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EPA's Enforcement Policy for XL

OECA's Operating Principles for Project XL Participants

Office of Enforcement and Compliance Assurance's

Operating Principles for Project XL Participants

The following is the text from a Memorandum, dated 2 October 1995, from Steve Herman, Assistant Administrator for Office of Enforcement and Compliance Assurance.

The purpose of this memorandum is to establish the overall operating principles for how the Agency intends to handle enforcement and compliance issues which may arise during the development and implementation of projects for facilities in Project XL. Project XL is an effort to link regulatory flexibility with positive environmental results, and to create and evaluate real world tests of performance-based environmental protection in specific XL projects. The results of XL projects will help set the Agency's regulatory reform agenda in the coming years. These general operating principles are intended to foster the spirit of cooperation that underlies Project XL, and at the same time address legitimate enforcement and compliance-related concerns at the outset.

In our efforts to develop a framework in which to determine how the Agency's enforcement authorities would most appropriately be employed in the context of Project XL, we have sought to ensure that the discretion afforded the Agency is exercised in a judicious and thoughtful manner. To this end, we have worked closely with the Office of Policy, Planning and Evaluation (OPPE) and the Office of General Counsel (OGC) in crafting the principles articulated in this memorandum. Additionally, we anticipate that the experience gained from negotiating and developing XL projects may indicate that these principles need to be refined, modified, or otherwise amended to address unanticipated fact patterns, circumstances, or new information. Accordingly, where there are compelling reasons to do so, we are open to incorporating such necessary changes. Of course, any modifications would only be made in consultation with OPPE, OGC, and the Regional XL contacts.

The May 23, 1995 Federal Register notice on Project XL outlines the different phases of an XL project: solicitation of proposals, selection, development of final project agreement, implementation and evaluation. Enforcement-related concerns are likely to arise in two distinct contexts: (1) in determining the response to violations which come to light during the negotiation of a final project agreement; and (2) in determining an appropriate response to statutory or regulatory violations during the course of an XL project. This memorandum addresses how the Agency intends to handle enforcement-related concerns in both these contexts.

The enforcement response framework discussed in Sections I and II of this memorandum applies only to those regulated facilities in the final project agreement development phase of an XL project, which is that period between the selection of a project for development of a final project agreement that sets forth the obligations of the Agency and the project sponsor, and the signing of such an agreement. Section III of this memorandum contains guidance on the appropriate use of enforcement discretion for dealing with noncompliance issues which may arise during implementation of an XL project, and how these issues should be addressed during negotiation of the final project agreements. The principles contained in this memorandum are in all fundamental respects similar to those contained in the October 31, 1994, memorandum on OECA's Operating Principles for the Common Sense Initiative. From an enforcement policy perspective, facilities in the negotiation phase of an XL project are most closely comparable to general participants in the CSI. It is our belief that these principles are consistent with the Administrator's goals of fostering a new generation of environmental protection, while at the same time maintaining the integrity and effectiveness of the enforcement program.

Certain key principles contained in the Operating Principles for the Common Sense Initiative memorandum bear repeating in this context: First, that no one will be singled out for enforcement as a result of participation in Project XL, but neither will anyone be fully immunized from enforcement because of their participation in XL. Second, there should be a line of demarcation between those circumstances in which information about a violation comes to our attention solely by virtue of a company's participation in XL (i.e., but for XL the violation would not have occurred, or it would not have been discovered), and circumstances in which information about a violation is obtained as a result of compliance monitoring activities which are separate and apart from Project XL.

While discussed in more detail below, the application of these principles generally means that where information about a violation is obtained as a result of participation in XL, a range of mitigated enforcement responses -- including the exercise of enforcement discretion not to pursue the violation -- is generally an appropriate manner in which to recognize the interest of XL participants and the public interest in promoting Project XL, and to acknowledge the good faith of the project sponsor's participation in Project XL. However, for those violations which are not discovered as a result of XL participation, or which come to light through means wholly apart from a facility's XL participation, the Agency will evaluate the appropriateness of any response in accordance with applicable Agency enforcement response policy(s), without regard to the participant's involvement in XL. Nevertheless, the fact of a project sponsor's participation in Project XL may be considered a relevant factor for mitigating penalties in the event a formal enforcement action is taken for such violation(s).

I. Selection of Project Proposals and Approval of Final Project Agreements

In reviewing XL proposals and developing final project agreements, the Agency should be aware of and consider whether a particular facility is currently scheduled for a planned inspection, under investigation, or involved in an enforcement action with the Agency, the State, local government, or citizens. Information about planned or pending EPA enforcement actions will be shared on a confidential basis within EPA, and with applicable states as appropriate, and should, for obvious reasons, be taken into account in considering whether to undertake a particular project. The selection of a given proposal and whether or not the final project agreement is ultimately approved by EPA should depend in part on the gravity of any compliance problem under review.

II. Compliance Problems at Facilities During Development of XL Projects

Project XL should not insulate facilities from enforcement when, either because of or apart from Project XL, information comes to light that calls for enforcement. However, as a general rule, the mere fact that a facility has been selected to participate in Project XL will not by itself subject the facility to greater scrutiny from an enforcement perspective. With this general framework in mind, we offer the following guidelines:

1. OECA will endeavor to ensure that those within the Agency who are responsible for managing the XL effort are aware of impending enforcement strategies and actions involving facilities that are developing XL projects. Additionally, in keeping with the spirit of openness that XL is intended to engender, OECA will ensure that advance notice is provided to facilities with XL projects in development before a civil or administrative action is brought against them. [Footnote 1]

2. The Agency must be free to respond to circumstances which may present an imminent and substantial endangerment or other threat to human health or the environment or are criminal in nature, even when discovery of such circumstances is through Project XL. With respect to civil violations which do not rise to the level of an endangerment, the Agency's enforcement response policy will necessarily depend on the nature of the violation and the manner in which it becomes known to the Agency. As appropriate, and subject to such conditions as the circumstances require, the Agency may give facilities with XL projects in development a time-limited opportunity to disclose and self-correct violations (see, e.g., "Interim Policy on Compliance Incentives for Small Businesses," June 13, 1995; "Interim Policy on Voluntary Self-Policing and Self-Disclosure," March 30, 1995).

3. Since, at the project development phase, neither the Agency nor the project sponsor have made any commitments to an alternative environmental strategy, planned and regularly scheduled inspections, on-going investigations, and enforcement activities should continue. [Footnote 2] Similarly, the deployment of enforcement and compliance resources based on current Agency priorities and information not secured through Project XL will continue. However, as part of its participation in Project XL, OECA will work closely with the XL teams to determine how to address compliance concerns.

4. If, consistent with the foregoing, a facility for which an XL project is under development becomes subject to an enforcement