New EPA policy would offer alternative to penalties for some oil, gas polluters

The Environmental Protection Agency’s (EPA) office of enforcement will soon unveil a new finalized audit policy that will offer significant new penalty reductions for the oil and gas industry, according to two internal memos obtained by The Hill.

The New Owner Clean Air Act Audit Program, tailored specifically for oil and natural gas producers, will focus on offering more flexibility to new company owners who choose to self-audit their emissions and report any failures to meet EPA’s regulations, according to the December draft memos for the new policy.

The policy originally was slated to be rolled out in late December but was delayed due to the partial government shutdown, according to an EPA source with knowledge.

“Policy finalization has been delayed; we can provide more details when we have a final policy to announce,” an  EPA spokesperson said of the rule.

The flexibilities include giving new owners of oil and gas companies nine months since the company is acquired to come forward to the EPA and announce any emissions issues they believe may exist. That’s an increase from the six months the agency first proposed in its original draft template of the rule.

Companies would also be given 180 days from the date of discovery to correct the emissions issue. The previous draft gave companies 60 days.

The policy proposal was first reported by The Hill and unveiled last April. 

The changes come after EPA’s Office of Enforcement and Compliance Assurance (OECA) received feedback from oil and gas industry players who thought the previous timeline was too burdensome.

“People in industry were concerned that the corrections were too onerous for them and asked, ‘Why would we sign up for this? You are asking for us to do more than the law requires,’ ” said the EPA source, referring to the Clean Air Act. “And the answer is, you get more generous protection, you get more time, because we recognize some of these facilities need it.”

The new policy will also allow for 100-percent penalty mitigation for any company that opts into the audit. That could mean millions of dollars in savings for noncompliant companies that, if caught not meeting EPA standards outside an audit, could face steep fines.

The idea of the program is to increase polluter compliance on the front end. The expectation is that companies will choose to self-audit and fix their problems rather than wait for EPA to conduct its own investigation, which could lead to a costly and lengthy legal battle.

In one draft memo addressing “implementation considerations,” EPA’s enforcement office promised that oil and gas companies who choose to enter in the program will be offered “penalty reductions beyond those provided” in EPA’s general audit policy for all categories of polluters.

Another draft memorandum issued from head of OECA Susan Bodine, with the subject “Oil and Natural Gas Exploration and Production Facilities New Owner Audit Program Finalization,” explains that the new policy is meant to “reduce transaction costs and improve efficiencies for the EPA and participating New Owners.”

“The EPA expects that this voluntary program will be environmentally protective and efficient while providing certainty in the upstream oil and natural gas exploration and production sector based on the EPA’s analyses of the sector’s operations,” Bodine wrote.

“New Owners have a unique opportunity to focus on, and invest in, making a clean start at newly acquired upstream oil and natural gas exploration and production facilities by proactively addressing Clean Air Act compliance issues. Most importantly, this Program provides an opportunity to achieve timely and cost-effective public health and environmental protections, and Clean Air Act compliance.”

Since 1995, the EPA has offered incentives to industries who choose to self-audit their potential pollution. Under the policy, called “Incentives for SelfPolicing: Discovery, Disclosure, Correction and Prevention of Violations,” companies that find they are breaking the law and report it to EPA promptly, and then fix the problem, will get certain fee exemptions. Another policy from 2008 offers exemptions to owners who buy any type of company or plant and find during an audit that the previous owners were not in compliance with environmental regulations.

One area the new program will specifically focus on is jumpstarting more compliance in tank vapor control systems at upstream oil and natural gas exploration production systems, of which the agency has seen an uptick in noncompliance.

The program goes hand in hand with the Trump administration’s push to entice emitters to comply with environmental regulations outside of the legal system. Since Trump took over, the number of polluters fined by the EPA and the settlement amount entered into has plummeted. EPA’s inspector general and the Government Accountability Office are both investigating the drop.

It’s anticipated that EPA’s 2018 numbers will be even lower.

A letter Bodine wrote to staff in early February highlighted the EPA’s new approach to polluters.

“Some outside entities that are unfamiliar with the true nature of our work here in OECA and have tried to measure the worth of what you do simply through the dollar amount of federal penalties and the number of federal case initiations,” Bodine wrote in the office-wide email, reviewed by The Hill.

“However it is also important for EPA to help and, if necessary, persuade states to take actions to address violations and informal actions can bring about a return to compliance more quickly.”

This story was updated 4:40 p.m.