On December 9, 2015, the U.S. Environmental Protection Agency (EPA) published a Federal Register Notice announcing the launch of the eDisclosure portal, a centralized web-based system for receiving and automatically processing self-disclosed civil violations.  The portal is intended to receive and respond to disclosures made under two of EPA’s existing policies: (1) the Audit Policy titled “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations” (65 FR 19618, April 11, 2000), and (2) the Small Business Compliance Policy (65 FR 19630, April 11, 2000).  EPA is not modifying the substantive conditions under either of these policies; instead, by setting up the eDisclosure portal, EPA intends to allow members of the regulated community to disclose violations more easily and EPA to process disclosures more efficiently.

EPA’s Audit Policy provides incentives for regulated entities that self-disclose environmental violations in accordance with the terms of the Policy.  In general, if all Audit Policy conditions are met, EPA will not refer the matter for criminal prosecution and will waive gravity-based penalties, which are based on the seriousness of the violation and represent the punitive component of a civil penalty.  EPA retains discretion, however, to collect any economic benefit that may have been realized because of the noncompliance.  To be eligible for penalty mitigation, an entity must satisfy various Audit Policy conditions.  The Audit Policy establishes a total of nine conditions.  Among other things, the entity must discover the violation through a voluntary, independent, and systemically conducted audit, disclose the violation within 21 days of discovery, and correct it within 60 days of discovery.  The entity must also cooperate with EPA and take measures to prevent the violation from recurring. The Audit Policy excludes violations that have been repeated at the same facility in the past three years or at multiple facilities owned or operated by the same entity in the past five years.  Entities that do not meet the first condition—systematic discovery—but meet the other eight conditions are eligible for 75% mitigation of any gravity-based civil penalty.  The Small Business Compliance Policy provides similar incentives.

Entities that wish to disclose a potential violation through the eDisclosure portal must follow a three-step process.  First, the entity must register with EPA’s Central Data Exchange system. Second, the entity must disclose the violation online.  Third, the entity must submit a Compliance Certification in the eDisclosure system, certifying that any noncompliance was timely corrected.  The eDisclosure system is not designed to manage Confidential Business Information (CBI).  As a result, any disclosure containing CBI must be sanitized before it is submitted to the portal, and any CBI must be submitted according to EPA procedures and requirements set forth in 40 C.F.R. Part 2.  According to EPA’s eDisclosure Information Sheet, consultants, attorneys, or other agents may disclose violations through the eDisclosure portal on behalf of a regulated entity.

The eDisclosure system will accept two categories of self-disclosures —“Category 1” and “Category 2” disclosures.  Category 1 disclosures include Emergency Planning and Community Right-to-Know Act (EPCRA) violations that meet all Audit Policy or Small Business Compliance Policy conditions but do not include chemical-release reporting violations under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) section 103 or EPCRA section 304, or EPCRA violations that resulted in significant economic benefit as defined by EPA.  Category 1 disclosures will be immediately resolved with no civil penalties assessed, conditioned upon the accuracy and completeness of disclosure.  EPA will “spot check” these types of disclosures.  Category 1 disclosures will receive especially favorable treatment because (1) EPA has experience providing Notice of Determinations for EPCRA violations; (2) EPA can easily confirm compliance with EPCRA; and (3) the regulated community suggested that EPCRA violations are well-suited for this streamlined approach.

EPA will also allow regulated entities to submit to the eDisclosure portal “Category 2” disclosures.  These disclosures include (1) all non-EPCRA violations; (2) EPCRA violations with respect to which the regulated entity cannot meet the Audit Policy’s “systematic discovery” condition but can meet its other conditions; and (3) EPCRA/CERCLA violations excluded from Category 1.  EPA will “screen” Category 2 disclosures for significant concerns (e.g., criminal conduct or potential imminent hazards).  For Category 2 disclosures, the eDisclosure portal will issue an electronic Acknowledgement Letter automatically, confirming that EPA has received the disclosure and stating that EPA will make a determination about penalty mitigation eligibility if and when EPA considers taking an enforcement action for the environmental violation(s) at issue.

In announcing the launch of the eDisclosure portal, EPA stated that it continues to believe strongly in the benefits of its self-disclosure policies.  Among other implementation details, EPA stated that the eDisclosure portal also includes a process for handling requests for extensions of deadlines imposed by EPA’s self-disclosure policies.  EPA also made clear that (1) criminal violation will continue to be handled by the Voluntary Disclosure Board, outside of the eDisclosure system and (2) EPA is not changing its approach to resolving New Owner disclosures as outlined in the New Owner Policy (73 Fed. Reg. 44991, Aug. 1, 2008).