As reported previously, we anticipate environmental nongovernmental organizations (eNGOs) to file more citizen suits in response to reduced federal enforcement by the U.S. Environmental Protection Agency (EPA). Some eNGOs have already committed to taking over enforcement where EPA left off and are anticipated to make strategic use of publicly available information – for example, self-reported noncompliance (e.g., Clean Air Act (CAA) Title V semiannual deviation reports), documentation from pending enforcement that the Trump EPA does not pursue, and company marketing and SEC reports.
While statutory citizen suit provisions allow citizens to stand in the shoes of EPA, they also face a number of constraints that agencies do not face -- Congress intended for citizens to supplement, not supplant, government enforcement of environmental actions, and jurisdiction over citizen claims is not automatic. See, e.g., Hamker v. Diamond Shamrock Chem. Co., 756 F.2d 392, 395 (5th Cir. 1985). Citizen plaintiffs must provide notice of intent to sue (NOI) -- 60 days’ notice for most environmental statutes -- providing defendants an opportunity to come into compliance as a way to moot the claims. Further, most citizen suit provisions provide jurisdiction only to enforce “ongoing violations” at the time of the suit. Sixty days is an extremely short timeframe to conduct a meaningful analysis of alleged violations in an NOI, much less address them, especially for a complex industrial facility facing scores of alleged violations in pleadings that can be difficult to unpack.
The best bet is for companies to identify and address potential noncompliance before receiving an NOI. Helpfully, companies with facilities in Texas can confirm or achieve compliance with self-audits under the Texas Environmental, Health & Safety Audit Privilege Act (“Texas Audit Act” or “Act”). The Act offers penalty immunity for qualifying violations voluntarily discovered, disclosed, and corrected in connection with an audit conducted under the Act, provided the company discloses them to a Texas state agency with environmental, health, or safety (EHS) regulatory enforcement authority. Those agencies include the Texas Commission on Environmental Quality (TCEQ) and the Railroad Commission of Texas (RRC).
Here are ten tips for using the Texas Audit Act to enhance compliance and reduce enforcement and citizen suit risk:
1. File the notice of audit before evaluating compliance at existing operations.
For existing owners, the Act’s immunity only applies to violations discovered during an audit conducted after filing a notice of audit. Violations discovered prior to filing a notice and initiating an audit are not eligible for immunity.
2. Identify in advance who will conduct the audit.
Before submitting a notice of audit, determine whether internal EHS personnel or a third-party consultant will lead the audit. Assigning roles up front ensures the audit proceeds efficiently and strategically. In making this decision, consider company personnel availability and expertise, and auditor independence and objectivity. In circumstances with substantial risks associated with potential findings, consider conducting the audit under attorney-client privilege. Although the facts of an audit are always discoverable, the legal advice will not be. Consider the audit report structure and whether to separate factual observations from a compliance analysis to help preserve the privilege. Where the risk of citizen suit is high, consider future litigation risks.
3. Define a precise and realistic audit scope.
The audit notice should specify what facilities, units, and programs (e.g., CAA, Resource Conservation and Recovery Act, and/or wastewater) will be included in the scope of the audit. Audit immunity will apply only to violations within the identified facilities and regulatory programs. Some audit scopes include only what can thoroughly and reasonably be reviewed, while others are designed more broadly to take full advantage of the audit opportunity. For any audit scope, prepare a process for quickly addressing noncompliance and the strategy for determining whether to disclose the findings to the TCEQ or RRC. The Act does not require disclosure of the audit findings, even after a notice of audit has been provided, although findings that are not disclosed do not qualify for audit immunity.
4. Audit beyond “Reasonable Inquiry” at Title V Facilities.
If the facility has a federal Title V air permit, to qualify for penalty immunity for CAA noncompliance, the violations must have been discovered by an audit that goes beyond the semiannual “reasonable inquiry” review required in connection with Title V deviation reporting. Prepare for TCEQ to ask questions about whether the audit entailed a review beyond the facility’s reasonable inquiry process and how to demonstrate that it did.
5. Disclose confirmed rather than potential violations.
Unconfirmed or potential violations do not qualify for immunity under the Audit Act. Disclosures must involve confirmed violations—not potential noncompliance. In a similar vein, the corrective action proposed in connection with a disclosure cannot involve determining whether a violation exists or clarifying the nature of a violation.
6. Disclose violations before agency discovery or investigation.
To qualify as “voluntary,” companies must disclose violations before the agency discovers them or initiates a related investigation. When the agency provides notification of or commences an investigation within the scope of an audit, no immunity is provided for violations within the scope of the audit that the agency also discovers. Submit disclosures as soon as the violations are confirmed.
7. Submit audit disclosures by certified mail only.
Disclosures must be submitted via certified mail. Email and regular mail do not meet the Act’s delivery requirements. Improper delivery will disqualify an otherwise valid disclosure and could expose your company to enforcement.
8. Act fast to correct violations.
Violations disclosed per an audit must be corrected within a “reasonable time.” TCEQ’s presumptive reasonable time period -- to correct the violation or submit a permit application that is needed to correct the violation -- is six months from the date a particular violation is disclosed. To stave off a citizen suit, sooner is better because no such grace period exists past an NOI’s 60-day notice period under federal environmental statutes. Based on good cause, TCEQ may approve extensions of time beyond this six-month timeframe.
9. Do not wait until the last minute to request extensions.
As noted, TCEQ will grant extensions of time to complete an audit or to complete corrective actions. However, extensions must be granted prior to the end of the audit term or the approved corrective action deadline. In light of the high volume of audits and staffing challenges, TCEQ asks that entities submit extension requests as early as possible -- ideally at least two weeks prior to the end of the period to be extended.
10. Maximize new owner protections.
The Act provides a powerful tool for new owners. A new owner audit allows the new owner to operate an acquired facility with a clean slate thereby avoiding liability for past and ongoing noncompliance caused by the previous owner. The Act provides immunity from monetary penalties for violations inherited with the acquisition or discovered during the audit period and voluntarily disclosed. Immunity applies to violations discovered during a pre-acquisition audit if they are disclosed within 45 days of closing and promptly corrected. TCEQ may extend the new owner audit period up to six months after closing. Facilities must provide notice of intent to continue the audit and later request approval for additional time to complete the audit.
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Curing violations may not always be enough to moot a citizen suit -- “continuing violations” can include intermittent violations with a continuing likelihood of recurrence. But a company’s demonstration of a strong compliance culture, vigilant attention to noncompliance, and timely implementation of corrective actions addressing the potential for recurring violations can help narrow the claims in a citizen suit and injunctive relief demands. We routinely assist clients with Texas Audit Act audits and disclosures, EPA’s Audit Policy, and self-audit programs in other states.
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