Title V Compliance Certification: Minimizing Enforcement Risk

• Introduction
• Minimizing Enforcement Risk
• Prior to Submitting the Annual
• Compliance Certification
• Know The Mechanics
• Create a Flexible Permit
• Consider Mitigation Opportunities
• Throughout the Year
• Crafting Your Submission
• Put Your Best Foot Forward
• Conducting a Reasonable Inquiry
• After The Fact
• Conclusion

Every holder of a Title V Operating Permit is required by 40 C.F.R. 70.6(c)(5) to submit an annual compliance certification to the United States Environmental Protection Agency (EPA) and the relevant state permitting authority. In the annual compliance certification, the entity certifying compliance must identify each permit term and condition and state whether the facility was in continuous or intermittent compliance (or .not applicable.) with permit terms and conditions throughout the year. If there are deviations from any permit terms, the entity must indicate that compliance was intermittent. Any deviations from permit terms and conditions are likely enforcement targets, and liability attaches to each deviation from a permit term or condition.

The annual compliance certification is a powerful new enforcement tool for environmental agencies. First, the certification must include a sworn statement by a responsible official of the company. Accordingly, any errors in the certification could lead to criminal charges against the company official and the company for making a false statement. Second, any deviations from permit terms and conditions noted in the annual compliance certification are admissions by the company that would be problematic or impossible to rebut in an enforcement action. In addition to the risk of enforcement action, compliance certifications could also be used by citizen groups in citizen suits or toxic tort actions. Deviation information summarized with a sworn statement by a company official is difficult to rebut in any forum.

The traditional enforcement model, which followed an inspection by EPA or a state inspector, left room for defenses and arguments of interpretation and applicability. But now, companies must annually disclose noncompliance to the agencies, encouraged by the risk of making a materially false statement. Enforcement by these agencies is now much easier to carry forward, and companies. defenses are fewer. Nothing prevents EPA or a state agency from collecting two or three years of annual compliance certifications and filing them with a complaint and motion for summary judgment in a court. For all of these reasons, minimizing enforcement risk is a critical step for any entity certifying compliance.

While each company must certify compliance with each permit term and condition, there are ways to minimize your company.s enforcement risk before, during, and after submitting the annual compliance certification. Before submitting the annual compliance certification, you can minimize your enforcement risk by knowing the mechanics of the compliance certification, permitting maximum operating flexibility to minimize the likelihood of a deviation from a permit term or condition and considering mitigation opportunities throughout the year.

Knowing the mechanics includes, among other things, knowing the due date and leaving enough time to meet the deadline. Many states vary in the timing for the submission. Some require the submission annually after the Title V permit is issued, while others have a set date each year for all companies to submit their certifications. Knowing the mechanics also includes knowing to whom the certification is sent (EPA and the state); knowing the reports that will need to be included with the certification; and having enough time not only to assemble the information, but to put your best foot forward (described below) in the certification itself. Compliance certification has motivated many companies to adopt environmental management systems.

Permitting maximum operating flexibility is the most effective way to minimize enforcement risk. The time to permit maximum operating flexibility is prior to the issuance of the permit. The flexibility that will be granted varies from state to state. Some states insist on rigid pound per hour emission limits for each source, while others are more flexible. Some operating flexibility options include rolling averages and .bubbled sources. (such as heaters, boilers, or tanks). Alternate operating scenarios are another opportunity to minimize the likelihood of a permit deviation. For example, if emissions from the loading rack will be vented to a flare when the vapor recovery unit is not otherwise in operation, permitting this alternate operating scenario will decrease the likelihood of a permit deviation. In addition, in guidance issued in April 2002 on the federally permitted release exemption to CERCLA reporting of air releases, EPA clearly stated that facilities may create federally enforceable emissions limits for emissions from startup and shutdown that are incident to normal operations. (Guidance on the CERCLA Section 101(10)(H) Federally Permitted Release Definition For Certain Air Emissions, April 17, 2002). EPA even left the door open for permitting some malfunctions. Id. In the .global settlement. context, companies have been developing preventive maintenance and operations (PMO) plans for their sulfur recovery units. Incorporating your PMO plan into a federally enforceable permit condition, if permitted by the state, may also minimize deviations from the permit. Permitting emissions during tank cleanings, the use of alternate fuels during natural gas curtailment, and even refinery turnarounds should be studied with an eye toward minimizing deviations from Title V terms and conditions.

Because noncompliance will be disclosed in the annual compliance certification, there may be additional incentive throughout the year to consider EPA and state self-disclosure policies. Under EPA.s and many state self-disclosure policies, a self-disclosure must be made within 21 days after you know or should have known of the existence of the violation. Therefore, by the time the annual compliance certification is prepared, it is in all likelihood too late to make a self-disclosure. In addition, a self-disclosure will not qualify under EPA.s audit policy if the violation was about to be discovered by EPA. (Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations, May 11, 2000). According to the policy, disclosure to avoid imminent discovery by the agency does not qualify under the policy. In addition, the policy will not apply if the violation is a repeat violation in the past two years, resulted in substantial harm to the environment or other policy exclusions apply. Evaluating self-disclosure opportunities throughout the year should be considered as a means of minimizing enforcement risk, but it will have to be balanced against other considerations, including the likelihood of enforcement if a selfdisclosure is not made and the risk of disclosing too often and calling attention to the company.

In addition to self disclosure, EPA.s policy on excess emissions from startup, shutdown and malfunction may provide a safe haven. (Policy on Excess Emissions During Startup, Shutdown, Maintenance, and Malfunctions, September 1982). EPA.s policy provides enforcement discretion for excess emissions caused by circumstances entirely beyond the control of the operator. Many states have incorporated EPA.s policy into their regulatory programs. EPA has approved state implementation plan provisions that provide a defense to a claim for violation if the regulated entity can prove that the emissions were completely outside the control of the operator. (State Implementation Plans (SIPs): Policy Regarding Excess Emissions During Malfunctions, Startup, and Shutdown). One exception is that SIP provisions cannot be used to shield a source or group of sources that in and of themselves have the ability to cause an exceedance of the National Ambient Air Quality Standards or the Prevention of Significant Deterioration (PSD) increment. In addition, SIP provisions cannot shield a facility from claims for injunctive relief or citizen suit actions.

When submitting the annual compliance certification, please note that being perfect may cause your company to become a target of further investigation. EPA believes that 80 percent of refineries are out of compliance with PSD, the New Source Performance Standards Subpart J (Flaring), Leak Detection and Repair and the Benzene Waste Oil NESHAP. If you report 100 percent compliance with these programs, you may find EPA or a state agency showing up for an inspection.

When you are forced to report noncompliance, put your best foot forward. Report not only the violation, but the steps you have taken to abate and minimize any harm to the environment, as well as any corrective action you have performed to prevent recurrence and any other mitigating factors. If there is some question as to whether a violation has occurred and the company is reporting the issue as a deviation from a permit term and condition, preserve the legal argument that no violation occurred by documenting it in the compliance certification (or in a cover letter if the cover letter is incorporated into the compliance certification). If a violation was self-disclosed under a self-disclosure policy or was covered by a global settlement or other consent decree or administrative order (such as flaring covered by the stipulated penalty provisions of a global settlement consent decree), include this fact with the annual compliance certification. In general, EPA will not overfile if it feels that the noncompliance has been adequately addressed in another forum. In addition, if a release is covered by the EPA policy of excess emissions during startup, shutdown, maintenance or malfunction, include this fact in the compliance certification. Also include any applicable SIP provision that may provide for a defense or enforcement discretion for qualifying emissions.

While you should always put your best foot forward when reporting noncompliance, you should not assume that a violation exists based solely on agency guidance that may not be consistent with the plain language of the statute or regulations. Examples of agency interpretations that may not have been tested to date include the definition of .fuel gas. as articulated in the Koch determination. (Fuel Gas/FGCD Applicability; Process Upset Gas Exemption, December 2, 1999). In general, agency guidance is given substantial deference by the courts. However, EPA does not always prevail, and, in some cases, may not want to have the guidance tested. When disclosing a deviation based solely on agency guidance, note the inconsistency between the guidance and the regulatory requirement to preserve the legal defense. In addition, missing records are not necessarily indicative of noncompliance with an emission limit or standard. EPA and the state will have difficulty proving that an emissions exceedance occurred simply by virtue of the absence of the records. Explain in the compliance certification why you believe that you were in compliance with the emission limit even though records are not available.

To minimize the risk of making a false statement, the company should establish a policy for conducting a .reasonable inquiry.. When conducting the annual compliance certification, document compliance with the internal policy before certifying compliance. Detailed description of gray area determinations may minimize the risk of a false certification.

As a last step in the process to minimize enforcement risk in the next year, you should review the areas of noncompliance disclosed in the annual compliance certification and determine whether permitting fixes can eliminate the risk of repeating the same violations. In addition, evaluate operational and mechanical changes to the extent that the noncompliance was within the company.s ability to prevent. If a violation is something that cannot be corrected quickly, consider incorporating a compliance plan into your Title V permit. If the compliance plan and schedule is structured correctly, you will be in a position to certify compliance with your Title V permit even if you are not in compliance with the underlying requirement.

EPA is now armed with a powerful new enforcement tool. Petroleum refineries and Title V compliance certifications will remain an EPA and state enforcement priority in 2005. Because the risk of enforcement action is high and the consequences for the company and corporate officials are significant, taking steps beforehand to minimize enforcement risk is an important defense. For more information, please contact LeAnn Johnson-Koch of Piper Rudnick.s Government Affairs practice group in Washington, D.C., at 202.861.6442.

This article is intended to provide information on recent legal developments. It should not be construed as legal advice or legal opinion on specific facts. Pursuant to applicable Rules of Professional Conduct, it may constitute advertising.