Written by Christopher Clare and Patrick Larkin, Clark Hill PLC
On April 2, 2020, the US EPA issued a letter to each member of Congress that makes our point that published Enforcement Discretion policies may require case-specific demonstrations of Force Majeure.
Greater certainty may be obtained under self-disclosure and penalty immunity policies.
On April 10, the US EPA also issued “Interim Guidance on Site Field Work Decisions Due to Impacts of COVID-19.” As in its March 26th Enforcement Discretion Guidance, EPA affirms that it will require actual evidence of “impracticability” to excuse or mitigate non-compliance with remedial activity obligations.
Act now – assume there will be gaps in compliance programs.
The COVID-19 pandemic will have (hopefully) once-in-a-lifetime impacts on all of us, including unavoidable and widespread non-compliance with regulatory obligations and deadlines. To help manage enforcement liability, the U.S. EPA and numerous state counterparts have issued new enforcement discretion guidance, and are emphasizing existing penalty relief mechanisms. To qualify for discretionary penalty mitigation, Environmental Health and Safety executives should actively participate in their companies’ resource-triage decisions, and take steps now to ensure self-audit penalty immunity. These steps include:
Take short term actions that, above all, prioritize the physical security of human health and environmental receptors (HH/E).
- As Hurricane Alley companies (and their EHS managers) have learned, in weeks and months after the disaster, governments will use 20/20 hindsight and expect environmentally significant operations to have prioritized human health and the environment.
- Where actual harm to HH/E occurs and arguably arises from a resource allocation decision, State and federal agencies may have limited discretion and less inclination to mitigate maximum statutory penalties (and equally existential economic consequences).
- When making decisions on how to prioritize limited company resources, EHS managers may present their claim to company resources in terms of preserving reputations and avoiding criminal sanctions and/or catastrophic civil liability.
Take the required steps to qualify for state and federal enforcement discretion guidance.
- These guidance documents recognize that the numerous executive orders restricting travel and calling on citizens to shelter in place will make compliance and agency interactions difficult and tenuous. These documents have thus far focused on: (1) force majeure recognition and self-documentation; and (2) online “registration” of force majeure events.
- Many permits, consent orders, and remediation agreements contain so-called “Act of God” or force majeure provisions that arguably excuse or defer actual or timely performance of these legal obligations.
- Establishing the criteria for force majeure typically requires a nuanced demonstration of the elements of eligibility, including:
- Near-immediate notice of intent to assert force majeure;
- Demonstration that nonperformance was unavoidable, cause unforeseeable; and
- Extremely rigorous, arguably unreasonable, levels of mitigation efforts.
Key provisions to look for in enforcement discretion guidance documents include:
- Specific eligibility criteria for force majeure / enforcement discretion.
- Waivers/penalty mitigation likely will be subject to a case-by-case analysis.
- Companies will need to “make their case” for relief.
- Documentation of direct causal connection between COVID-19 pandemic and impacts on the company will likely be necessary.
- It is unclear if rigorous force majeure demonstrations will be required. (e.g. non-foreseeability) by most agencies.
- Violations which could have “practicably” been prevented are likely ineligible.
- Intentional criminal acts will be ineligible (“knowing but unavoidable” are likely eligible).
- Discretion policies will likely not apply to non-compliance with cleanup/enforcement orders.
- Orders are quasi-contractual and often include force majeure terms.
- For rule-based obligations, the agency may need additional authority to use force majeure defenses to waive enforcement.
- Most importantly, these exclusions emphasize that EPA guidance provides only a first step:
- Guidance is an invitation to apply force majeure concepts to rule obligations.
- No blanket immunity is provided.
- EPA’s enforcement discretion guidance can be found here. Examples of state agencies with similar guidance include Texas, Pennsylvania, Michigan, and California.
- State enforcement discretion policies may provide broader waivers of state-specific regulatory requirements and state enforcement of federally delegated programs.
- When requesting relief from a solely-federal requirement (e.g., EPCRA Tier II, SPCC or Toxic Release Inventory reporting), the EPA’s guidance should be used.
- Several states’ guidance emphasizes self-reporting and appears to set a lower bar to secure enforcement discretion, e.g., Texas, linked above, and Ohio.
Do not assume these defenses will apply, or be applied consistently, in the future.
- Many eligibility decisions will not be made until 2021 or later and may be made by agency management from a new Administration or revised post-pandemic roster.
- It may be prudent to view agency enforcement discretion guidance as offers to apply force majeure principles if/when you can show it is appropriate.
- Optimistically, a company may consider the guidance as an acknowledgment that one or more of the force majeure elements are generally satisfied.
- Guidance seems to imply that “un-foreseeability” elements of force majeure are satisfied.
- The (next) most difficult prerequisite to satisfy is likely to be the adequacy of mitigation efforts.
Use Self-Audit/Self-disclosure Policies to seek full immunity or minimized enforcement responses.
- A company’s chance to enforce discretion is greatly enhanced by invoking agency authority to grant penalty immunity: self-audit and self-disclosure programs.
- Prerequisites and protocols for audit-based immunity vary across agencies, but can generally be optimized by planning and for some, pre-negotiation of terms with the agency.
- Negotiating a pre-planned audit/disclosure can provide flexibility in the satisfaction of penalty immunity deadlines and criteria. Moreover, the EPA and state agencies are likely to show audit agreement flexibility while the pandemic continues.
- More information concerning EPA’s self-audit program can be found here.
- Many states have similar audit/disclosure programs, but eligibility nuances and “trap-doors” require careful attention to detail. See Texas, Pennsylvania, California, and Michigan.
About the Authors
Christopher B. Clare is a Senior Attorney in the Environment, Energy & Natural Resources group in Clark Hill’s Washington, DC office. Chris concentrates his practice on environmental litigation, regulatory compliance matters and business transactions involving environmental issues.
Pat Larkin practices exclusively in environmental law, including regulatory compliance, litigation, administrative law, and environmental counseling in business transactions. Pat regularly represents industrial, transportation, real estate and retail clients in air, water and waste permitting, compliance counseling and audits, voluntary site cleanups, government enforcement actions, and in agency rulemaking and associated stakeholder and guidance writing work groups.