This client alert focuses on the circumstances that could lead to criminal investigation or enforcement for environmental noncompliance during COVID-19, and provides four practical pointers on how to avoid those pitfalls. On March 30 and April 20, we published an overview of the U.S. Environmental Protection Agency’s (EPA) and similar state agencies’ compliance enforcement policies that have been implemented in response to COVID-19. (See U.S. EPA alert here and state EPA alert here.) These alerts are aimed at providing a practical, high-level review of the options available to entities that may be struggling to meet environmental compliance obligations under applicable regulations and permits given the growing impact of COVID-19.

It is important to remember, however, that recent U.S. EPA and state agency guidance on temporary compliance enforcement is not an across-the-board relaxation of environmental compliance obligations and enforcement. Rather, the common theme, or requirement, in these policies continues to be that instances of specific noncompliance may qualify for enforcement discretion only if the noncompliance stems directly from COVID-19-related complications. Otherwise, U.S. EPA and state EPA counterparts make clear that regulated entities should still undertake every effort to meet their compliance obligations, and must “operate their facilities in a manner that is safe and protects the public and environment.” (See U.S. EPA Memo at 4.)

As such, the scope of any enforcement discretion policy necessarily depends on precisely what instances of noncompliance regulators will accept as “caused” by COVID-19. If a routine inspection or reporting deadline is missed because environmental personnel have been re-tasked to ensure a company’s supply chain is unaffected, will that be excused? What about an environmental compliance officer who knows emissions tests and trainings are being continually rescheduled because he or she must remain home to care for a sick family member? Is noncompliance under these scenarios “caused” by COVID-19, or are excusable causes narrowly limited to things like travel restrictions, social distancing restrictions and closure of sampling laboratories?

Answers to these questions are not merely theoretical, as versions of these hypothetical situations are likely playing out every day. Moreover, the uncertainty and subjectivity of enforcement discretion in practice – versus simply on paper – creates risks for entities that fail to properly navigate and document their way through any instances of noncompliance.

In worst-case scenarios, unsuspecting entities and environmental compliance personnel who believe they are relying on current discretionary enforcement policies may subsequently find themselves subject to a criminal investigation or enforcement action for periods of noncompliance during COVID-19. Indeed, as U.S. EPA explicitly notes in its March 26 memorandum, its temporary policy does “not apply to any criminal violations or conditions of probation in criminal sentences.” (See U.S. EPA Memo at 2.) “EPA’s Criminal Investigative Division remains vigilant and is prepared to pursue violators who demonstrate a criminal mens rea.” (Id. at 7.)

This alert is therefore intended to provide an overview of circumstances that could lead to criminal investigation or enforcement for environmental noncompliance during COVID-19, and our high-level recommendations for avoiding pitfalls that create a risk of future liability.

HINDSIGHT IS 20/20

History shows that periods of discretionary enforcement and leniency during national crises can often be followed by a return to active compliance enforcement that seemingly forgets about the circumstances and justifications warranting enforcement discretion in the first place. For example, during the 2008 financial crisis, Congress passed the Troubled Asset Relief Program (TARP) and provided $700 billion to prop up the financial system by purchasing troubled assets from financial institutions. Although safeguards were put in place to protect taxpayer dollars, companies that applied for money without proper compliance plans and less-than-ideal compliance controls were later prosecuted for false statements and misuse of TARP funds. This enforcement effort ran contrary to the initial encouragement to apply for such assistance in the midst of a frantic financial meltdown. In a similar manner, environmental noncompliance that an entity or compliance official believes will be excused as a result of COVID-19 may instead ultimately be viewed as an aggravating factor in subsequent enforcement actions, regardless of initial government assurances.

Despite the growing list of temporary environmental compliance enforcement discretion policies, it is imperative that regulated entities and environmental personnel do not turn a blind eye to, or otherwise fall behind on, their environmental compliance obligations with the hope that regulators will subsequently excuse periods of noncompliance during COVID-19. The reality is that temporary enforcement discretion is just what it sounds like – temporary and open to interpretation. Regulators are usually in the business of enforcing environmental laws, not routinely excusing the compliance they require. And even when mandated from the top down, enforcement discretion is typically implemented by a mix of rank and file regulators, each with different agendas and views on compliance that cannot be predicted.

Accordingly, we noted in our previous alert that “[w]ith hindsight almost always being 20/20 in the context of environmental enforcement ... companies may want to proceed with caution and avail themselves of COVID-19-related federal and state environmental enforcement discretion as a last resort.” But for regulated entities with no alternative option, the following guidance should be considered before any decision to rely on temporary enforcement discretion.

CRIMINAL ENFORCEMENT

As a regulated entity considers how to navigate its environmental compliance obligations, it is important to understand the mens rea (i.e., requisite level of culpability) the government must show to prosecute individuals and companies. In general, environmental statutes require the government to prove that the wrongdoer knowingly violated an environmental law. For example, under the Clean Air Act, in order to prosecute a company for violating provisions of the National Emission Standard for Hazardous Air Pollutants, the government must prove that the company knowingly violated its permit. (See 42 U.S.C. § 7413(c)(1).)

Moreover, U.S. EPA has stated that its temporary enforcement policy will “not provide leniency for intentional criminal violations of law,” and many environmental statutes, including both the Clean Air Act and the Clean Water Act, also contain criminal penalties for both negligent violations and false statements. (See U.S. EPA March 26 Press Release.) As such, even if an entity only negligently released hazardous air pollutants and the release was not “unavoidable as a result of COVID-19 restrictions,” the company and its responsible officers may be open to criminal prosecution. (See U.S. EPA Memo at 7.)

U.S. EPA’s criminal prosecution of the Wood Group Production Services Network Inc. (Wood Group PSN) provides a cautionary tale of how failing to keep up with compliance obligations can quickly escalate into multiple criminal investigations. (See EPA case summary.) Between 2011 and 2014, employees at the company’s Cameron, Louisiana, office failed to conduct required routine safety and environmental inspections due to labor and transportation shortages. Nevertheless, the company continued to submit false statements and reports to the Bureau of Safety and Environmental Enforcement. Then, on Nov. 16, 2012, disaster struck when an explosion occurred during construction in the Gulf of Mexico. The explosion occurred after a company representative had stopped issuing “hot work” permits and conducting all-hands safety meetings and instead “delegated hot work permitting to a less experienced operator.” (Id.) The fire and explosion killed three construction workers. In addition to the manslaughter charges brought against the co-defendants, individual Wood Group PSN employees faced criminal charges under the Clean Water Act. The company was also ordered to pay $7 million for its false statements.

To be sure, Wood Group PSN’s conduct, and the outcome it caused, was extreme. But this example shows how risks and unforeseen issues caused by routine noncompliance can quickly and irreversibly spiral into much bigger – and criminal – issues down the road. Regulated entities struggling to meet compliance obligations during COVID-19 should learn from these mistakes and take a different, more proactive approach.

RECOMMENDATIONS

A review of existing temporary enforcement discretion policies leads to the following high-level recommendations for regulated entities that may seek temporary compliance relief. Of course, specific questions and guidance should be analyzed on a case-by-case basis in conjunction with counsel and environmental consultants. But in general, we believe that by working closely with applicable regulators and strictly documenting the justifications for seeking temporary enforcement discretion, regulated entities can both (1) avoid after-the-fact allegations of knowing violations, and (2) demonstrate they undertook “good faith efforts to comply with their obligations in this difficult time” and thereby avoid negligence violations. (See U.S. EPA Memo at 7.)

1. Ensure Your Noncompliance Is Eligible for Temporary Enforcement Discretion. Some instances of environmental noncompliance are explicitly excluded from temporary enforcement discretion policies, or at least appear to be entitled to less leniency. For example, U.S. EPA’s current policy “does not apply to activities that are carried out under Superfund and RCRA Corrective Action enforcement instruments.” (Id. at 2.) Nor does it eliminate obligations to immediately report and respond to operations impacted by COVID-19 that “may create an acute risk or an imminent threat to human health or the environment” (e.g., failure of air emissions controls or wastewater treatment systems, accidental or unauthorized releases). (See id. at 4-5.) Similarly, CalEPA is still prioritizing its focus on and investigation of instances of noncompliance that jeopardize air quality based on COVID-19 risk factors. Several state agencies are also carving out exceptions for ongoing remediation at sites where contamination is already documented. Accordingly, regulated entities must complete an initial assessment of whether specific instances of noncompliance are even eligible for temporary enforcement discretion (based on the applicable agency policy) before falling behind on any compliance obligations with the expectation that temporary relief will be granted.
2. Start a Dialogue With Regulators Before Falling Out of Compliance. Early and frequent communication with regulators, in writing, is critical to protect against subsequent investigations of noncompliance. The safest course is to engage with the applicable regulator as red flags start to arise and before COVID-19 causes any noncompliance. Certain state agencies, such as CalEPA, are explicitly conditioning any enforcement discretion on such prior notification: “[R]egulated entities that cannot meet a specific regulatory requirement due to emergency government directives or a specific hardship must contact the appropriate CalEPA board, department or office before falling out of compliance.” (CalEPA Memo, emphasis added.) The Texas Commission on Environmental Quality (TCEQ) likewise notes: “TCEQ is not offering enforcement forbearance where an entity fails to report its noncompliance.” (TCEQ Memo, emphasis added.) Taking a proactive approach with regulators helps ensure the regulated entity is in control of the process (instead of being reactionary), and is strong evidence that the entity or compliance personnel are engaged in good faith efforts to meet their compliance obligations.
3. Document Precisely How COVID-19 Disruptions Hhave Caused Specific Instances of Noncompliance. As explained above, enforcement discretion is limited to instances of noncompliance that are directly caused by COVID-19. But it remains unclear what types of circumstances regulators are prepared to accept as “COVID-19 related.” Thus, diligently maintaining documents, communications with employees/consultants/regulators, government press releases, agency guidance memos, etc., as noncompliance becomes more and more likely will best prepare an argument for why COVID-19 has prevented an entity from being in compliance, as opposed to trying to piece together documents and justifications after the fact. Ideally, the specific reasons why COVID-19 has prevented compliance will be communicated, and recognized (in writing), by regulators in No. 2 above. In the event of subsequent investigations for noncompliance, having this documentation and correspondence from regulators will go a long way in demonstrating a knowing compliance violation did not occur. And under many temporary enforcement policies, regulated entities that are granted temporary enforcement relief or alternative compliance options are expressly required to maintain adequate records of agreements with regulators concerning temporarily excused noncompliance.
4. Undertake All Practicable Efforts to Limit Periods of Time Out of Compliance. A regulated entity that successfully obtains temporary enforcement relief is not protected indefinitely. Rather, as explained in U.S. EPA’s March 26 memorandum (at 3), an entity should be able to demonstrate precisely how it undertook its best efforts to return to compliance as soon as possible. As such, obtaining temporary relief is only half of the equation. Entities that receive temporary enforcement relief must continue to strictly document why compliance is prevented by COVID-19 complications until they are able to fully come back into compliance. This documentation should show, at a minimum, consistent and meaningful efforts to address and solve the complications preventing compliance. The ultimate goal is to easily demonstrate in subsequent investigations or compliance enforcement actions (should they unfortunately arise) that even after temporary relief was granted, the entity continued its best efforts to comply and did not simply take advantage of COVID-19 to neglect its compliance obligations.

CONCLUSION

In short, while many questions about COVID-19-related environmental noncompliance and subsequent criminal enforcement remain unanswered, we believe that through early and frequent communication with regulators and steadfast documentation, regulated entities can position themselves to avoid compliance pitfalls should they need to rely on temporary enforcement discretion.