The Window, Again

Posted on December 23, 2016 by Steven J. Levine

My practice, one way or another, is all about compliance . . . or noncompliance.  This is as true of the litigation side as it is of the regulatory counseling side.  I typically face the question of which of those terms best describes the situation a client brings to me.  It’s always been true that the practice goes beyond the mere facts or law at hand.  The real world also includes the client’s culture and values, politics, and economics.  These aspects, and others in varying proportions, have usually controlled process and outcome.

Today I am witnessing what appears to be an unprecedented unraveling of these foundations.  I see it in the words and actions of regulators, consultants, other attorneys, judges, and clients.  Obviously this imposes itself on the lawyer’s task of figuring out what the problem is, on the one hand, and, on the other, what the best advice for a client might be, specifically how (and when) to address the problem.  The path forward these days seems to be influenced, often significantly, by two related things:  widespread mistrust of government/science/etc., and a social media rife with rumors, innuendo, assumptions, and the like.  So I find myself asking:  of what value is advice derived from traditional avenues of carefully established fact, well-analyzed law, professional judgment, and years of relationship building?

I find the answer in the first week at my first real law job clerking for a federal district court judge.  On the third day of that job, I stood behind my desk, looked out the window, and thought, with despairing certainty:  I don’t have the tools to do this job!  I will never make it as a law clerk!  I will never make it as a lawyer!  Why did I ever go to law school?  Time passed.  Things cleared up.  I learned how to begin to apply what I knew to what I had to do.  And, while the view may be new, the path forward is the same as ever.  Now, as I think about the potential unraveling of fundamental policies and foundations upon which we have rested for a generation, I’m looking out of that same window, in a sense. 

Risky Business? Third Party Auditing, Risk Management Planning, And The General Duty Clause: Time to Vote!

Posted on March 25, 2016 by David Tripp

Third Party Auditing may not be the first choice of the estimated 12,000 companies covered by the Clean Air Act Risk Management Plan (RMP) rule. Many of these companies are not traditional "stationary sources" of air emissions, but are warehouses and other facilities that process or repackage chemical products containing toxic or flammable substances. Third Party Auditing is coming to those companies under EPA's proposed RMP rulemaking announced on March 14, 2016, when they have an accidental or "near miss" of a release involving an RMP-regulated chemical.

Why Third Party Auditing? Is it a good thing or a bad thing? It can be a good thing, depending on how the Audit is structured and implemented,. There are several recent judicial consent decrees containing Third Party Audit requirements that are being implemented successfully. EPA's new rule will require Third Party Auditing when there has been a fire, explosion, release or near release of chemicals. Experience with Third Party Audits shows that a well-designed audit protocol with emphasis on improved internal company environmental tracking and management systems can actually create efficiencies in product logistics and cost control.

Some brand-name companies such as PepsiCo use voluntary Third Party Audits to highlight independent audit programs and results:

In 2013, all company-owned plants were assessed against PepsiCo’s global Health and Safety program and, following completion of the audit, each plant developed an improvement action plan. In addition, 65 plants are OHSAS 18001-certified by independent consultants, and 31 facilities in the United States are part of the Occupational Safety and Health Administration Voluntary Protection Program, the industry standard for health and safety.

Is Third Party Auditing Under EPA's New Rule An Expansion of Existing RMP Requirements? Yes. Companies subject to RMP already are required to periodically review their risk plans and update terms each five years, or earlier, when conditions change. Most companies follow that practice. However, EPA cites the 2013 West Fertilizer explosion in West, Texas as one example of the ineffectiveness of existing RMP regulations to prevent a fire and explosion where RMP chemicals are stored or handled. From the West case and others, EPA sees a need for additional strengthening of the RMP rules.

Third party auditing as an enforcement compliance tool is becoming more common. The U.S. v. Tyson Foods Consent Decree (2014) required an independent third party auditor to investigate equipment processes and safety issues. The third party auditor was to evaluate ammonia refrigerant systems at 23 plants in four states, and report directly to EPA on the findings of discrepancies or violations. In addition to RMP requirements, other recent EPA and Department of Justice enforcement cases require injunctive relief in the form of Third Party Audits on RMP and General Duty Clause (GDC) compliance.

How Does the General Duty Clause Become Involved in Third Party Auditing? EPA's RMP amendments occur at a time when interpretation of the CAA Sec. 112(r) GDC by EPA also subjects each stationary source to audit and enforcement based on chemicals in storage. The GDC interpretation does not rely only on the presence of regulated quantities of Extremely Hazardous Substances at a facility and is not limited to enforcement of RMP requirements. GDC requirements focus on unsafe conditions at a facility, and the compliance thresholds arise from potentially applicable regulations, electrical, fire and explosion advisories by the National Fire Protection Association, American Petroleum Institute, American Chemistry Council, industry practice and other health, safety or environmental authorities. Any fire, explosion or injury incident, the reporting of a near miss that might have resulted in catastrophic damage or injury, or an inspector's subjective audit finding of the presence of dangerous conditions from an audit or after-the-fact review may trigger an EPA demand for a Third Party Audit.

Risky Business or Not? Increased use of Third Party Auditors will be required if EPA's proposed changes to the RMP rules are adopted Owners and operators will be required to engage and pay for the services of Independent Auditors when a release of a reportable quantity of regulated chemicals has occurred, or the facility has had a "near miss" incident that might have caused a catastrophic release. Manufacturers in the chemical, paper and oil/coal categories must also undertake a root cause failure analysis, and additional reporting on process hazard analysis following a release or near miss. But under those circumstances, companies facing a demand for a Third Party Audit can take the opportunity to investigate improved process safety, product management and internal management systems, all of which will result in reduced environmental and health risks, and overall cost savings.

Action Items? Get Out and Vote!
Proponents and Opponents of EPA's proposed changes to the RMP rules and requirements for Third Party Auditing can register their position on EPA's rulemaking docket. The deadline for comments is May 13, 2016.