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Combat Your New Air Compliance Challenges with Compliance Audits

February 14, 2008

As you are probably aware, companies that emit volatile organic compounds ("VOCs") in southeast Texas – especially those with frequent upsets and toxics releases – will likely face much stricter scrutiny in the near future.  Significant potential compliance, enforcement, and liability risks can be mitigated by performing well-designed air quality audits before you find yourself directly in the crosshairs of federal, state, and local regulators or environmental groups on these issues.  Bracewell & Giuliani is helping several clients develop and implement targeted, independent audits to help get their house in order in the event of inspection, enforcement, or litigation and to help favorably resolve potential liability exposures. 

As noted above, companies are likely to see greater scrutiny and enforcement and litigation risk in the immediate future for several reasons:

  • City of Houston Toxics Initiative – Mayor Bill White proposed a draft ordinance to regulate toxics.  Mayor White has tabled his ordinance temporarily but has given industry a six month ultimatum to reduce toxics “or else” – and currently we are in month three.

  • Shell Deer Park Lawsuit – Environmental Defense and the Sierra Club recently filed a federal lawsuit regarding upset emissions.  Other facilities may face similar claims.

  • TCEQ appears to be narrowing its interpretation of its "affirmative defense" for upsets

  • Many industries and facilities have recently completed or soon will complete permitting for planned startup, shutdown, and maintenance ("SSM") permitting.  This moment offers an opportunity for a clean break from the past and clearer path forward on SSM issues.

  • Bracewell & Giuliani attorney Rich Alonso, who recently joined the firm after serving as U.S. EPA's second ranking official for stationary source enforcement, reports that future enforcement activity will almost certainly focus even more on upsets and toxics releases.

  • EPA, TCEQ, and others are now focusing on perceived emission inventory errors and unpermitted emissions that contribute to non-attainment status (including the recent DIAL study suggesting emissions inventories could be off by a factor of 10 or more).

  • Environmental Defense and the Sierra Club have also petitioned EPA to revoke TCEQ's Clean Air Act permitting authority and prohibit the construction of new or modified sources in Texas.  The petition reflects attention to the details of TCEQ's permitting and enforcement programs and may cause both TCEQ and EPA to scrutinize emitting facilities and their permits even more closely.

As these events converge to present heightened challenges for regulated industry, we have found carefully constructed environmental audits to be an important tool for many of our clients.  An audit can help:

  • Determine what problems may exist and allow a company to address the problems before litigation or enforcement occurs

  • Concerns identified through audits, if properly managed and disclosed, may be eligible for a substantial reduction of or immunity from penalties.

  • Create an opportunity for careful self-evaluation that may be protected from discovery in a civil suit by the City of Houston, a citizen suit, or an agency enforcement action.  With potential lawsuits by environmental groups and the City, we believe companies might find it useful to better protect communications and proactively address enforcement exposures.

  • Notably, the Texas Audit Privilege Act can be valuable, but it may provide far less protection – especially in federal and criminal contexts – than the attorney-client privilege.  In addition, the audit-related penalty forgiveness programs overseen by both EPA and TCEQ contain important traps for the unwary for companies that audit with respect to Clean Air Act compliance.

Bracewell & Giuliani is nationally recognized for its work on environmental audits and audit privilege issues.  Every day we work with our clients' management and environmental personnel and with top independent environmental consulting firms to design and implement audit programs that can best help companies achieve and maintain compliance, appropriately manage and correct identified concerns, and protect their legal interests with respect to privilege, enforcement, and liability.   We believe that this era of increased attention to SSM and other air emissions concerns warrants careful consideration of well-designed compliance audits as a tool to help your company get ahead of these issues and to become confidently prepared for inevitably increasing scrutiny.