Environmental Audit Privilege & Immunity
Many companies conduct an environmental compliance audit to identify areas of non-compliance and to address the identified areas. The MDEQ recognizes the importance of these audits. As a method of encouraging environmental compliance audits, the MDEQ gives companies incentives to conduct and disclose the audit results by offering immunity against violation, fines, and penalties.
Environmental compliance audits are internal evaluations with the purpose of identifying past or current non-compliance, preventing non-compliance, improving compliance or improving an environmental management system. Environmental audit reports are the resulting report of the audit. Certain information must be included in the audit report to be eligible for confidentiality and immunity. The audit report must include an implementation plan that corrects past non-compliance, improves existing compliance management systems, or prevents future non-compliance.
The environmental audit program has two major provisions:
Establishes limited privilege status for an environmental audit. This means that certain information contained in the environmental audit report can be held confidential (privileged) and is not accessible to a state or local government agency or the public.
Provides immunity from state administrative or civil fines and penalties and certain criminal penalties and fines for negligent acts or omissions (except in the case of gross negligence) for violations that are discovered through an environmental audit, provided they are voluntarily and promptly corrected and disclosed to the appropriate agencies.
The purpose of the Environmental Audit program is to encourage businesses to conduct environmental audits and to promptly disclose and correct any violations found. Immunity from criminal fines and penalties is only available for negligent acts or omissions and not acts of gross negligence. To be considered voluntary, the disclosure must make a showing that all of the following conditions are met:
The disclosure of the information arises out of an environmental audit;
The audit occurs before the person is made aware that he or she is under investigation by a regulatory agency;
The disclosure is made promptly after knowledge of the environmental violation is obtained by the person; and
The person initiates an appropriate and good-faith effort to achieve compliance, pursues compliance with due diligence, and promptly corrects the violation after its discovery.
The penalty immunity does not apply when:
A person has been found guilty of knowingly committing a criminal act;
A person has committed a series of violations that constitute a pattern of violations within a three-year period prior to the date of the voluntary disclosure;
The violation results in a substantial economic benefit and gives a clear advantage over business competitors;
The violations have resulted in serious harm or imminent and substantial endangerment to human health or the environment; or
There is a violation of an administrative or judicial order.
The immunity does not eliminate the responsibility to correct the violation, conduct necessary remediation, or pay damages. This means, for example, that if a company determines through an environmental audit that it had a spill of gasoline on the ground, the company must address the situation. This could include investigations, remedial plans, and/or remediation activities.
CFR has been conducting environmental audits for nearly 30 years. Contact CFR for more information about conducting these specific audits.