Accidents happen, and an accidental release of chemicals can be devastating to human health and the environment. The short- and long-term effects of an accidental chemical release can be astronomical and may include loss of life, damage to property, and costs expended to respond to and clean up the release.
The effects of a serious spill can also be legal, with government investigations at a minimum, and potential civil and criminal exposure as well. That exposure may be personal in many cases.
The 1984 accidental chemical release from a pesticide plant in Bhopal, India, which resulted in the immediate death of more than 3,800 people, brought forth seismic changes in emergency planning and accident prevention at facilities producing, storing or using hazardous chemicals.
The U.S. Congress responded to the Bhopal incident by enacting new environmental laws, such as the Emergency Planning and Community Right-to-Know Act (EPCRA) in 1986, and by amending other laws to impose legal duties on owners and operators of numerous facilities throughout the nation to inform the public of the presence of chemicals, to aid local emergency responders to mitigate releases, and to develop release prevention programs.
As an incentive to comply with these new environmental laws, Congress included significant civil and criminal penalties for organizations, responsible corporate officers, and other “persons in charge” that knowingly violate applicable provisions of the statutes.
Until recently, one of the most significant release prevention laws enacted by Congress in the wake of the Bhopal incident was largely unused as a criminal enforcement tool by the U.S. Environmental Protection Agency.
In 1990, Congress substantially amended the Clean Air Act (CAA). Those amendments included the addition of Section 112(r), 42 U.S.C. § 7412(r), to prevent accidental releases of “extremely hazardous substances” and other “regulated substances” that are known to cause or may reasonably be anticipated to cause death, injury, or serious adverse effects to human health or the environment.
Section 112(r)(1), which is commonly known as the CAA General Duty Clause, imposes a general duty upon owners and operators of facilities where extremely hazardous substances are produced, used, or stored, to identify potential hazards that may result from accidental releases of hazardous substances, to design and maintain a safe facility, and to minimize the consequences of a release should one occur.
Section 112(r)(7) and the regulations promulgated by the EPA pursuant to it, which are commonly referred to as the Risk Management Plan (RMP) program, require owners and operators of certain facilities that produce, store, or use regulated substances above threshold quantities to prepare and implement written RMPs, which are often highly complex and expensive to prepare and maintain. The RMPs apply to a wide range of industries, including many facilities with large ammonia refrigeration systems.
For more than a decade, the EPA apparently did not seek criminal prosecution of any individuals who violated Section 112(r). In fact, an Aug. 15, 2001, EPA document titled “Combined Enforcement Policy for Section 112(r) of the Clean Air Act” explicitly provided that the policy did not address criminal sanctions.
However, there appeared to be a major shift in EPA policy in the late 2000s as the EPA began to aggressively seek criminal prosecution of Section 112(r) violations. In 2007 and 2008, the EPA obtained guilty pleas from two corporations based on different fact patterns.
There may be two policy considerations that are driving the increased use of criminal prosecutions under Section 112(r): protection of the community and worker safety.
As will be discussed further in this piece, the criminal penalties available to the EPA are more severe than those available to the Occupational Safety and Health Administration (OSHA). Companies must now be cognizant of the interplay between the OSHA Process Safety Management (“PSM”) regulations and the CAA Section 112(r) to potentially avoid becoming “knowing” violators subject to criminal penalties.
CAA RMP Regulations
Congress enacted CAA Section 112(r)(7), 42 U.S.C. § 7412(r)(7), to prevent, and in some cases punish, accidental releases of “regulated substances” above specified quantities. Pursuant to authorization under Section 112(r)(7), the EPA promulgated the RMP regulations set forth in 40 CFR Part 68 in 1996.
The RMP regulations apply to owners and operators of facilities that manufacture, use, and/or store at least one “regulated substance” above a specified threshold quantity. These regulated substances and threshold quantities are identified in 40 CFR § 68.130.
Owners and operators subject to these regulations must develop and implement a written RMP consisting of an executive summary, registration information, an off-site consequence analysis, a five-year accident history, a release prevention program, and an emergency response program.
The RMP regulations focus on process safety information, identifying process hazards, employee training programs, and identifying risks to those living and working in the vicinity of the facility. OSHA promulgated and enforces substantially similar regulations known as Process Safety Management (PSM), but the CAA RMP regulations are more expansive and focus on potential risks to members of the community. OSHA and the EPA have stated that the agencies are working together to interpret and enforce the PSM and RMP programs consistently.
Section 113(c)(1) of the CAA, 42 U.S.C. § 7413(c)(1), imposes criminal penalties for knowing violations of certain provisions of the CAA, including Section 112(r). Criminal penalties include fines and/or imprisonment of up to five years. The U.S. Supreme Court, referring to the maxim that ignorance of the law is not a defense, has held that the “knowledge requisite to knowing violation of a statute is factual knowledge as distinguished from knowledge of the law,” Bryan v. United States, 524 U.S. 184, 192 (1998). Federal courts have routinely applied this “knowing” degree of scienter to environmental statutes, requiring the government to demonstrate a knowledge of the facts and not the law.
An apparent turning point in the use of criminal prosecution of RMP regulations occurred in March 2005 when an explosion at a BP Products North America Inc. petroleum refinery in Texas City, Texas, killed 15 workers and injured another 170. After an extensive investigation by the EPA and OSHA, the government charged BP Products in 2007 with a felony violation of the RMP regulations.
BP Products entered a guilty plea and paid a fine of $50 million — the largest criminal fine assessed for a CAA violation and the largest criminal fine imposed for a fatal industrial accident.
Additionally, BP Products was placed on three years of probation. BP Products admitted to several violations of the RMP regulations, including failing to establish and implement written procedures to maintain the ongoing integrity of process equipment by, in part, continuing to use equipment despite the knowledge from a 2003 inspection that the equipment was deficient.
BP Products also paid additional civil penalties for additional CAA violations as well as violations of the OSHA PSM regulations. Interestingly, the government decided to prosecute BP Products under the RMP regulations because the CAA criminal penalties are substantially higher than the OSHA regulations, which do not allow a felony penalty and contain a lower maximum default fine. We note that the government did not go after any individuals for the crime, but the potential exposure for individuals does exist.
The government filed a subsequent felony charge under the RMP regulations in 2008 against Hershey Creamery Co. for a facility in Harrisburg, Pa. Unlike the BP Products criminal charge, the Hershey matter did not involve a chemical release or incident that resulted in injury to human health or property. In fact, the criminal charge was based entirely on paperwork violations. The Hershey case demonstrates the apparent interplay between OSHA PSM regulations and demonstrating a knowing violation of the RMP regulations.
According to the facts contained within the criminal information, Hershey had certified to the EPA in 1999 and 2004 that the company had developed and implemented a compliant RMP. The September 2004 certification was submitted approximately two months after an OSHA inspection revealed violations of the PSM regulations. Hershey subsequently paid a civil penalty of $100,000 to settle the 2004 OSHA violations.
In October 2005, the EPA performed an RMP inspection of the Hershey plant. One of the documents reviewed by the EPA was a compliance audit report by a consultant retained by Hershey that concluded the RMP and PSM programs were not being implemented.
The EPA issued a Compliance Order to Hershey in December 2006 identifying specific failures of Hershey to comply with the RMP regulations and ordering Hershey to comply with RMP regulations by certain dates. A follow-up inspection by the EPA in April 2007 revealed that Hershey was in compliance with the RMP regulations.
Nonetheless, the government filed the criminal charges in September 2007 accusing Hershey of knowingly violating the RMP regulations between September 2004 and April 2007. The government noted in the charging instrument that OSHA had issued three administrative penalties against Hershey between 1998 and 2006, including two for PSM violations. Hershey entered a guilty plea to the RMP charges in September and paid a fine of $100,000.
It is apparent from the charging instrument that the government was relying on the OSHA PSM violations to prove that Hershey knowingly violated the RMP violations. The criminal information specifically notes that the PSM and RMP regulations are substantially similar in many areas.
Despite knowing in 2004 that OSHA had determined that Hershey was not in compliance with the PSM regulations, Hershey certified to the EPA that the company had developed and implemented a compliant RMP, which was clearly not the case.
It is obvious that the EPA and OSHA are working together to enforce the release prevention programs covered under the RMP and the PSM. It is also apparent that the government will not hesitate to file criminal charges for violations of Section 112(r), especially in situations where a catastrophic event has resulted in multiple deaths or where a facility has demonstrated a history of noncompliance. Additionally, the government has shown a preference for charging companies under the CAA, as the penalties available are significantly more severe than OSHA’s criminal penalties.
Over the past few years the EPA has provided teeth to Section 112(r) of the CAA. Companies that are subject to the CAA RMP regulations should diligently maintain their RMPs by performing regular audits and immediately correcting any deficiencies. In light of the Hershey case, companies must also recognize that prior OSHA PSM violations may be interwoven with a government claim of a knowing violation of Section 112(r).
Michael C. Murphy is an associate attorney with Phillips Lytle LLP. He is a member of the firm’s Environment and White Collar Criminal Defense and Government Investigations Practice teams. He counsels clients on environmental compliance and permitting, brownfield redevelopment, site remediation, and environmental issues arising out of corporate and commercial real estate transactions. He can be reached at firstname.lastname@example.org or (716) 504-5748.
Alan J. Bozer is a partner with Phillips Lytle LLP and is co-chair of the firm’s White Collar Criminal Defense and Government Investigations Practice Team. He is active in trying criminal and civil cases, and handles appellate and arbitration work as well. He can be reached at email@example.com or (716) 504-5700.