March 24, 2020Client Alert

COVID-19 and Environmental Compliance

Companies across the U.S. face substantial disruptions, both to business operations and to supply chains, due to the expanding coronavirus (COVID-19) pandemic. For entities with environmental compliance obligations, these disruptions may cause delay or other unanticipated hardship in satisfying permit or other stipulated conditions.

While other federal agencies have announced blanket extensions of certain compliance terms and deadlines, the U.S. Environmental Protection Agency (EPA) has not yet taken sweeping measures to relieve regulatory pressure in light of this unprecedented crisis. State regulators have likewise indicated that relief will be granted on a case-by-case basis.

Still, a number of environmental statutes and regulatory instruments do contemplate certain relief—either full or partial—in the event of extreme circumstances. Companies should be aware that such options may exist, and should plan ahead to communicate productively with regulators when it comes to the compliance, cleanup, or reporting requirements most likely to be affected during the pandemic.

Emergency Exemptions and “Acts of God”

Environmental statutes may include various “exemptions,” allowing for the limited suspension of applicable requirements under enumerated circumstances. Relevant examples include:

  • Sec. 18 of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA): Authorizes EPA to allow emergency exemptions for unregistered uses of pesticides to address emergency conditions. In fact, EPA recently announced an expanded list of approved disinfectant products for combating the coronavirus.
  • Sec. 110(f) of the Clean Air Act (CAA): Authorizing the President to declare a national or regional emergency, during which the Governor of an affected state could suspend for up to four months certain provisions for achieving air quality standards, excess emission penalties, and compliance schedules. Although President Trump recently declared a national emergency, he has not yet invoked this authority.
  • Sec. 1416(a) of the Safe Drinking Water Act (SDWA): Authorizes states to exempt public water supply systems from maximum contaminant levels due to “compelling factors,” including economic factors.
  • 40 C.F.R. § 270.1(c)(3), Resource Conservation and Recovery Act (RCRA) Regulations: Authorizes exemption from the RCRA permitting and substantive requirements for activities taken in immediate response to a discharge of hazardous waste or an imminent and substantial threat of discharge of hazardous waste.

More typically, environmental permits or consent agreements related to pollution prevention or corrective action may include force majeure–type exceptions, recognizing “acts of God” or emergencies beyond the control of the regulated entity. Note that pandemics may qualify as an emergency under some policies, but “acts of God” are highly subject to limiting language and may have to meet certain criteria. Note also that regulated entities claiming an exception may be required to notify regulators immediately or within a narrow window of time (e.g., 72 hours or less) following the force majeure event.

Enforcement Defenses and Agency Discretion

For companies unable to meet compliance or cleanup obligations due to staff, contractor, or supply shortages, affirmative defenses may also be available if the regulated entity is legitimately unable to meet its obligations due to circumstances beyond its control. Further, air permits may contemplate “malfunction and upset” defenses in the event of unpreventable deviations from permit terms.

These defenses will be evaluated by regulators on a case-by-case basis, and will likely require an evidentiary showing that emergency conditions actually and substantially impacted the entity and precluded its ability to fully comply. Consequently, regulated entities are advised to diligently document all compliance efforts taken, even under the emergency condition. This is especially true when the environmental program at issue requires the filing of periodic compliance certifications (e.g., the Clean Air Act operation permit program). 

In general, EPA prohibits the issuance of “No Action Assurance” letters (indicating the regulator will not pursue enforcement for violation of a specific environmental requirement) outside of formal enforcement proceedings. Even so, exceptions to this policy may be available (1) where authorized by statute; or (2) “in extremely unusual circumstances where an assurance is clearly necessary to serve the public interest and which no other mechanism can address adequately.”

Historically, EPA has provided the business sector with other, more informal displays of discretion—notably for extreme weather events. At the state level, some environmental regulators are starting to issue guidance for submitting enforcement discretion requests. Early examples of such guidance contemplate extension of emissions inventory and annual compliance report deadlines and “additional discretion” as warranted by the circumstances. As the COVID‑19 outbreak continues, more states are likely to publish similar guidance.

Other Considerations for Compliance

Practically speaking, regulated entities may find it most difficult in the short term to comply with routine record-keeping and reporting requirements, due to staffing shortages under stay-home orders or similar restrictions. Companies might also experience disruptions in their supply chains or with contractors that provide services necessary for compliance (stack testing, LDAR monitoring, equipment calibrations, pollution control device media). Some companies might temporarily shut down due to state or federal orders, or due to financial challenges.

Wherever possible, it is always advisable to make every effort to comply with applicable rules and deadlines, including designating alternative employees to share responsibility for ensuring compliance. However, regulated entities should also consider when and how to inform regulators if a lapse is anticipated or expected. Proactive communication and prompt disclosure of any noncompliance is likely to increase the chances of enforcement discretion, and in many jurisdictions may qualify the self-reporting entity for audit immunity or other reduced-penalty programs. Many agencies now have established a specific point person to facilitate these interactions.

Note that states implement most environmental programs pursuant to a delegation from the federal EPA. EPA retains independent enforcement authority in most circumstances, and a company should consider whether it should reach out to both state and federal regulators when facing compliance challenges.   

For more information about the business and legal implications of the coronavirus pandemic, please contact your Michael Best attorney or visit our COVID-19 Resource Center. We’re here to help.

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