United States: New York’s New Environmental Audit Policy Similar To (Not Same As) Federal Counterpart

Last Updated: October 27 2013
Article by Christine A. Fazio and Victor J. Gallo

On October 18, the New York State Department of Environmental Conservation (DEC) adopted a new Environmental Audit Incentive Policy that provides relief to qualifying entities that voluntarily report their environmental violations and implement environmental management systems. This advisory outlines key elements of the new policy and some of its most important differences with the audit policy of the U.S. Environmental Protection Agency (EPA).

DEC's Environmental Audit Policy

New York's Policy provides that DEC will reduce or waive penalties for certain violations that are voluntarily reported; discovered by DEC or another regulator in the course of compliance assistance or pollution prevention programs; or discovered through an environmental audit. 

The DEC Policy generally applies to any entity that does not have a history of non-compliance, and is therefore more broadly applicable than DEC's earlier Small Business Self-Disclosure Policy, which applied to small businesses only. The policy provides a high degree of flexibility in regard to the eligibility criteria for regulated entities. The policy excludes only "bad actors" that had a violation within the last 5 years and were uncooperative in remedying violations. Eligible violations include any violations of New York State law and regulations enforced by DEC; however DEC staff may exclude violations categorized as "Significant Non-Compliance" (SNC) or "High Priority Violation" under federal law.

The Policy was revised based on public comments to explicitly provide that eligible entities include federal and state agencies and municipalities. The Policy does not apply to criminal violations, nor does it limit a participant's liability to DEC for environmental remediation costs or natural resource damages.

If an entity discovers a possible violation and wants to be covered under the Policy, it is required to provide written notice to the regional DEC office where the violation occurred or where the entity is located. DEC will then assign a staff person to determine the entity's eligibility under the Policy, negotiate an environmental audit agreement, and possibly require the execution of a "return to compliance" form. 

To be covered under the Policy, the entity must disclose the violation to DEC within 30 calendar days after the violation is discovered, unless a shorter time period is required by law or regulation. The entity must also correct the violation within 60 days of disclosure, but an alternate time frame can be agreed to under the environmental audit agreement. Under the Policy, DEC will waive the gravity component of any monetary penalty. DEC may also waive 100% of the penalty's economic benefit component if it is de minimis ($5,000 or less), or if the entity commits to invest in pollution prevention measures not otherwise required by law.

Under the Policy, DEC may provide incentives for entities that agree to undertake compliance audits or agree to reduce the adverse environmental impact of their activities by implementing environmental management systems or pollution prevention measures. Incentives include, for example, receiving recognition on DEC's website or obtaining cost-sharing from NYSERDA for audit-related activities to reduce energy usage.

Key Similarities & Differences With EPA's Self-Policing Policy

The DEC Policy is, in many respects, similar to the federal audit policy promulgated by the EPA.1 For example, both policies are inapplicable to violations that are required to be disclosed. EPA's policy specifically excludes violations disclosed through continuous emissions monitors (CEMs), discharge monitoring reports (DMRs) or violations called out in a citizen suit notice. To be eligible for reduced penalties under both policies, the violator must not have violated a consent order resolving the same or similar violations nor have a history of noncompliance. Both policies require the disclosed violation be corrected expeditiously. 

DEC's Policy differs from EPA's policy in certain significant respects. To be afforded coverage under EPA's policy, disclosure of violations must generally be made within 21 days, not 30 days, although both policies give new owners additional time to disclose.2 Unlike EPA and other states, which limit the availability of their audit policies to entities that engage in defined, systematic environmental audits or compliance management incentives, DEC's policy encourages disclosure by entities that may not have the resources to implement such internal systems by allowing disclosure of violation discovered through informal internal reviews, such as an internal compliance review by a facility employee.

Under EPA's policy, if the disclosed violation is the result of an accidental discovery, rather than through adherence to a formal "compliance management system," only 75% of the gravity component of the civil penalty can be waived. DEC's Policy, on the other hand, permits 100% of the gravity component to be waived, even if no environmental management system is in place, and allows for additional penalty reductions if the entity commits to deploy environmental audits or environmental management systems. 

DEC will inform EPA Region 2 staff of any violations disclosed by a regulated entity pursuant to the DEC Policy, and will provide EPA with information concerning the regulated entity's return to compliance. Because of this, and because neither policy confers an audit privilege or immunity from criminal prosecution, it usually makes sense for an entity to conduct a thorough internal investigation and to consult with counsel before seeking protection under either policy.

New York State's policy is available on the DEC website at:



1 See 65 FR 19618-27 (April 11, 2000) (Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations; Notice).

2 See 73 FR 44991-45006 (August 1, 2008) (Interim Approach to Applying the Audit Policy to New Owners; Notice).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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