Since 2000, US EPA has offered reduced enforcement for self-disclosure of environmental compliance violations. EPA’s policy document, “Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations” is commonly known as the “Audit Policy”. On August 1, 2008, the EPA published an interim approach to applying the Audit Policy to new owners that allows new owners to make a fresh start with the EPA. With the interim approach, the EPA recognizes that a new owner should not be penalized for the economic benefit component relating to violations that arose before a facility was under its control, as long as the new owner is willing to correct issues promptly and institute preventive measures.
Some key elements of the interim approach include:
- Defining a “new owner” to ensure that the violations disclosed originated with the prior owner, and that the new owner was not responsible for the non-compliance disclosed;
- Extending the time for reporting for up to nine months after closing the transaction;
- Relief from the economic benefit component of the penalty for new owners; and
- Applying five of the nine qualifying conditions differently to the new owner.
One of the important aspects of this policy is that non-compliance at the Seller’s facility can be reported to regulatory agencies before or soon after property transfer. In making the disclosure, the new owner can make the previous owner responsible for penalties, etc., especially associated with economic benefit component, related to the non-compliance. This stetches out the liabilities that could be assumed by the previous owner, and makes it more important to assure that facilities are in "material compliance" with applicable regulations.