- Colorado enacted the Environmental Audit Privilege and Voluntary Disclosure Act in 1994, one of 21 states to do so. Audit laws facilitate self-enforcement by encouraging regulated companies to investigate their own operations and proactively correct any discovered violations.
- Colorados audit law differs from federal policy in that it provides privilege and immunity for audit reports so long as any discovered violations are disclosed and corrected. The federal EPA and Department of Justice, on the other hand, insist on retaining the right to use audit reports in subsequent legal actions, a factor that discourages many firms from undertaking audits in the first place.
- The EPA has engaged in an intimidation campaign against Colorado and other states with audit laws. None of the EPA charges stand up to scrutiny:
- Colorados legal protections only apply for violations that are disclosed to the appropriate authorities and promptly and permanently remedied;
- There are exceptions for serious, life-threatening, or deliberate violations;
- The audit privilege extends only to voluntarily undertaken audit reports, and not to any other information required by law.
- Environmental audits shift the focus away from Washington, D.C., and replace red tape and litigation with a streamlined, cooperative and results-oriented approach.
- The federal bureaucracys opposition to state audit laws has sparked Congressional interest in creating federally-binding protections for audits.
Environmental regulation has experienced tremendous growth in the last quarter century. Much of this growth has occurred at the federal level, resulting in a heavily centralized, command-and-control bureaucracy overseeing virtually all aspects of environmental protection, including enforcement. State and local governments are a significant part of the enforcement scheme, but under strict federal oversight. This approach to achieving compliance has several limitations, and is beginning to show signs of obsolescence. The current system is inflexible, inefficient, costly, unduly adversarial, and does not maximize environmental protection.
These failings are widely acknowledged. In the 1995 report Reinventing Environmental Regulation, the Clinton Administration concedes the “limitations of command-and-control regulation.” According to the report, “the adversarial approach that has often characterized our environmental system precludes opportunities for creative solutions that a more collaborative system might encourage.” It acknowledges that “Washington, D.C. is not the source of all the answers” and endorses “shifting more authority and responsibility from the Federal government to states, tribes and local communities.” Similarly, in an April 1995 report to Congress, the National Academy of Public Administration said that “[t]o continue to make environmental progress, the nation will have to develop a more rational, less costly strategy for protecting the environment, one that achieves its goals more efficiently, using more creativity and less bureaucracy.” Despite this consensus, the federal government has proven resistant to new ideas for improving environmental compliance. Current reform efforts, including the EPAs Common Sense Initiative, Project XL, and others, have been extremely limited, due in part to the EPAs unwillingness to change its treatment of the regulated community or its relationship with state and local governments. The largely inconsequential nature of these reforms exemplifies how ossified the environmental enforcement bureaucracy has become.
While there is little real initiative at the federal level, creative improvements have come from the states. One example is environmental audits. Without any encouragement from Washington, almost every state legislature has either passed or considered an audit bill since 1993.
Colorado enacted its audit law in 1994, one of twenty-one states to do so. These laws facilitate self-enforcement by removing disincentives for regulated entities to investigate their own operations and proactively correct any discovered violations. According to their proponents, environmental audits could harken a shift away from punitive command-and-control regimes toward outcome-based policies. However, audit laws have been actively opposed by the federal environmental bureaucracy, to the detriment of policy innovation and environmental protection.
Environmental Laws and Traditional Enforcement
Compliance with federal environmental laws and regulations is one of the most difficult legal challenges facing businesses today. The Clean Air Act (CAA) alone is several hundred pages long, has spawned thousands of pages of implementing regulations and guidance documents, and has been interpreted in numerous court decisions. The Act is applicable to several hundred thousand regulated entities throughout the nation. Yet the CAA is but one of more than 20 federal environmental laws on the books today.
Each of these complicated statutes has an equally complicated enforcement scheme. Enforcement is carried out by state and local environmental authorities, the EPAs Office of Enforcement and Compliance Assurance, and the Department of Justices (DOJ) Environment and Natural Resources Division. Most environmental statutes also have citizen suit provisions to complement traditional enforcement. These provisions allow environmental groups to act as private attorneys general and enforce compliance with environmental regulations in court.
Not surprisingly, dealing with these regulations and the authorities that enforce them can be extremely difficult. A recent survey reported that seventy percent of corporate lawyers consider total compliance with every applicable requirement to be impossible.
Enforcement takes the form of administrative, civil, and criminal actions against regulated entities for violations of the myriad requirements. In recent years, the number of federal actions has ballooned, as has the cost of compliance. These traditional, adversarial enforcement strategies have played a part in achieving compliance with environmental statutes. However, given the complexities of the regulations and the limitations on enforcement resources, there are constraints on the extent of compliance, and, ultimately, the environmental benefits that government officials alone can attain. Incentives for regulated entities to find and correct violations are also very important. Many believe that environmental audits could play a crucial role in the self-enforcement process.
The EPA defines an environmental audit as a “systematic, documented, periodic, and objective review by regulated entities of facility operations and practices related to meeting environmental requirements.” In other words, environmental audits refer to the process by which companies evaluate themselves for compliance with environmental regulations. Any violations discovered through an audit can then be corrected. In addition, environmental audits may provide information useful for preventing future pollution problems.
For most companies, environmental audits are a relatively new phenomenon, and one with a significant potential for future growth. According to a recent survey, approximately 75 percent of industrial companies have some form of environmental audit program. On average, these firms have had such a program in place for seven years. Twenty-five percent do not audit, and, perhaps more importantly, most of the 75 percent who do have refrained from expanding their programs. Many firms say they would increase the size and scope of their audit programs if the government removed certain disincentives.
Of the 75% of companies that conduct environmental audits;
- 64% said elimination of penalties for self-identified, reported, and corrected items encourages auditing
- 45% said the threat of using audit information in lawsuits or government enforcement actions was a factor that detracted from their willingness to expand their audit program
- 81% believed there is a need to protect or hold confidential audit findings
- 68% said audit reports are drafted to minimize concerns about disclosure outside the company
- 10% said that an audit report has been used against them by the government
- 25% said that there have been attempts by outside parties to obtain audit information.
Conflicting Positions on Environmental Audits
Environmental audits are discouraged by existing environmental statutes. These statutes have their own enforcement schemes, which have been aggressively pursued by the federal government. These laws do not grant protected status to information uncovered through environmental audits. Any information revealed by an audit can expose a firm to administrative, civil, or criminal liability. Nor are environmental audits well protected by existing evidentiary privileges, such as the attorney-client, work product, or self-evaluative privilege.
As a result, plant managers have good reasons not to voluntarily undertake audits (or to undertake them in a defensive and limited manner), as the information they disclose may result in the assessment of penalties and/or the commencement of further civil or criminal actions by the government or third parties. The risks are particularly great for small and mid-sized entities that wish to conduct environmental audits. Fear of penalties from disclosed violations and concerns about the subsequent use of audit information have been cited as important factors for companies that are hesitant to expand their audit programs. Without additional legal protections, the promise of cost-effective pollution reductions through environmental audits will never be fully realized.
Generally speaking, the federal government has opposed substantive efforts to encourage auditing. But a growing number of states like Colorado have recently passed laws granting stronger protections. These conflicting positions will be detailed below.
The Environmental Protection Agency
In 1986, the EPA first set out a policy providing limited incentives for regulated industries to conduct audits and disclose violations. In this policy, the EPA announced that it may take into consideration the fact that an environmental audit was conducted (and the discovered violations promptly corrected) as a mitigating factor in assessing penalties against firms that violate environmental laws. The EPA also stated that it will not routinely request an audit report for use in subsequent enforcement actions. These limited protections were discretionary, and applied only to the EPA. Under this scheme, the number and scope of environmental audits remained limited.
Largely in response to state audit laws enacted since 1993, and the introduction of federal audit bills, the EPA revisited the issue of environmental audits. The agency issued a new Final Policy Statement that took effect on January 22, 1996. According to the EPA, “because government resources are limited, maximum compliance cannot be achieved without active efforts by the regulated community to police themselves.” The new policy offers what it calls “major incentives that EPA will provide to encourage self-policing, self-disclosure, and prompt self-correction.” These include a waiver or 75 percent reduction of “gravity-based” (punitive) civil penalties, and a policy of not recommending criminal prosecution of violations discovered through an audit. The EPA also stated that it will not routinely request audit reports.
The EPA set out nine criteria for which the penalty waivers apply:
1. the violations must be discovered through an environmental audit, as defined in the 1986 policy, or through the companys due diligence;
2. the violation must have been identified voluntarily, as opposed to being detected through required procedures such as mandatory monitoring;
3. the violation must be promptly disclosed to the EPA;
4. the disclosure cannot have been prompted by an impending inspection, investigation, citizen suit, or other action;
5. the violation must be corrected and any harm remediated;
6. the entity must take steps to prevent recurrence of the violation;
7. the specific violation must not be part of a pattern of such violations;
8. the violation must not be one which resulted in serious actual harm, or presented an imminent and substantial endangerment to human health or the environment, or violated any legally binding agreement; and
9. the entity must fully cooperate with the EPA.
The EPA has attempted, through the publication of an interpretive guidance, to clarify the many ambiguities in these criteria.
If all nine conditions are met to the EPAs satisfaction, the agency may grant immunity for the gravity-based portion of the penalty. If condition one is not met (i.e., the violation was not detected through an environmental audit or due diligence), but conditions two through nine are met, then 75 percent of the gravity-based penalty may be waived. In neither case will the portion of the penalty attributed to the economic benefit accrued to the violator be waived, unless it is trivial. The economic benefit is calculated by the EPA.
In addition to penalty immunity, the policy offers qualified assurances that audit reports and contributing materials will not be requested for use in subsequent actions. But the EPA expressly reserves the right to request an audit report if the agency has what it deems “independent evidence of a violation.” The EPA specifically opposes state laws which make such materials privileged and offer penalty reductions without conditions and qualifications similar to those in its policy.
The EPA also offers assurances that it will not recommend self-reported violations to the Department of Justice or other authorities for criminal prosecution. This protection does not apply to violations that the EPA determines to involve a prevalent management philosophy or practice that concealed or condoned violations. Also excluded are instances of high-level officials or managers conscious involvement in or willful blindness to the violations. The EPA also reserves the right to recommend criminal prosecutions for the acts of individual managers or employees.
It is important to note that the EPAs policy is not a regulation, and thus is not legally binding on the agency. EPA expressly states that the policy “does not create any rights, duties, obligations, or defenses, implied or otherwise, in any third parties.” It also does not apply to the Department of Justice, or to environmental organizations and other potential third party litigants. Therefore, it provides only limited assurances to firms that wish to conduct environmental audits without fear of prosecution. Thus far, the number of audits conducted pursuant to EPAs new policy is disappointingly low.
The Department of Justice
Since 1991, the DOJ has had a policy of providing limited and inducements for companies that conduct audits. More recently, the DOJ has expressed support for the new EPA policy, though it is not bound by it. The DOJ has stated it will “consider in the exercise of prosecutorial discretion self-auditing, self-policing, and voluntary disclosure as important mitigating factors,” both in deciding to undertake a criminal investigation, and in the sentencing phase of criminal cases. The DOJ states that it “generally will not seek an environmental audit from a regulated entity,” but adds that “once an investigation is begun on the basis of independent information of violations, the Department seeks all relevant information, including audit reports.”
As with the EPA, the DOJs policy is totally discretionary. There are no assurances in any particular case that the DOJ will not request an audit report and/or fully prosecute and penalize self-disclosed violations. The DOJ also joins the EPA in opposing privilege for audit reports, and in warning of conflicts with state laws that establish privilege. In other words, companies undertake audits at their own risk.
Colorado and Other States
In the last few years, many state governments came to realize that existing policies were discouraging environmental audits, and that potential environmental benefits were being lost. This impression was buttressed by a few publicized incidents of audit reports being used against companies that voluntarily disclosed their violations. For example, the Coors Brewing Company initiated an environmental audit in 1990, and discovered a Clean Air Act violation unlikely to have otherwise been detected. Despite disclosing the problem and initiating steps to control it, the company was hit with a large penalty by the state of Colorado.
Consequently, the states have taken the lead in encouraging environmental audits, providing broader protections and greater certainty for entities conducting audits than the federal government. The first environmental audit law was passed in the state of Oregon in 1993. Colorado followed suit in 1994 with its Environmental Audit Privilege and Voluntary Disclosure Act. And, despite opposition at the federal level, a total of twenty-one have passed audit laws, and many others are considering such legislation. These states are identified in Figure 1. State audit laws have been supported by legislators and governors of both parties.
Generally, these laws allow regulated entities to conduct environmental audits and report any discovered violations to the state environmental authorities. Then, in exchange for promptly remedying any discovered problems, the audit report becomes privileged, and thus cannot be used as evidence against the auditee in a subsequent enforcement action. Many also offer partial or total immunity from additional penalties for self-disclosed and corrected violations.
Colorados audit law provides privilege for environmental audit reports. Thus, such voluntarily compiled reports cannot ordinarily be seized and used against a company in legal proceedings. However, there are numerous exceptions. For example, privilege is waived if the entity does not promptly initiate measures to correct any discovered problems, if the report uncovers violations that pose a danger to public health or the environment, if the report was prepared to avoid disclosure of information in an ongoing or imminent government investigation or legal proceeding, or for any other fraudulent purpose. Nor does the privilege apply to information otherwise required to be disclosed by U.S. or Colorado law, or information obtained through any source independent of the environmental audit.
Colorados law also establishes a presumption of immunity against administrative, civil, or criminal penalties for unintentional violations that are reported and corrected. As with privilege, there are several exceptions.
Thus, Colorados law differs from the EPAs new policy in two important areas:
It provides privilege for the audit report and supporting materials. The audit data can be compiled without fear that it will be used by the government or private parties in administrative, civil, or criminal actions.
It provides more reliable immunity provisions for the underlying violations. Unlike the penalty immunity under EPAs policy, Colorado subjects auditees seeking immunity to fewer conditions, qualifications, and exclusions. This gives firms considering undertaking environmental audits greater certainty that audit reports will not later be used against them.
Some state audit laws have sunsetting provisions. Colorados law, for example, is subject to review in 1999. It will become permanent only if the state legislature deems the experiment in encouraging self-enforcement a success and chooses to continue with it.
The audit laws of Colorado and other states are still too new to draw any firm conclusions as to their success or failure. Thus far, only a small number of regulated entities have taken advantage of state privilege and immunity to conduct audits and report violations, in part due to the lack of comparable federal protections. But the early indications are positive.
Congress and the White House
In the 104th Congress, Congressman Joel Hefley (R – Colorado), and Senators Mark Hatfield (R – Oregon) and Hank Brown (R-Colorado) introduced federal audit bills. The House and Senate versions provide privilege and penalty immunity, like the state laws. But unlike state laws, a federal law would bind the EPA and DOJ. In addition, Congress unsuccessfully attempted to encourage environmental audits through the appropriations process, by prohibiting the EPA from allocating enforcement resources for actions against companies disclosing and correcting violations under state audit laws.
Thus far, the Clinton administration has opposed any protections for environmental audits beyond those in EPAs policy. Vice President Gore criticized state audits laws as both dangerous to the environment and unfair because they allow “those who caused the pollution to get off the hook.”
Similar bills have recently been introduced in the 105th Congress by Senator Kay Bailey Hutchison (R-Texas) and Senate Majority Leader Trent Lott (R-Mississippi), and again by Rep. Hefley. Administration opposition remains likely.
The Federal Government versus Colorado and Other States
The Clinton EPA remains vigorously opposed to most state environmental audit laws. In the past two years, the EPA has engaged in strong-arm tactics, interfering with the states implementation of existing laws and discouraging states considering audit bills. And the EPA has several weapons in its arsenal.
Many statutes, like the Clean Water Act and the Clean Air Act, delegate enforcement authority to the states, conditioned on these states meeting EPAs approval. For example, under Title V of the Clean Air Act, each state runs its own air operating permits program. But if EPA deems state enforcement inadequate, it has the discretion to take back this authority and operate the program at the federal level, a highly undesirable option for most states. EPA now claims that some state audit laws compromise enforcement and compel the agency to withdraw its delegated authority. Specifically, in response to its dissatisfaction with the audit laws of Texas, Idaho, and Michigan, the EPA informed these states that their Title V programs will receive only temporary approval.
In an attempt to discourage additional states from passing audit bills, the EPA has made similar threats to states with bills pending in the legislature, as it did in Colorado when its bill was under consideration in 1994. This has provoked a strong response from several state legislators and environmental officials. “Its arrogant, its bullying, and its legally and factually wrong,” noted Representative William Schuck, Chairman of the Ohio House Energy and Environment Committee. Despite EPAs intimidation campaign, the Ohio legislature passed its audit bill, and many other states are actively considering similar bills.
The EPA has also suggested that it will step up enforcement efforts in those states whose audit laws are not to its liking, and may commence federal actions against companies that disclose violations under state audit laws, a tactic commonly called overfiling. The agency declared that it “will scrutinize enforcement more closely in states with audit privilege and/or immunity laws and may find it necessary to increase federal enforcement.”
The EPA has already begun this process in Colorado, sending letters of inquiry to companies conducting audits. Such intimidation is legal, since Congress attempt to restrict it through the appropriations process failed. However, some have suggested that such an approach is environmentally counterproductive, because shifting scarce enforcement resources towards firms that self-audit means relatively less oversight of those that do not, although the latter are more likely to have serious and undetected violations.
In response, some states have modified their audit laws to avoid any conflicts with the federal government. Texas, for example, made several changes to its audit law to placate EPA and resolve any delegation problems.
Thus far, the EPA has taken no official action against the state of Colorado for its audit law, beyond stating its objections to it, and asserting that it is not bound by it when undertaking federal investigations of regulated entities in Colorado. However, several environmental and labor groups have petitioned EPA to withdraw its delegation to Colorado of permitting authority under the Clean Water Act. The EPA has not yet responded to this petition. Despite the opposition, Governor Romer continues to support Colorados audit law.
Federal Opposition to Audits: The Stated Reasons
The EPA has several justifications for its opposition to state environmental audit laws. Generally, the EPA argues that these laws, particularly the privilege they extend to audit reports, provide too much protection for violators, and thus will endanger public health and the environment by failing to deter serious acts of non-compliance. The agency also claims that audits will interfere with its own enforcement efforts. Finally, the EPA asserts that privilege and other protections beyond those provided in its policy are unnecessary to encourage audits. The Department of Justice echoes these views.
The EPAs characterization of state audit laws as providing amnesty for polluters who deliberately threaten human health and the environment is widespread. However, it does not stand up to scrutiny. Most state laws deny privilege and/or immunity for audits that uncover environmentally serious, life-threatening, or deliberate violations, thus preserving deterrence where needed. Colorados law denies privilege to audit reports that uncover “a clear, present, and impending danger to the public health or the environment in areas outside of the facility property.” Further, immunity does not apply to repeated violations or intentional criminal acts.
In fact, audits may actually assist in the detection and deterrence of environmentally significant problems, as government regulators can focus their resources on finding major violations, while relying more heavily on industry to self-police minor and unintentional violations. The latter are far more numerous, given the extreme complexity of environmental statutes and regulations. As it is, both the EPA and DOJ squander a substantial and increasing amount of enforcement resources on trivial problems, such as paperwork violations. Unfortunately, neither is willing to encourage self-detection and self-correction by extending privilege, no matter how environmentally insignificant the violation.
Most importantly, the protections for auditees are granted only if the violations are reported to the authorities, and promptly and permanently remedied. In Colorado, privilege for audit reports is lost if “the person or entity did not initiate appropriate efforts to achieve compliance…promptly after the noncompliance with the environmental law was discovered….” Similarly, immunity from penalties does not apply to violations uncovered in an audit unless “the person or entity making the disclosure initiates the appropriate effort to achieve compliance, pursues compliance with due diligence, and corrects the noncompliance within two years after the completion of the voluntary self-evaluation.” This ensures that all environmental benefits are attained before any protections are bestowed, and undermines the argument that audits will harm the environment by preventing subsequent enforcement by the EPA or DOJ. Quite the opposite, there are no environmental gains from pursuing federal enforcement actions for violations that have already been fixed, or are about to be.
Nor do these laws interfere with independent enforcement efforts. Despite claims to the contrary, the EPA, DOJ, state enforcement officials, and private parties can undertake enforcement actions if necessary, and Colorados audit law does nothing to get in the way. Legally required information, and any violations revealed, is unprotected. Most environmental statutes have extensive paperwork requirements, under which federal and state authorities receive voluminous amounts of information, none of which is subject to privilege. Publicly available data, such as the Toxics Release Inventory, is also unaffected. The audit privilege only protects voluntarily undertaken audit reports. Nor are government-mandated inspections of facilities limited in any manner, except that audit reports cannot be seized.
In sum, government and third party enforcement continues unabated under state audit laws, the only limitation being that the audit report cannot be used as a roadmap for an easy enforcement score. In fact, Colorado and other states with audit laws report no decline in traditional enforcement activity.
Although the audit laws of Colorado and other states are still relatively new, the early experience suggests that the kind of violations reported and remedied are those that would have escaped detection from state and federal inspectors. This is not surprising, as a regulated entity knows much more about its own operations than any outsider. Audit laws provide the necessary incentives to harness this superior knowledge for the benefit of environmental protection.
The initial results in Colorado are quite promising. Patti Shwayder, Executive Director of the Colorado Department of Public Health and Environment, stated that “we have learned about pollution problems we didnt know about and probably wouldnt have known about,” and that “companies are working with us to eliminate pollution that previously has not been identified or stopped.” Patricia Bangert, Director of Legal Policy for the Attorney Generals Office, also believes that “we are talking about a positive environmental gain.”
In contrast, the critics of Colorados audit law have not pointed to any actual experiences supporting their hypothetical concerns.
The EPA has suggested that its policy is sufficient to encourage companies to audit and that the additional incentives provided by the states are not necessary. But a large number of regulated companies believe otherwise. Of the surveyed companies that conduct audits, 45 percent said that their willingness to expand their program was affected by the fact that information could be used in a citizens suit, toxic tort suit, civil or criminal enforcement action. Sixty-eight percent of surveyed firms also said that audit reports are drafted to minimize concerns about disclosure outside the company. Such defensive measures may reduce an audit reports usefulness. Eighty-one percent believed that audit findings need to be kept confidential. And, of the companies that do not audit, 20 percent cited fears of the information being used against them as a reason for their policy. Although the number of instances of environmental audit reports being overtly used to secure a criminal conviction or a substantial civil penalty is small, the federal government has done so often enough to pose a real threat.
In addition, the EPA and DOJ have taken advantage of audit information in other ways. For example, the DOJ has frequently used audit materials (or the threat of using them) as “bargaining chips” during criminal investigations and settlement negotiations. Nearly 10 percent of companies that audit said that an audit report has been used against them by the government. Twenty-five percent report attempts by outside parties to obtain audit information.
Given industrys concerns and past experiences, the federal governments new audit policy, though a step in the right direction, falls far short of providing protections adequate to encourage audits. It is totally discretionary, provides limited benefits, and does not affect other agencies or third party litigants.
That the current policy does not preclude subsequent use of audit reports is of particular concern given the fact that the criminal knowledge standard is very easily met in the context of environmental law. An audit report can provide the DOJ with sufficient evidence to turn even minor and unintentional violations into criminal cases, an increasingly common occurrence.
The EPA and DOJ insist that they will not take advantage of companies that audit, although they have done so in the past and stubbornly defend a policy that gives them every opportunity to do so. One could argue that neither agency has earned sufficient trust among the regulated community for such a discretionary policy to work. Quite the contrary, in many circles the EPA and DOJ have a reputation for unfairness, enforcement zeal, and anti-industry bias. Many companies will not settle for anything less than legally binding assurances before fully expanding their audit programs.
There is little question that the federal governments policy has a chilling effect on environmental audits, and that, absent state laws or a federal statute providing sufficient protections, audits will never fulfill their potential for improving environmental compliance.
Federal Opposition to Audits: The Unstated Reasons
The federal governments vehement opposition to state audit laws may well go beyond the reasons stated. In truth, the war on audits can also be explained in terms of bureaucratic self-interest. The modern environmental movement has spawned a large and powerful centralized bureaucracy, as formidable as any in Washington. Many policy decisions are made for the benefit of this bureaucracy, and not the benefit of the environment.
This is particularly true for environmental enforcement, where the command-and-control model, however flawed, still predominates. Prescriptive, inflexible rules are enforced in a confrontational and adversarial manner by a bureaucracy strongly resistant to change. Against this leviathan, environmental audits must fight for acceptance.
Despite their potential for achieving cost-effective compliance, audits do nothing to advance the interests of the enforcement bureaucracy. Quite the contrary, they pose something of a threat to agencies that view enforcement as an end in itself, and not a means toward the end of improved compliance and a cleaner environment.
Audits, particularly those sanctioned at the state level, shift the focus away from Washington, and de-emphasize red tape and process in favor of a streamlined, results-oriented approach. Audits also foster cooperation with the regulated community, rather than confrontation and litigation. In contrast, the EPA and DOJ measure success (and attempt to justify budget increases) by the number years of prison sentences meted out and the dollar totals of penalties imposed, irrespective of whether they result in a cleaner environment. Federal opposition to audits is understandable, given this bean counting mindset. Violations proactively detected and eliminated through audits will not result in a notch in a DOJ lawyers gun or show up as so many dollars in EPAs annual penalty totals. That they improve compliance and do so at minimal cost matters little in Washington.
The EPA has acknowledged deficiencies in the existing enforcement scheme, and has made some attempts to incorporate innovative approaches. But well-hyped programs like the Common Sense Initiative and Project XL do not go far enough, and fail to overcome the problems they were created to eliminate. The same is true for EPAs improved but still inadequate audit policy. Like other “reforms,” the audit policy is still shackled by EPA micromanagement and red tape, and fails to curb the agencys self-interested control over the process of environmental enforcement.
Perhaps more troubling than the EPAs unwillingness to change is its refusal to allow Colorado and other states the autonomy to do so. Environmental audit laws and other state-level alternative approaches to environmental protection are being frustrated by federal inflexibility and opposition to any diminution of control. The EPA has even denied a modest request from several states to simply give their audit laws a chance to prove themselves before cracking down on them. Although the Clinton Administration has embraced the rhetoric of “building partnerships” with state governments in the area of environmental protection, the treatment of Colorado and other states with environmental audit laws strongly suggests that the partnership is decidedly unequal.
The federal government opposes substantive measures to encourage environmental audits. Current EPA and DOJ policies do not provide adequate protections for regulated entities conducting audits. The audit laws of Colorado and other states face considerable federal opposition. Federal legislation, binding on the EPA and DOJ and similar to the state laws in providing sufficient privilege and immunity to facilitate the conduct of environmental audits, will be necessary if audits are to realize their considerable potential for producing cost-effective improvements in the level of compliance with environmental laws, and, more importantly, a cleaner environment.+
Copyright 1998, Independence Institute
INDEPENDENCE INSTITUTE is a nonprofit, nonpartisan Colorado think tank. Its public policy focuses on economic growth, education reform, local government effectiveness, and constitutional rights.
TOM TANCREDO is President of the Institute.
BEN LIEBERMAN, J.D., CPA, is an environmental research associate with the Competitive Enterprise Institute. Additional information about the Competitive Enterprise Institute, and additional writings by Mr. Lieberman, can be found at the CEIwebsite.
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Additional Independence Institute resources on environmental policy can be found at the Independence Institute website: https://i2i.org, and in the Independence Institutes comprehensive guide to Colorado public policy, Colorado in the Balance.
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