A Clean Start: Understanding the EPA’s Recent Audit Program for New Upstream Facility Owners

On 29 March, the US Environmental Protection Agency (EPA) finalized a tailored voluntary disclosure program aimed at new owners of upstream oil and natural gas facilities and designed to encourage new owners to find, correct, and self-report violations of the Clean Air Act (CAA), in particular CAA violations associated with emissions from storage vessels. The EPA expects the program to provide improved regulatory certainty to upstream oil and gas operators who want to address CAA violations in a timely and cost-effective manner, in addition to increased environmental protection and pollution reductions.

The program is available to owners that recently acquired oil and gas exploration and production facilities (e.g., wellsites along with associated tank batteries and vapor-control systems) who satisfy certain eligibility criteria. If a new owner is able to meet these criteria, it can enter into the New Owner Audit Program Agreement, which specifies the vapor-control system engineering and design analysis, field survey, corrective action guidelines, and the schedule for corrective actions the owner must conduct and meet. 

A new owner may also audit the facilities it identifies in the agreement for other types of CAA violations. Once these activities are completed to the satisfaction of the EPA, the EPA will absolve the owner of civil liability for violations discovered, disclosed, and corrected during the audit process. This approach to resolution of civil liability is comparable to the benefits offered under the Texas Environmental, Health, and Safety Audit Privilege Act but goes beyond the benefits offered under EPA’s general self-audit policy, which, even if an owner meets the criteria to absolve itself of the penalty component associated with the gravity of a violation, still allows the EPA to assess an economic benefit component. 

Specifically, the following requirements must be met in order for a new owner of upstream facilities to be eligible for the program:

  • The new owner was not responsible for environmental compliance at the subject facilities before the date of the acquisition
  • Neither the new owner nor the previoous owner may have held the largest ownership share of the other entity before the acquisition, and the two entities may not have had a common corporate parent
  • To be considered a “new owner,” an owner must notify the EPA of its intent to participate in the program within 9 months of the acquisition or program finalization (29 March 2019)

Once admitted to the program, the new owner will consult with the EPA to determine the scope of the audit, the facilities covered, and the length of the audit. In order to receive the benefits of the program, the new owner must successfully complete all obligations, including recordkeeping and reporting requirements, in addition to the technical requirements under the agreement.

 Read the full story here.

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