Enforcement and Inspection

Audits Highlighted in RMP Enforcement Case

Even though the U.S. Environmental Protection Agency (EPA) has delayed the effective date of the amendments to the Risk Management Program under the Clean Air Act (CAA) until February 19, 2019, the Agency continues to scrutinize facilities that are required to have risk management plans (RMPs). Today we will review a recent enforcement case in which the remedy will span 19 states and cost the company millions of dollars. What happened to this company is a good indication of the facets of the program amendments the Agency plans to keep.

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Note: The Risk Management Program requires that sources with more than a threshold quantity (TQ) of a regulated substance in a process develop and implement a risk management program and submit an RMP to the EPA. Those affected include (but are not limited to) chemical manufacturers, petroleum refineries, water treatment systems, agricultural chemical distributors, refrigerated warehouses, chemical distributors, nonchemical manufacturers, wholesale fuel distributors, and energy generation facilities.

The Risk Management Program applies to any facility that has a listed regulated substance above the TQ in any single process at the facility. The listed regulated substances include 77 toxic chemicals with thresholds ranging from 500 pounds (lb) to 20,000 lb and 63 flammable substances with a threshold quantity of 10,000 lb.

Effective Date Delayed to Consider Changes

The effective date of the Risk Management Program amendments has been pushed out to 2019 so that the EPA can reconsider comments it received and give itself the opportunity to make changes to the amendments, which it likely will.

Under the Risk Management Programs amendments, owners or operators of covered facilities must have an independent third party conduct a compliance audit at a facility if there has been a reportable accident or if an implementing Risk Management Program agency determines that a third-party audit is necessary based on information about the facility or about a prior third-party audit at the facility. The final rule contains criteria for auditor competence and independence.

Based on this recent enforcement case, it seems very likely that the EPA will retain the audit provisions of the amendments, at least in part, even though during the proposal stage of the amendment rulemaking, a majority of industry commenters opposed third-party audits.

Here’s what happened recently to a company that actually came forward with its violations.

What Went Wrong

Harcros Chemicals, based in Kansas City, Kansas, maintains and operates 31 facilities in 19 states that manufacture, blend, repackage, and distribute a wide variety of commercial chemicals, including extremely hazardous substances.

The company initially notified the EPA that there were likely violations of the Risk Management Program requirements at some of its facilities. Three pilot audits were conducted by independent third-party auditors to serve as the starting point for negotiations and development of a settlement package.

The audits revealed deficiencies with the CAA General Duty Clause (GDC) and Risk Management Program requirements. Specifically, deficiencies included noncompliance with GDC requirements to identify hazards using appropriate hazard assessment techniques, to design and maintain a safe facility taking such steps as are necessary to prevent releases, and to minimize the consequences of accidental releases that do occur. In addition, the facilities subject to Risk Management Program requirements were shown to have not timely and adequately implemented all elements of a Risk Management Program.

Harcros and the EPA then developed a settlement structure for a voluntary, global settlement of potential RMP and GDC requirements at their facilities nationwide.

The Fine and the Fix—Audits Up Front and Center

The company will pay a $950,000 fine. In addition, Harcros will hire independent third-party auditors to audit 28 of its facilities to identify and correct any potential violations of its Risk Management Program and comply with GDC requirements that facilities adequately assess hazards, undertake measures to prevent accidents, and be prepared to effectively address such accidents when they do occur. Harcros will correct any violations identified in the audits according to a schedule in the agreement.

Up to 7 of the 28 facilities may be exempted from the third-party audit requirements if the company implements process changes to reduce quantities of chemicals on-site to below RMP thresholds. However, Harcros will be required to conduct internal audits of these facilities to ensure compliance with the GDC.

On top of the fine and the costs of hiring third-party auditors for over 20 facilities and implementing process changes at others, Harcros will be conducting a supplemental environmental project (SEP) to the tune of $2.5 million.

The SEP involves installing foam-based fire suppression systems at eight existing warehouses that store flammable or combustible liquids. These systems are meant to minimize the impacts of an accident, specifically a fire, by enhancing the speed and effectiveness of the facility’s ability to extinguish the flames.

Although Harcros is voluntarily engaging in third-party auditors as part of the settlement, these audits are not required under the RMP regulations currently in effect. However, they are a controversial part of the RMP amendments. Check tomorrow’s Advisor for a discussion of the third-party audit provisions of the amendments.

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