On August 5, Governor Evers signed into law 2021 Wisconsin Act 78, passed in the Legislature as Senate Bill 151. Act 78 amends and updates the guidelines for Wisconsin’s environmental compliance audit program, sometimes referred to as “Enviro-Check.”
Like the EPA Audit Policy, the Wisconsin audit program gives regulated businesses the opportunity to voluntarily discover, disclose, and correct violations in exchange for limited liability and/or lower penalties for noncompliance. Despite their shared goal of encouraging proactive self-regulation, the programs employ different timelines and procedures. Act 78 aligns more of the state audit program’s policies and procedures with the EPA’s Audit Policy, a move that the legislation’s supporters hope will incentivize businesses to take advantage of the state program.
Reducing Administrative Burden
First, Act 78 eliminates the requirement to provide notice to the Wisconsin Department of Natural Resources (WDNR) 30 days prior to beginning an audit. However, businesses will still be required to submit a signed statement acknowledging that liability protections do not extend to any violations discovered before the audit begins.
Aligning with the EPA’s Timeline
Under prior law, all regulated entities had 90 days to correct violations from the date it submits the audit report to WDNR. Act 78 modifies the default timeline to correct violations to 60 days, with an extension to 180 days for qualified small business stationary sources. This timeline aligns with EPA’s Audit Policy, which impacts businesses differently depending on their size. Subject to WDNR determination, a small business stationary source is generally independently owned and operated and not dominant in its field of operation, employs 100 or fewer individuals, emits less than 50 tons per year of any regulated pollutant, and emits a combined total of less than 75 tons per year of all regulated pollutants.
Additionally, a small business stationary source may take up to 360 days if the correction involves “pollution prevention measures,” which are practices that reduce or eliminate the creation of pollutants. Examples include modifying equipment, changing standard procedures, and redesigning products.
As under current law, a regulated entity may propose a lengthened compliance schedule for correcting discovered violations. Act 78 removes the requirement that DNR issue public notice and seek comment if the regulated entity proposes a compliance schedule.
Incentivizing Small Businesses
Act 78 adds potential lenience for small businesses if the compliance audit reveals a criminal violation. Under prior law, when determining whether to pursue criminal enforcement action, WDNR and the Wisconsin Department of Justice were directed to consider if the regulated entity acted with due diligence and reasonable care, both before and after the violation. Act 78 adds the requirement to also consider if the entity is a small business stationary source that has committed a minor violation.
Businesses should note some key differences remain between Wisconsin’s audit program and the EPA Audit Policy. For example, the Wisconsin program caps penalties at $500 per violation if corrected within the required time period. In contrast, the EPA provides up to 100 percent reduction for gravity-based penalties (the portion of a penalty assessed based on the severity of the violation) but retains the discretion to impose penalties to recapture any economic benefit the business may have received as a result of noncompliance. The Wisconsin statute considers economic benefit in a different context – businesses may be ineligible for the program altogether if a violation resulted in a substantial economic benefit that gave them a clear advantage over competitors. Wisconsin’s program also provides no ability to voluntarily disclose and receive immunity for violations that are discovered outside of the context of an audit. The EPA Audit Policy provides for a partial reduction in gravity-based civil forfeitures when the violation is not discovered through a “systematic discovery process,” such as an audit.
Further improvements to the audit program should be considered to increase participation. These could include extending audit protections to violations discovered through an environmental management system; providing protections to new owners of a business for violations discovered during the due diligence phase prior to acquisition; and protecting audit-related documents from public disclosure.
Both Wisconsin’s audit program and the EPA’s Audit Policy can be valuable tools for businesses to self-assess, prevent rule violations, streamline compliance, and protect the environment. The new law will likely make Wisconsin’s environmental compliance audit program more appealing, especially for some smaller sources, but each business must assess its needs and consider the remaining nuanced program differences to shape its own audit practices. For more information, contact your Michael Best attorney or an attorney listed below.
Special thanks to Michael Best Summer Associate Kaitlin Dryden for her assistance with this alert.