Document ID: EPA-HQ-OECA-2007-0291-0032
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2007-09-28T04:00Z

Environmental Protection Agency 

Office of Enforcement and Compliance and Assurance 

New Owners Audit Policy Working Session 

Summary Notes

San Francisco, California

June 21, 2007

INTRODUCTION

With a May 14, 2007 Federal Register (FR) Notice, “Enhancing
Environmental Outcomes from Audit Policy Disclosures through Tailored
Incentives for New Owners,” (72 Fed. Reg. 27,116), Environmental
Protection Agency’s (EPA) Office of Enforcement and Compliance
Assurance (OECA) launched a 60-day public comment process to explore
ways to increase environmental outcomes through implementation of the
Agency’s leading compliance incentive settlement policy, the “Audit
Policy,” and to encourage the Policy’s use by “new owners” after
M&A transactions.  

EPA is exploring the idea of offering tailored incentives to encourage
new owners to audit their newly acquired facilities and self-disclose
violations they find to the Agency.  This is part of an Agency effort to
increase disclosure and resolution of environmental violations that,
once corrected, will yield significant pollutant reductions and
environmental benefits.  

As part of the public comment process, EPA set up a docket to accept and
record written comments from the public; held two public meetings to
discuss the FR Notice and take oral comments for the public record; and
also invited a diverse, but balanced, group of industry, government,
academic and interest group participants to working sessions focused on
the questions posed in the FR.  The working sessions were envisioned as
a chance for the Agency to hear the views of a variety of individuals
with different perspectives and experiences in a relatively informal,
frank atmosphere.  No consensus of opinion was sought or encouraged.

The notes below summarize the comments made at the working session in
San Francisco, and the general discussion about ways to encourage the
self-discovery, correction, disclosure, and prevention of environmental
violations by new owners.  The summary represents participant
observations and recommendations, but no comment is attributed to any
individual participant.  The individuals who accepted EPA’s invitation
to participate are, however, identified below, by name and affiliation. 
EPA will make this summary part of the public record, and will consider
it, along with all the other public input, in deciding whether and how
to proceed with the development of incentives for new owners.

PARTICIPANTS  

EPA

Susan O’Keefe

Acting Director, Special Litigation and Projects Division, Office of
Civil Enforcement (OCE), OECA

Caroline Makepeace

Jonathan Libber

Phillip Milton 

All: Special Litigation and Projects Division, OCE, OECA

Dan Reich, Region 9, Office of Regional Counsel

IEc (Consultants to EPA)

Gail Coad

Mark Ewen

Jane Israel

Public

Anthony Saponara 

EORM Environmental & Occupational Risk Management

Francis Keeler

Keesal Young & Logan

Diane Sinclair

Nu Star Energy

Lisa Jackson

Commissioner, New Jersey Department of Environmental Protection

Vice Chair, Environmental Council of the States 

Gary Lucks

Beyond Compliance LLC

Vice Chair, West Coast Audit Roundtable

Nicholas Targ 

Holland & Knight

David Pais

Seagate Technology

Larry Gutterridge

Hanna and Morton

Paul Stretesky

Colorado State University

Raj Basi 

The Williams Companies

Doris Reid 

Goodrich Corporation

Chris Semonsen

Kirkland & Ellis

Al Collins

Occidental Petroleum

INTRODUCTORY COMMENTS

Susan O'Keefe, Acting Director, Special Litigation and Projects
Division, Office of Civil Enforcement, Office of Enforcement and
Compliance Assurance

Ms. O'Keefe thanked the participants for coming, and provided contextual
detail on the issues up for discussion.  She noted that EPA’s
overarching goals continue to be maximizing compliance with
environmental laws and regulations, and increasing disclosures of
violations that, once corrected, will yield significant pollutant
reductions and environmental benefits.  She said that the Agency
believes that the situation of new ownership may present a unique
opportunity to facilitate environmental compliance   After purchase, new
owners are likely already assessing environmental compliance issues and
developing plans to operate their newly acquired facilities, and their
budget commitments may still be relatively flexible, with funding
available to fix problems.  EPA also believes, based on some recent
experience, that new owners may be interested in using the audit policy
to make a clean start for their operation of the recently acquired
facility.  And, importantly, EPA believes that focus on disclosures from
new owners might allow EPA to achieve significant reductions in
pollution.  EPA is interested in thoroughly exploring ways to implement
the audit policy to encourage new owners to come forward, and to allow
EPA to maximize the Agency's limited resources.  Ms. O'Keefe
specifically asked for input on how to define “new owners,” and on
the possibility of adjusting the calculation or assessment of penalties
for economic benefit.  She also requested suggestions regarding the
implementation of a pilot project, if one were developed.  Ms. O’Keefe
stressed the need for approaches that are straightforward and fair, but
could be easily and simply implemented, to help preserve limited
enforcement resources.

PARTICIPANT DISCUSSION OF OFFERING NEW OWNERS TAILORED INCENTIVES UNDER
THE AUDIT POLICY

Basis for Offering Tailored Incentives - Should EPA Offer Incentives to
New Owners, and Why?

Comments:

Offering incentives could have a potentially chilling effect on mergers
and acquisitions (M&A).  Transaction costs could be major.  Greatest
incentive to come in under the audit policy is when a company is doing
due diligence.  Parties will factor in the reaction of EPA and what
penalties will be in that process. Questioned what it means to offer
incentives, and how will sellers be penalized.  Sellers may question
whether to go forward with the deal.  Party that comes in under the
audit policy raises transaction costs - such that it becomes very
complex to work out insurance/ indemnity agreements.  

It would be "heaven on wheels" to be able to work with EPA.  Companies
would love to get to where they can work with EPA.  But they are the
concerned because they are often the seller in many instances, so
don’t want to penalize the seller.  Investment required to be
compliant is huge.  

EPA needs to have a strong enforcement program.  Have to have
credibility with public, so that the public believes and has faith in
them. All partners have to maintain that partnership through strong
enforcement to deal with non-compliance.

When companies change hands, if the previous owner was not complying
then the change in ownership may create an opportunity to bring the
company into compliance, which can benefit community around them. 
Anything to reduce pollution in communities is key versus focusing on
penalizing company that has been non-compliant.  

Creating incentives for the special opportunity created when companies
change hands is really important.  

Businesses want sites to be compliant and want a good relationship with
the community and with EPA.  Like the idea of pre-acquisition
involvement on the compliance piece.  But can’t always get into
facilities pre-acquisition and so not sure how to do that in case deal
doesn’t go through – there are confidentiality issues.   What are we
truly trying to accomplish?  If truly trying to accomplish compliance,
there may be other avenues better suited to achieve this.

What purpose would be served for EPA to require due diligence?  If
ultimate goal is to get compliance, does it matter when it was
discovered?

Anything EPA can do to open doors and make safe harbor as safe as
possible, otherwise companies will opt-out. 

Sellers will prohibit the buyers from voluntary reporting.  Unless there
is some express or implied assurance that EPA is not going back after
sellers, it will be very difficult.  

In general regulators have to make that policy balance to go after the
bad apples.  They can’t adopt policy just to get after the guy
that’s going to cheat.  You’ll lose all the good people that want to
do something.  How much risk is EPA willing to take to create new
incentives and potentially allow for some cheating? 

From the beginning, public policy always has had to balance chasing bad
guys versus getting compliance.  There are enormous transaction costs to
clean up sites.  It’s the nature of political balance.  Here the issue
is to balance how much EPA is willing to give up penalties to get
compliance.

Is EPA’s goal to get rid of pollution, or to get money in penalties? 
What does EPA want to tell the public?  If EPA wants to get new
companies to come forward and be compliant, there needs to be some give
and take.

If getting companies into compliance is the goal, don’t worry about a
few getting out of penalties.  OECA was created to focus on compliance
assurance, less focus on penalizing people, right?  Keeping the door
open as wide as possible is key.

Most people agree that there should be an incentive here.  If we all
agree on that, then we are just trying to find the place where it feels
comfortable to provide incentive to new owners – maybe it’s when is
there no economic benefit gained (i.e., when economic benefit is zero or
minimal to the new owner)?

Realities of Merger & Acquisition (M&A) Transactions Today

Comments:

Operational side of M&A – on the due diligence piece, it takes a
little bit of time to get into regulatory compliance.  (Contamination at
a site is, by contrast, much easier to nail down.  That could be done
effectively prior to purchase.)  Takes more in depth review; have not
seen this happen before the deal is made – that’s when the buyer
gets all the information.  It takes several months before you can get in
and understand what’s going on.  Need to allow a reasonable time
period to get in there.

In most M&A's involved with, have to sign confidentiality agreements –
also have SEC requirements, so the idea that anything could happen
pre-deal is hard to think about.  Companies need time after to do
baseline audit to figure out what was not revealed in the due diligence
process – they do this within 90 days.  

The amount of due diligence is very deal dependent.  Will have several
months in some cases, but for some deals no time - no due diligence. 
It’s not a matter of whether it’s an asset or stock deal.  The level
of due diligence is not specific to type of deal or size of deal. 
It’s a business judgment.  Sometimes send consultants out to do 2-3
day audits of facilities.  Many deals where you have lots of information
and identify regulatory issues they want to report, and want to get the
benefits of the audit policy.  Don’t want to give impression that most
M&A deals don’t look at regulatory compliance.  They will get an audit
done if they think it’s needed.

Can’t always get into facilities pre-acquisition and so not sure how
to do that in case deal doesn’t go – there are confidentiality
issues.   

Purchasers of assets are not subject to the audit policy anyhow.  Stock
buyers really need it – and this is 95% of the deals commenter
involved in.  This area may provide the most significant opportunity,
but EPA has to give sellers some assurance that it won’t come after
them.

The American Society for Testing and Materials (ASTM) standard is too
narrow to be helpful in this case – it is only for buyers of assets
(i.e., real estate).  Doesn’t apply to lots of deals.  It’s a mess
to apply if trying to work with stock or partnership deals.  

Generally if you don’t have constraints, deals can be as-is or no
indemnity; structure will be deal specific.   There are a range of
issues that affect indemnity agreements (i.e., how big is the deal, are
there known violations, etc.).  

Motivation for Self-Auditing and Disclosures

Comments:

Sometimes violations are identified in documents as pre-existing, the
new guy wants to report problems, information is there to be collected
and reported.

If the assumption is that company has the wherewithal to acquire another
company, then they should have resources to take a serious look at
problems.  When companies are really trying to come into compliance, the
issue is timing in terms of investments they can make.  Companies may
want to know EPA doesn’t expect them to stop operating to make
corrections, but will give them time to come into compliance. 
Agreements should include commitment to address problems on an
aggressive time schedule.  Doesn't necessarily agree with idea that
there is incentive to say, don’t blame me for other owners bad
operations. Concerned about the idea of not able to go after the bad
operator.  For example, some states have mandatory penalties and can’t
waive them.  Or a company may find out it was doing sampling wrong and
state may still penalize them for this even if coming into compliance.
States may be more interested in injunctive relief.  

The level of due diligence is not specific to type of deal or size of
deal.  It’s a business judgment.  

Companies are not reporting because they don’t want to be labeled a
violator and don’t want to pay huge penalties.  You’ve got
cross-agency liability.  If violate air law, there is local, State and
Federal liability.  EPA says no penalty, but may still have to pay State
and local penalties – so it’s a deterrent to using audit policy. 
Have to look at the full package, or not going to get compliance.  
There are a lot of state audit policies to consider, too.

(5)	EPA needs to offer buyers that, if they do pre-purchase audit, they
are eligible for consideration.  This would sell the idea to his clients
as currently his clients feel they are taking on some risk to self
audit.

Is Economic Benefit a Barrier to Self-Disclosure? Should Economic
Benefit be Negotiable?

Comments:

In a stock purchase transaction, don’t know how previous company was
operating.  May have pre-deal agreements so that you can’t talk to
agency, may only have one day to talk to people at plant (i.e., for a
refinery) and make it all happen.  What was the economic benefit?  Hard
to put a number on that.  For example, in calculating economic benefit,
EPA may assume you couldn’t have operated for three years – but
that’s not right.  

Folks want some certainty about what is the exposure when they come in. 
Need to know what factors EPA will apply.

Two types of economic benefit:  one from existing violation from
operating, also one from the sale, fact that not in compliance get less
for their sale.

Policy is probably going to drive up the price, because if buyer can
invoke policy and avoid penalty, buyer willing to pay more than it
normally would if policy not there.   If discover something in due
diligence, that would give company pause to go forward with a deal.  If
found something that quick, would want better indemnity.  But if policy
is there, makes you willing to pay more money.  Seller that is
responsible for problem gets benefit of higher price.  So, then there is
economic benefit that isn’t disgorged relative to a normal process.

If new owners voluntarily reporting violations by partners in the deals,
there will be provisions that buyer shall not report any voluntary
disclosures if they want to get the deal done.  

Audit Policy - How to Deal with Sellers?

Comments:

Offering incentives could have a potentially chilling effect on mergers
and acquisitions (M&A).  Transaction costs for the seller could
substantially increase.  Greatest incentive to come in under the audit
policy is when a company is doing due diligence.  Parties will factor in
the reaction of EPA and what penalties will be in that process.
Questioned what it means to offer incentives, and how will sellers be
penalized.  Sellers may question whether to go forward with the deal. 
Party that comes in under the audit policy raises transaction costs -
such that it becomes very complex to work out insurance/ indemnity
agreements.

New owners will be voluntarily reporting violations by partners in the
deals.  This in turn will result in provisions that buyer shall not
report any voluntary disclosures if they want to get the deal done. 
Buyers will learn that you don’t go digging or hunting if you want to
do the deal.

Sellers will prohibit the buyers from voluntary reporting.  Unless there
is some express or implied assurance that EPA is not going back after
sellers, it will be very difficult.

Generally if you don’t have constraints, deals can be as-is or no
indemnity; structure will be deal specific.   There are a range of
issues that affect indemnity agreements (i.e., how big is the deal, are
there known violations, etc.).  Maybe could specify what type of
culpability seller will be responsible for?  For example, only for
willful actions, where truly know violating a regulation? 

Policy is probably going to drive up the price, because if buyer can
invoke policy and avoid penalty, buyer willing to pay more than would if
policy not there.   Seller gets benefit of higher price.  So, then there
is economic benefit that isn’t disgorged relative to a normal process.

Determining who is a “New Owner”

In a change of stock ownership – just change of parent company –
same operators.   The old parent company becomes subsidiary and is not
in control anymore.  Really is a new company in culture and philosophy. 
That’s what EPA should want, that change in control.  For example, for
Ports or State land commissions that hold leases, the operating
subsidiary will continue to be the reporting entity, but there is a
requirement to provide notification when there is more than a 50 percent
change in control.  That definitely is a new company.

Problem is when grand-son buys company from grand-dad.  But still have
new management – whether employees or IPO.  SEC might have some rules
about new companies that could be applicable.

One indication is that a new company is willing to come forward and say
they are going to fix all of this.   

With regard to suspicions that company could spin off parts because of
problems/violations – SEC would call that fraud – would be a
problem. 

But, avoiding liability could just be a factor in why they are spinning
it off, so SEC rules are not going to be a factor.

How about having company certify/sign something says this is arm’s
length transaction not done for the purpose of avoiding penalties.  It
must be both a change in management and control.  Is this setting bar
too low?  If you have an IPO or employee buy-out, you still need to have
new culture and new management.

Determination of New Ownership – Timing 

Comments:

Timing is critical.  If wait until new owner, it’s too late, need to
get in before deal is made.

Give people options – current audit policy only gives 21 days from
closing.

Give longer time for reporting post-acquisition.  Also don’t want to
eliminate option to do pre-closing reporting.   What kind of time
period?  A range – something reasonable, could be a year depends on
size of deal – also at that time trying to integrate systems.  

Flexibility is the key.  If you’ve got time or insist on the time can
do soup to nuts audit.  Bigger the deal, the less likely there will be
audits.  Once deal is above 10 to 20 billion dollars, not doing audits.

On the due diligence piece, it takes a little bit of time to get into
regulatory compliance.  Takes more in depth review; hasn’t seen this
happen before the deal is made – that’s when the buyer gets all the
information.  It takes several months before you can get in and
understand what’s going on.  Need to allow a reasonable time period to
get in there.  (Contamination at a site is, by contrast, much easier to
nail down.  That could be done effectively prior to purchase.)  

In most M&A you have to sign confidentiality agreements – also have
SEC requirements, so the idea that anything could happen pre-deal is
hard to think about.  Companies need time after to do baseline audit to
figure out what was not revealed in due diligence process – they do
this within 90 days.  Don’t see how to choose specific timeframe.  For
example, with a small facility may know what to look for, or if it’s a
large company operating in many different areas, use discretion based on
complexity and size of deal.

Hard to imagine that time should be more than a year because of
reporting cycles, etc.  Hard to defend it much further than that.  But
if EPA exercises good discretion more time may be warranted in some
cases.

Likes idea of pre-acquisition involvement on the compliance piece.  But
can’t always get into facilities pre-acquisition and so not sure how
to do that in case deal doesn’t go – there are confidentiality
issues.   

Commenter’s company tries to get to new facilities within 3-6 months. 
They designed a management wide system designed on how they do business
as an organization because they ran into problems.  For example, some
sites were ISO 14000 compliant, but not in compliance.  The audit took
place, and the problems were clearly identified.  But there was no
management system in place to ensure that the problems were addressed. 
When the follow-up audit was done several years later, many of the same
problems were noted.

If new owner, should get benefits regardless of whether did it before,
during or after the deal.  Shouldn’t matter as long as you do it.

A year makes commenter uncomfortable but clean slate issue is a problem
in general because maybe not have a clean slate with states, maybe only
with EPA.    

With regard to timeframe, can’t put a number on it - it varies with
transaction and assets obtained.  For example, if buy several facilities
and to audit each can take a long time.  Versus if buy small facility
and previous owner hid non-compliance, may take a while to find out what
they actually were doing.

Important to put some time period – or else need some clarity from EPA
about what is considered.  Need some degree of certainty that when they
raise hand not identifying self as next likely target.

EPA will just have to pick a time (i.e., when audit policy first came
out it was 10 days from closing, changed to 21 days).  There is a
limited window of opportunity to convince a client to undertake
voluntary audit under the audit policy.  

Design of Potential Incentives - What Should New Owners Get?

Comments:

If looking for incentives, if buyer, will focus energy on integrating to
proactively ensure compliance.  Explore SEP policy, emphasize compliance
management – if I’m buyer want reward, have some penalty money go
into building compliance – putting tools in place.

But we’re trying to get penalties waived here!

Few companies actually do have good environmental management systems –
laws are piecemeal, companies do not often have this in place,
definitely not across the board.  EPA could put resources into managing
compliance – providing incentives to install compliance management
systems.  Companies may have great audit programs, but don’t have a
solid program to respond to the findings of the audits (e.g., may have
separate divisions dealing with each).  Find same thing year after year.
 

Like the idea of pre-acquisition incentives.

There is a limited window of opportunity to convince a client to
undertake voluntary audit under the audit policy.  Now doing ASTM Phase
1 reviews for all sites.  Can see as part of package, they could do
Phase 1 and a compliance review of key facilities.  Then, with that
package could be that presume safe from CERCLA liability and safe from
penalties.

EPA says no penalty, but still have to pay state and local – so it’s
a deterrent to using the audit policy.  Have to look at the full
package, or not going to get compliance.  There are a lot of state audit
policies too.

Measurement of Success 

Comments:

Suggest the following measures:

Changes in capital costs (i.e., physical plant pollution equipment) –
is more being spent?

Changes in pollution output – emissions went down or up?

Changes in due diligence (EPA wants to ensure it doesn’t go down) –
but this would be hard to measure – would require qualitative survey.

Changes in enforcement cases or costs (EPA costs go down, companies’
costs for inspections go down)

Could look at representative types of test cases – then can explore
and check quantitative data later.  Can look at California for a model
for test cases – CA passed a law like performance track programs and
looked at eight case studies.  Interviewed EHS managers, more of a
qualitative look, then developed lessons learned.  Would need to think
about what are the representative categories to use.

For pilot program, may want to consider how going to evaluate success in
design of program.  For example, what information on pollution
reductions will be used?  TRI reporting only comes out periodically, so
if trying to assess efficacy of pilot – might not know in the first
few years because data not available.  If have to throw something out
for pilot program timeframe, would suggest 3 years.

CONCLUDING REMARKS

Susan O'Keefe, Acting Director, SPLD, OECA-OCE 

Ms. O’Keefe thanked the participants for attending and providing very
useful information.  She further encouraged the participants to submit
formal written comments during the public comment period which runs
through July 13.

Enhancing Environmental Outcomes from Audit Policy Disclosures

Through Tailored Incentives for New Owners:

Working Session Questions

Basis for Offering Tailored Incentives – Should EPA Offer Incentives
to New Owners, and Why?

Motivation of Self-Auditing and Disclosures

Do the circumstances of new ownership warrant special consideration or
handling, if the new owner was not responsible for creating a violation,
is willing to promptly address that violation and make changes to ensure
the facility stays in compliance in the future, and significant
environmental benefit could result?

Or, does the Audit Policy as currently implemented already offer
sufficient incentives to induce new owners to undertake self-audits and
disclosures?   

Realities of M&A Transactions Today

To what extent do pre-acquisition due diligence reviews reveal
environmental noncompliance (as opposed to environmental contamination
and remedial liability), and to what extent are these liabilities
reflected in purchase price?

If a selling firm has indemnified the purchaser for violations which are
ultimately disclosed by the new owner, are tailored incentives to
self-report needed at all? 

What are the potential effects on environmental compliance and on due
diligence reviews that might result from offering tailored incentives
for new owners?

Eligibility Requirements for a Pilot Program Offering Tailored
Incentives – What Does a “New Owner” Have to Be and Do to Get
Incentives?

Aspects of the Transaction which Might Affect Eligibility or the
Structure of a Program.

Would it be appropriate to require that new owners have performed a
certain level of pre-acquisition due diligence to qualify for tailored
incentives, and if so, what that level should be?  

Should any tailored incentives take into account the extent to which
environmental noncompliance liabilities (as distinguished from
environmental remediation liabilities) are reflected in purchase price
and, if so, how?

Given the Agency’s interest in encouraging appropriate accountability
and buyer/seller agreements on environmental compliance issues, should
the existence or terms of an indemnification agreement have any bearing
on a new owner’s eligibility for tailored incentives and, if so, how? 
 

Determination of New Ownership

Authenticity of New Ownership 

Since the Agency is concerned about using its enforcement resources to
delve into complex corporate structures and histories to make
determinations about the authenticity of new ownership in the context of
such Audit Policy self-disclosures -- what would be a clear,
straightforward and easily administered approach to determining if a
“new owner” is bona-fide?

What should a company need to provide to demonstrate to the Agency that
it is a bona-fide “new owner?” 

What should the standard be, to demonstrate “new ownership” in this
context?

Should the Agency require each company to self-certify to the government
that it is indeed a bona-fide new owner, and eligible for tailored
incentives?  

If a self-certification is appropriate in this situation, what should it
contain?

Should other proof be offered along with the self-certification?  

Timing of New Ownership

How long after an acquisition should an owner still be considered
“new,” for the purpose of being offered tailored incentives? 

What would be a clear, straightforward and easily administered approach
to determining whether an owner is “new” enough to be eligible for
tailored incentives?

Context of New Ownership

How should the Agency treat different acquisition transactions?

Should the Agency make any distinctions between acquisitions and
mergers?

How should EPA handle disclosures by reorganized companies that emerge
from Chapter 11 bankruptcy?  

Should companies in which the controlling interest is purchased by a new
firm with no plans to participate in management or operations be
eligible for any tailored incentives?  

How should the Agency treat companies that are purchased by their
employees, who were employed by the company when noncompliance began?

Other Concerns

Should the Agency consider other eligibility criteria or participation
requirements if a program to offer tailored incentives is developed?  

Design of Potential Incentives - What Should New Owners Get?

Reducing Penalties for Economic Benefit

Calculation of Economic Benefit

When should the clock start running when calculating economic benefit?

From the date the facility was acquired?

From the date the post-acquisition audit was completed?  

How long is reasonable for new owner to complete the audit? 

From the date of any delays beyond the reasonable period the owner is
given to put on controls, particularly where those controls are complex?

Should the economic benefit calculation take into account whether and
the extent to which the seller has indemnified the buyer and, if so,
how?

In calculating economic benefit, should the Agency allow the new owner
to offset the cost of the audit?

What is a fair, objective and efficient way of establishing the cost of
the audit (especially when an audit has been performed by the company
itself)?

Audit Policy consideration of violations which would otherwise be
ineligible. (Certain violations are not eligible for penalty mitigation
because their discovery is already legally required, and thus not
“voluntary,” as the Audit Policy requires.)

Since EPA wants to encourage new owners to examine compliance and
operations at their newly-acquired facilities, correct violations and
upgrade deficient equipment and practices, the Agency has allowed Audit
Policy consideration for new owners that disclose Clean Air Act Title V
violations before the first required annual certification at the new
facility, or that discover (and subsequently disclose) such violations
as part of a compliance exam the new owners agree to undertake before
the first certification is due.  Are there other similar categories of
violations disclosed by new owners that should be eligible for Audit
Policy consideration? 

For example, should new owners that in good faith undertake a RMP
triennial Audit and inform the Agency of violations, which existed prior
to acquisition and are discovered through the audit, be eligible for
Audit Policy consideration?  

Recognition from the Agency of new owners who self-audit and disclose
under the Audit Policy.

Would positive recognition by the Agency, commending a new owner’s
willingness to voluntarily audit and disclose, encourage a company to
undertake such actions?

What sort of recognition, if any, would be most desirable?

d)  Are there other incentives that make sense to consider offering?

Measurement of Success – How Do We Tell if it has been a Good or Bad
Idea?

If the main goal of any program is to increase compliance with
environmental laws and regulations and attain significant environmental
benefit and pollutant reductions, what measures of success should the
Agency adopt for the evaluation of a pilot program?

Should we consider outcomes besides: 

the number of disclosures made under the pilot program, 

the significance of the violations involved, 

the significance of the pollutant reductions that can be attributed to
or associated with these disclosures?

Should we consider implementation issues besides:

transparency of the program, 

efficiency in administration,

low transaction costs and resource savings?

.    

d)   What methodologies should we use to accurately measure these
outcomes?

 Incentives for Self-Policing: Discovery, Disclosure, Correction and
Prevention of Violations, 65 Fed. Reg. 19618 (April 11, 2000), commonly
referred to as the “Audit Policy.”

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