition and as a result of limitations on the Agency's authority, eliminate all of the obstacles to self-policing. For example, EPA's policy cannot impact prosecutions by the Department of Justice or other federal agencies, citizen suits, toxic tort actions or state prosecutions. Stated another way, the EPA Policy is not a substitute for federal legislation.

During the dialogue on the Policy, many in the regulated community discussed with EPA why the failure to have in place adequate and certain protections for audit reports and voluntary disclosures created obstacles to environmental auditing and had a strong chilling effect which severely reduced the utility of audits that are undertaken. They emphasized that a responsible regulated entity that audits should not be in a position of greater liability than an entity that does not audit. Nor should its management or environmental personnel be put at greater risk.

In issuing the Policy (60 Fed. Reg. 66706, December 22, 1995) , EPA reiterated that voluntary auditing and disclosure (i.e., self-policing) by the regulated community were -- especially with EPA's limited resources -- critical to achieving environmental protection goals. Although it is still in need of revision, we commend EPA for improving and clarifying the availability of penalty mitigation for responsible entities. Yet, the penalty mitigation of the Policy falls short of the environmental protections EPA could have achieved through the adoption of a broader policy. For example:

A regulated entity that uncovers through auditing and promptly discloses and corrects a violation and satisfies all of the criteria set forth in the policy still faces potentially severe penalties.

The Policy does not apply to individuals, who are left entirely unprotected and as a result will not be encouraged to aggressively identify environmental issues.

The Policy provides EPA with substantial discretion as to whether the various applicable prerequisites are satisfied, thereby failing to provide the certainty necessary to promote candid, self-critical analyses.

The Policy does not protect information provided to EPA from disclosure to other government agencies or third-parties, nor does it adopt an alternative approach that would allow such a disclosure but provide limited protection to those who disclose.

The limited nature of the Policy, coupled with its exclusive focus on

penalty mitigation, only underscores the need for comprehensive federal and state legislation if we are to achieve the environmental benefits that EPA seeks.


As discussed above, an EPA policy is not an adequate substitute for federal legislation. Similarly, the protections offered by the states that have adopted audit laws are not enough. Moreover, in light of EPA's ongoing campaign against these laws, there is an increasing need for federal legislation to clarify the rights and roles of states in developing audit laws without EPA's undue interference, in addition to establishing a federal law that goes beyond the necessarily limited protections state laws offer.

We are not suggesting that federal legislation should take away the states' rights to develop their own programs. However, Congress needs to build on the states' programs -- as it has in so many other areas where the states are the initial proving grounds -- to further federal policy. Thus, federal legislation should ensure that state programs are allowed to develop.

It should also be noted that the elements of the legislation we support are neither novel nor without precedent. For example, as part of the budget package passed last year, Congress amended the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) to provide for a privilege for information developed in audits conducted to determine compliance with the ECOA and FHA. See 15 U.S.C. 1691c and 42 U.S.C. 3614 note. The federal law governing skilled nursing facilities clearly prohibits a state or the federal government from requiring disclosure of the records of a quality assessment, which every nursing home receiving Medicare or Medicare funds is required to establish. See 42 U.S.C. 1396r (b)(1)(B). In addition, protections have long been provided for certain disclosures pursuant to the Comprehensive Emergency Response, Compensation and Liability Act (42 U.S.C. 104(e)(7)(E)) and the Clean Water Act (33 U.S.C. 1318 (b)).


NAM and CEEC recognize that federal legislation needs to be carefully crafted, and that it should include safeguards to preclude abuse of its limited protections. Critics of federal legislation have consistently made a series of generalized charges to support their concerns about the legislation. These charges -- while perhaps creating attractive sound bites -- are unsupported, and take aim at hypothesized dangers and imaginary legislation that does not provide the safeguards that responsible members of the regulated community so strongly support. These charges include:

1.Federal legislation would amount to "blanket immunity."

Proposed federal legislation has not provided for "blanket" immunity. But it has proposed to provide environmentally responsible entities with a qualified protection if the entity establishes that the violation was promptly corrected and disclosed to the appropriate governmental agency, and the entity provided all further relevant information requested by the agency. In addition there is no qualified immunity for repeated violations.

2.The legislation would protect "bad actors" and promotes "secrecy."

"Bad actors" who intentionally violate environmental laws do not typically take the time to conduct voluntary self-audits, much less undertake the costly steps required to comply with environmental requirements in a timely fashion. In any event, it was never the intention of any federal legislation to protect willful and intentional violators, and the pending bills do not do that. Nor will that legislation in any way restrict EPA' s (or the public's) ability to obtain the broad array of documents, data and other information that is currently available. To the contrary, following enactment of self-disclosure legislation, EPA and the public will have more information, as much of the information identified by an environmental audit may be disclosed pursuant to one or more of the many disclosure requirements that are at the heart of our environmental regulatory system. A list of many of those reporting requirements is attached to this statement.

3.Environmental protection will suffer as a result of the legislation.

No basis for this assertion has been seriously suggested, and once again the opposite is true. The limited protections offered by the legislation do not affect the government's ability to issue an order or obtain any injunctive relief necessary to protect public health or the environment. Moreover, effective environmental auditing typically is more probing and thorough than a regulatory compliance inspection, and therefore is more likely to uncover deficiencies or instances of environmental noncompliance than a government inspection. In order to benefit from the voluntary disclosure component of proposed federal legislation, an entity must act quickly to correct any non-compliance. For this reason too, increased environmental auditing will result in increased compliance with environmental requirements, and ultimately improved environmental protection.

In addition, we believe that environmental protection will be enhanced as the regulators will be provided with more extensive information about regulatory compliance. As regulators are presented with this increased information about how the regulations do and do not work in the real world, they will be able to improve upon existing regulations.

4.The legislation will not impact the behavior of regulated entities.

We do not believe that this is correct. Audit protection/voluntary disclosure legislation will remove obstacles to the voluntary self-auditing process in several ways. First, entities and individuals that already perform voluntary environmental audits will be able to do so more candidly and thoroughly and thereby auditing will be more useful. Second, more entities and individuals will be encouraged to perform voluntary environmental audits, and to do so aggressively. Third, more companies and individuals will go beyond compliance, undertaking evaluations that are not required.

5.The legislation protects factual information about environmental violations from regulators.

This argument ignores the very narrow scope and qualified nature of the protections. Protection is not extended to any of the information that is required to be collected under environmental laws. Stated another way, the qualified privilege does not cover routine sampling or monitoring data or information obtained from an independent source. Nor does it restrict the government's ability to use its broad authority to investigate and obtain information related to the underlying facts.

Moreover, as noted previously, such qualified protection will encourage and increase the free flow of information, enhancing the information available to the government and the public. Absent protection for audit reports and related disclosures, information will not be internally communicated as openly, nor will it all be available for release. Indeed, neither regulated entities nor individuals will not have the incentive to aggressively seek to uncover additional information in the first place, much less disclose it.

6.Federal legislation would impede the government's ability to bring environmental enforcement actions.

Because enforcement officials will continue to have access to all of the information that regulated entities are required to maintain and disclose and because EPA retains its full inspection and information gathering authorities, qualified audit protection will not have any effect on the ability of EPA or any regulatory agency to establish nonconformance with a regulatory requirement. Enforcement officials will continue to be able to inspect, sample and monitor an entity's compliance under existing environmental laws, and entities will still be required to comply with all existing recordkeeping and reporting requirements.


Removing the obstacles and providing the proper types of incentives and protections for voluntarily conducted environmental audits and related disclosures will only serve environmental goals. Administrator Browner to her credit often cites the need to use a "Common Sense" approach to development of effective environmental policy. Providing incentives and qualified protections for those in the regulated community that are good citizens and are doing the "right thing" by trying to find, report and fix any actual or potential environmental problem is "Common Sense." Mr. Chairman, NAM and CEEC look forward to working with Congress in a bipartisan fashion so federal audit legislation that is good for the environment can be enacted.



Permit Applications
Spill Plans
Discharge Monitoring Reports
Excursion and Release Reports

Permits (Part A & B)
Quarterly, Annual and Biennial Reports
Exception Reports
Closure Plans
Emergency & Spill Plans
Underground Storage Tank Registration Release Reports

Release Reports
Monitoring Reports
Excursion Reports
Annual Compliance Certification
SIP-Specific Reporting
NSPS Reports

Material Safety Data Sheet
Emergency and Hazardous Chemical Inventory Forms
Annual Toxic Chemical Release Forms
Release Reports
Superfund Site Plans
Facility Reports

Registration and Notices for Manufacturing, Processing and Importation of Chemical Substances
Submission of Test Data and Health and Safety Studies
Chemical Information Reporting Requirements
Reporting of Information Relating to Chemicals Posing Substantial Risks

Certification Reports
Under Ground Injection Permits
Under Ground Injection Reports

Registration Reports
Compliance Reports

OSHA 200 Logs
Incident Reports

10K Environmental Disclosures
10Q Environmental Disclosures

Massachusetts Toxic Use Reduction Act Reporting
New Jersey Industrial Site Recovery Act Reporting
California Proposition 65 Reporting


The Corporate Environmental Enforcement Council ("CEEC") is an organization of diverse major companies with facilities throughout the United States and across the globe. Member companies share a strong commitment to the environment. They are supportive of aggressively set environmental goals consonant with a modern economy. Our members also support proactive, contemporary environmental stewardship dedicated to effective environmental protection and prudent use of resources. We believe such stewardship encompasses a number of elements beyond the traditional compliance/enforcement approach, including compliance education, promotion of voluntary actions beyond compliance, and a recognition of the importance of the competitive market place for driving environmental stewardship.

At the same time, CEEC recognizes the need for a strong environmental compliance program and a strong enforcement program that identifies and penalizes significant violators who have not availed themselves of compliance options, as well as those who willfully and intentionally violate our environmental laws. Unfortunately, in many respects, the current compliance and enforcement programs are neither properly balanced nor focused.

When the environmental laws were first being implemented in the 1970s, not everyone moved quickly to adopt their operations and practices to the new environmental requirements, even those for which compliance was not difficult. At that juncture, well-publicized enforcement was often beneficial, sending the message to the regulated community that compliance with the new environmental legal structure was mandatory.

Now, however, the vast majority of the regulated community has demonstrated its strong commitment to operating within the regulatory structure. Compliance is the rule, not the exception. The tremendous improvement in the attitude of the regulated community with respect to environmental protection and compliance practices has been widely recognized.

EPA's and DOJ's approach to environmental compliance and enforcement needs to more fully evolve to keep up with these changes. As we have found better ways to achieve our environmental goals, CEEC believes that a new construct for environmental compliance and enforcement is long overdue -- one that reflects the current compliance realities; that ensures that sufficient and proper resources are devoted to environmental compliance; and, that, while a strong enforcement presence is maintained, enforcement actions are properly directed. We also believe that innovative solutions should be recognized and rewarded and that science, technology and collective goal-setting should be the tools used to improve environmental performance. To that end, CEEC has adopted the following set of Principles for an effective environmental compliance and enforcement program:

CEEC Principles

The states should be the primary focus for implementation and enforcement of environmental programs.

While maintaining a strong and focused enforcement program, Agency efforts and resources should primarily be devoted to compliance.

Environmental compliance and enforcement efforts must be directed at achieving desired environmental goals.

Environmental enforcement should be prioritized at all levels based on the seriousness and the nature of the violation.

Prosecution of environmental criminal violations should be based on intentional violations of clearly enunciated standards that are interpreted and applied in a consistent manner.

Self-assessment, as well as a qualified immunity where appropriate for voluntary disclosures, should be encouraged as the most effective way of achieving our environmental goals.

The states should be the primary focus for implementation and enforcement of environmental programs.

As an initial matter, CEEC believes it is time for an immediate and substantive change in the roles of the various government regulatory agencies.

EPA's Role: EPA should focus on the implementation of environmental statutes, in particular on the achievement of environmental goals, and not on the specific method to achieve the goals. With regard to compliance, EPA's policies should focus on the actual performance result that is wanted and the environmental performance metrics that will be used to judge the success of compliance with those goals. EPA should then coordinate and ensure that its policies are uniformly understood by the states, thereby providing a national baseline as to what environmental result is desired. Enforcement should become principally a state function, with EPA maintaining a strong presence and the ability to step in if a particular state has demonstrably failed to enforce the environmental laws. EPA should not reflexively consider a drop in enforcement cases as a sign of failure or a signal that there is something wrong with a state program. Rather, EPA needs to acknowledge that an increase in compliance rates is compatible and should necessarily result in a downward turn in enforcement.

The Role of the Regions: As EPA's relationship with the states changes, the role of the EPA regional offices would also need to be reexamined. In particular, we believe that the regional offices are best suited to providing compliance and technical assistance. In essence, the offices should act as technical consultants to states on how to best achieve environmental performance results. Any regional policymaking role should be returned to EPA Headquarters. All unused resources in the Regions should be transferred to the states to bolster the manpower of the agencies who are actually implementing and operating the environmental programs. Finally, the Regions should assist EPA Headquarters in policing overall state efforts.

The States' Role: The states would then have the primary responsibility for the implementation of the operating programs and the resulting enforcement programs. The states would have to commit not only to implementing the programs, but also to actual environmental results, which results would be consistent across the country. In this way, CEEC believes that states would be the better arbiters and implementers of how to achieve the national environmental goals.

DOJ's Role: Finally, DOJ's role, too, needs to be reevaluated. The application and implementation of all of CEEC's Principles for Effective Environmental Compliance and Enforcement apply to both EPA and DOJ, in their respective roles. However, with regard to DOJ's role in particular, CEEC believes that DOJ's resources need to be redirected to working with EPA to pursue those regulated entities clearly operating outside the system. In addition, DOJ's focus with respect to environmental crimes should be on those criminal cases that reflect intentional and willful conduct.

While maintaining a strong and focused enforcement program, Agency efforts and resources should primarily be devoted to compliance.

Environmental laws and regulations continue to expand in number and complexity at a rate which exceeds most other regulatory areas. Agency interpretations of these rules are often difficult to ascertain and may vary over the years and throughout EPA's regions. Moreover, implementation of environmental laws through thousands of pages of regulations and variable "guidance," interpretations, and "policy statements" makes 100% compliance impossible all of the time. EPA needs to recognize this and work with the regulated community to help achieve the highest possible level of compliance and better protection of the environment.

In a mature regulatory program, continually increasing enforcement suggests that there is something wrong with the system. Enforcement should be a tool that is employed only when a regulated entity is not working to come into compliance. EPA and the regulated community should be proud of the increased compliance rates and take credit for their respective roles in achieving them. However, EPA needs to work on increasing compliance and technical assistance to all regulated entities, not just small businesses. By way of example, CEEC believes that an expansion of the Small Business Assistance Policy that was put into place in 1996 would maximize environmental benefits for all.

Environmental compliance and enforcement efforts must be directed at achieving the desired environmental goals.

As an initial matter, CEEC believes that environmental protection must be the overriding goal of all environmental regulation and environmental programs. Likewise, the compliance expectations of agencies should be tailored to the achievement of that goal and to allow the necessary flexibility to achieve it. Thus, CEEC believes that ultimately environmental regulations should be recast to focus on the goal of environmental protection, instead of the current focus on the process or method to achieve that goal. However, until that time, we must work incrementally to change the enforcement policies and procedures that have evolved as a result of an over-emphasis on enforcement.

One method of refocusing EPA's current compliance and enforcement program would be to adjust the goals and measures of the program to assure that EPA does not reward the pursuit of enforcement for enforcement's sake, but instead encourages systematic and creative compliance with environmental laws in ways that achieve the greatest environmental benefit. Individual noncompliance problems are less important to society than achieving the goals of lessened pollution, lessened exposures and lessened ecological impacts. Thus, the success of a compliance program should be measured incrementally by the number of noncompliance problems that an organization detects, corrects and reports to a government agency. Alternatively, a measurement of the success of a compliance program could focus on the numbers of training and outreach person-hours, the extent of private self-auditing, and the measurable ambient environmental improvements, such as stream water oxygen levels.

Companies also routinely provide incentives and measure employee activity for the completion of the more difficult environmental compliance tasks. Likewise, CEEC believes EPA should measure its success by the ways in which it encourages its employees to properly value and take credit for compliance-oriented activities, to pursue the truly difficult or serious enforcement cases, and not simply to go after the easy inadvertent violations.

Environmental enforcement should be prioritized at all levels based on the seriousness and nature of the violation.

CEEC members support an effective environmental enforcement program aimed at identifying and punishing those who lack the commitment to comply, as well as those who willfully and intentionally violate environmental laws. At the same time, CEEC believes an enforcement-first mind-set is counterproductive. EPA and DOJ enforcement must recognize a distinction between the truly serious and non-serious violation in terms of whether an enforcement action should be pursued at all.

Enforcement, whether civil or criminal, should be seen as a last resort to be used when regulated entities do not make good faith efforts and fail to manage and control environmental issues. EPA's enforcement goal should be to take no enforcement actions for minor "outages" or "mistakes," in light of outstanding corporate performance. Playing "gotcha" by finding technical violations at a facility is not productive; enforcement should focus on violations that actually harm the environment.

EPA and DOJ need to make clear distinctions in terms of the seriousness of the compliance lapse and its impact on ambient environmental conditions. This is especially true in the multimedia enforcement context, where a handful of minor violations can be packaged into a major enforcement action. EPA should explain the process by which decisions are made to take enforcement actions, and ensure that the criteria are consistent with overall environmental goals. While a company's responsible actions may be taken into account in the penalty phase (or in the sentencing context in a criminal case), the drive for enforcement for enforcement's sake often effectively precludes consideration of those factors as part of the decision to pursue a case.

At a minimum, EPA's screening methodology should ensure that enforcement is not the first resort in gray areas: such as where a regulation is ambiguous, or a member of the regulated community did not have fair notice of the interpretation that EPA is seeking to enforce. Unfortunately, punitive enforcement measures have been taken where the regulations are unclear or where an unpublished agency interpretation is inconsistent with the meaning of the regulation. These kinds of enforcement actions have diverted significant compliance and production resources and negatively impacted our ability to achieve statutory environmental goals.

Prosecution of environmental criminal violations should be based on clearly enunciated standards that are interpreted and applied in a consistent manner.

Despite the ever-improving performance of the regulated community, there has been an increasing overcriminalization of environmental statutes, as civil cases have been elevated to criminal ones and misdemeanor cases to felonies. Discovery and prosecution of criminal activities is in general a laudable goal; however, CEEC believes the severity of the actions being punished should be commensurate with the punishment itself. Thus, there should be a clear distinction between a civil and a criminal environmental violation. Criminal enforcement should only be used in egregious cases where there is a knowing or willful intent to violate, such as midnight dumping, intentional or long-term noncompliance with a permit or standard, or falsification of records.

CEEC believes that there must be a bright-line standard concerning the actions or mental state that transforms a civil regulatory violation into an object of criminal investigation and prosecution -- that is, the use of a specific intent standard. If specific intent is not a required element of a crime, well-intentioned but misguided or uninformed persons can be subject to felony sanctions. Application of the specific intent standard for the initiation of a criminal environmental case would not diminish the effectiveness of the government's enforcement efforts. Criminal penalties would be reserved for those recalcitrant individuals and organizations who flout their environmental obligations, while EPA's broad civil enforcement powers would be applied to those individuals and organizations who made other than acceptable good-faith efforts to comply.

Additionally, the severity of the penalty for an environmental crime should be closely related to the culpability of the violator, and mitigating factors (especially compliance programs) should result in meaningful penalty reduction. CEEC believes that the penalty setting mechanism of the Federal Sentencing Guidelines, Chapter 8 - "Sentencing of Organizations" should be expanded to include environmental crimes, should recognize and accommodate the wide variability of environmental crimes, and should take into account that small businesses have fewer compliance resources. Finally, the sentencing guidelines should reflect the strong societal interest in encouraging regulated entities to protect the environment -- and encourage, not punish, self-policing and self-correction of environmental deficiencies.

Self-assessment, as well as a qualified immunity where appropriate for voluntary disclosures, should be encouraged as the most effective way of achieving our environmental goals.

CEEC believes that most of the regulated community is committed to environmental compliance. One way the regulated community has already demonstrated its commitment is through self-auditing and detection and correction of mistakes early on. CEEC believes that self-auditing must be encouraged and obstacles removed, so that entities are able to ensure that they are complying to the fullest extent without enhancing their potential liability.

Moreover, CEEC believes that corporate environmental programs could be even more successful absent the unintended chilling effects of the current enforcement program. Instead of being commended for voluntarily collecting more data and attempting to put it to good use, many regulated entities have watched their own data -- which they voluntarily collected and analyzed to identify problems and improve performance -- put to use against them in enforcement proceedings. Any enforcement program must be structured so that those entities who move forward with these innovative activities -- and the individuals who implement them -- do not expose themselves to more liability than those that take no action.

Thus, CEEC supports a three-pronged approach. First, there is a need for legislative action to encourage self-auditing and self-correcting by providing a qualified immunity that protects the self-auditing volunteer from unfair prosecution or civil suits based on the results, so long as there are good faith efforts to correct the problems found and the corrected problems are reported promptly. Second, as EPA does not have the resources to inspect every facility, or pursue endless enforcement actions, CEEC believes EPA should encourage the self-policing efforts by the regulated community, and count with pride the guidance and technical assistance it provides that allows members of the regulated community to correct and/or avoid compliance issues. Third, CEEC believes that the states should be encouraged to experiment with legislation and/or other flexible methods to provide incentives for self-auditing and self-correction programs that produce positive compliance efforts among the regulated community.