The United States Environmental Protection Agency (EPA) has long conducted inspections to assess the efficacy of companies’ environmental compliance programs. However, under the EPA’s Climate Enforcement and Compliance Strategy announced late last year, the EPA is now taking an even more aggressive approach to holding companies accountable for non-compliance. EPA inspection numbers are on the rise; and, while the EPA may be prioritizing climate-related concerns, all environmental compliance failures present risks for either civil or criminal enforcement.
As the EPA recently explained, it “dramatically increased its enforcement and compliance resources during 2023, after a decade of budget cuts reduced EPA enforcement by approximately 950 positions and hampered EPA’s ability to protect communities from the harmful effects of pollution.” This includes hiring hundreds of “inspectors, attorneys, and technical staff . . . [who will] increase [the EPA’s] enforcement and compliance presence throughout the United States.” Thus, for companies that are subject to the EPA’s oversight, compliance monitoring is more important now than ever—as the EPA is both conducting more inspections and facility inspections than it has in the past and taking more aggressive action in response to environmental violations uncovered during the inspection process.
“EPA inspections can present substantial risks for companies of all sizes. With the EPA enhancing its enforcement resources in 2023 and 2024, these inspections are becoming increasingly common, and companies that aren’t prepared are increasingly facing substantial penalties.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
Along with announcing its efforts to bolster its enforcement and compliance resources, the EPA also highlighted some of its “enforcement and compliance accomplishments” during fiscal year (FY) 2023. These include:
- Concluding 1,791 civil settlements in FY 2023—an increase of nearly 10 percent compared to FY 2022.
- Opening 199 criminal cases in FY 2023—an increase of approximately 70 percent compared to FY 2022.
- Securing approximately $1.1 billion in Superfund cleanup and cost recovery settlements and collections.
- Training more than 200 personnel from other federal agencies who assist with identifying environmental compliance violations.
- Conducting more than 60% of on-site inspections at facilities affecting communities with potential environmental justice concerns.
Clearly, the EPA is prioritizing enforcement, with particular emphasis on environmental justice (which the EPA defines as preventing, “disproportionate and adverse human health and environmental effects . . . and hazards, including those related to climate change,” and ensuring that all people “have equitable access to a healthy, sustainable, and resilient environment in which to live, play, work, learn, grow, worship, and engage in cultural and subsistence practices”). What does this mean for companies that are facing (or that may be at risk of facing) EPA inspections? Here are some tips for success and mistakes to avoid:
Tips for Avoiding Penalties and Other Adverse Consequences During an EPA Inspection
Tip #1: Locate All Relevant Environmental Compliance Documentation
The EPA will typically request access to numerous forms of documentation during the inspection process. Being prepared to provide this documentation upon request can help to both maximize the efficiency of the audit process and avoid raising any concerns about the sufficiency of the company’s EPA compliance program.
This document review, of course, will be in addition to the EPA’s inspection of the company’s facilities themselves. Thus, beyond simply locating all relevant environmental compliance documentation, companies facing inspections should also review this documentation themselves to identify any potential compliance-related concerns (including any insufficiencies in the documentation itself). When facing an EPA inspection, knowing what risks (if any) the company will face during the process is critical to formulating an informed and effective defense strategy.
Tip #2: Proactively Engage with the EPA’s Inspectors and Technical Staff
Companies should seek to proactively engage with the EPA’s auditors and technical staff throughout the inspection process. Opening effective lines of communication can help to prevent unnecessary confusion, and it can ultimately help steer an inspection toward an efficient and favorable result. To ensure that all messages get delivered clearly and accurately to the intended recipients on both sides, companies should appoint a liaison (typically their outside EPA compliance counsel) to manage their communications for the duration of the inspection.
Tip #3: Do Not Make Any Assumptions
Assumptions can prove very costly during an EPA inspection. This includes both assumptions about the company’s compliance record and assumptions about the accuracy of inspectors and technical personnel’s findings. During an EPA inspection, informed decision-making is key. When deciding how to address potential environmental violations during the inspection process, companies need to have a clear and accurate understanding of both the relevant facts and the relevant law. This means working with experienced EPA compliance counsel who can oversee the process and evaluate any potential concerns before they lead to unnecessary problems with the EPA.
Tip #4: Work with (Rather than Against) the EPA to Resolve Any Environmental Compliance Concerns
When environmental compliance concerns arise during an EPA inspection, it is often best to work with (rather than against) the EPA to achieve a favorable resolution. While it won’t always be possible to come to terms with the EPA, in the vast majority of circumstances, it will be in both the company’s and the EPA’s best interests to find a solution that facilitates compliance without wasting corporate or taxpayer dollars. When seeking to work with the EPA to avoid enforcement, the key is to understand the EPA’s priorities and concerns—and then to focus on addressing these priorities and concerns as efficiently as possible.
Tip #5: Rely on EPA Audit Policy Compliance (as Warranted)
Most companies that are subject to the EPA’s inspection authority will have compliance programs in place that implement the EPA’s Audit Policy. The EPA strongly encourages implementation of its Audit Policy, and it provides benefits (in the form of penalty relief and mitigation) to companies that use systematic audits to proactively identify and resolve any environmental compliance violations.
With this in mind, demonstrating compliance with the EPA’s Audit Policy can be an effective defense strategy during many inspections. If a company can affirmatively demonstrate its use of the relevant Audit Protocols, this can go a long way toward convincing inspectors and technical personnel that enforcement action is not warranted.
Common Mistakes to Avoid During an EPA Inspection
Mistake #1: Taking a Back Seat During the EPA’s Inspection
As we mentioned above, it is important to take a proactive approach to working with EPA inspectors and technical personnel during the inspection process. When companies take a back seat during their inspections, they can end up facing consequences that they could—and should—have avoided. This includes avoidable consequences both due to misinterpretations of the relevant facts and the relevant law and due to missing opportunities to negotiate a more favorable resolution.
Mistake #2: Attempting to Obfuscate Environmental Compliance Failures
While companies need to take a proactive approach to protecting themselves during EPA inspections, this does not mean attempting to obfuscate environmental compliance failures. Not only are these attempts likely to be ineffective, but they are also likely to do more harm than good.
Companies have an obligation to voluntarily disclose environmental violations in many cases, and voluntary disclosure is one of the eligibility criteria for penalty mitigation under the EPA’s Audit Policy. If inspectors or technical personnel discover attempts to cover up or conceal information about a violation during an inspection, this will present a high risk for enforcement—and it will also raise red flags that are likely to enhance the scope and seriousness of the EPA’s inquiry.
Mistake #3: Disputing Accurate Findings of Non-Compliance
While companies can—and should—dispute inaccurate findings during EPA inspections, they should not dispute accurate findings of non-compliance. Not only are such disputes unlikely to lead to a reversal of the EPA’s findings, but they are also unlikely to assuage any concerns about the company’s understanding of (and ability to effectively address) its environmental compliance obligations. To determine which findings to dispute, companies will need to work with experienced outside counsel who can independently evaluate the EPA’s interpretation of the facts and application of the law.
Mistake #4: Giving the EPA More Access Than Is Required
While companies must give the EPA substantial access to their records, facilities, and personnel when they request information during the inspection process, companies should be careful to avoid granting more access than is required. There are generally no benefits to doing so, and being overly cooperative in this regard will only serve to add to the costs and risks involved in the inspection process.
Mistake #5: Failing to Document Issues Arising During the EPA Inspection Process
Finally, when going through EPA inspections, companies should work with their counsel to carefully document any issues that arise with the inspection itself. These may include issues such as inaccurate findings and exceeding the EPA’s inspection authority, among others. In the event that the company needs to dispute the EPA’s findings or defend against a civil or criminal enforcement proceeding, having this documentation on hand will be essential for preserving all of the options that are available for seeking a fair resolution.
