Effective Air Compliance Auditing Drives Business Improvement



There are many reasons that industrial facilities and their owners or operators seek to demonstrate compliance with their air quality operating permits and construction permits, as well as ensure that all capital projects and improvement projects are correctly vetted for permitting applicability.  Legal requirements and potential enforcement ramifications for not demonstrating compliance with applicable air quality permits are strong justifications for the associated effort.  Companies can also derive broad benefits from implementing auditing programs for ensuring compliance with air quality requirements.

Meeting air quality regulatory requirements can provide a springboard for companies to gain business benefits through a process focused on identifying potential improvements and methods of risk mitigation.  A systematic, proactive approach to assessing compliance can also help organizations avoid regulatory fines, negative publicity, increased costs (such as insurance and Workers’ Compensation), and poor employee morale.  Potentially the largest benefit is the bottom line or economic improvement that can be identified through limiting the potential for non-compliance and enforcement or mitigating the liability for a company in self-disclosing violations.  Examples of the substantial penalties that can result from violations are provided in the table below, which lists the settlements agreed upon under some recent consent decrees issued by the U.S. Environmental Protection Agency (EPA) and the Department of Justice (DOJ) regarding significant Clean Air Act violations.

Auditing table

The civil penalties and costs of additional air pollution control equipment required for mitigation are not insignificant, and EPA will undoubtedly keep a close eye on these entities regarding permit compliance moving forward.  Proactive air compliance audits could have been effective at identifying and resolving these compliance concerns before they became enforcement issues.

Assessing Compliance and Reducing Risk

One benefit regarding air compliance audits is the ability to assess and demonstrate compliance with current permits and applicable regulations.  At the completion of an audit, the auditor will prepare an audit report that details any findings related to applicable regulatory requirements.  If use of audit checklists is mandated by the auditee and provided as part of the report deliverable, the audit report will also detail specific regulatory requirements with which the facility has demonstrated compliance.  An audit checklist has proven beneficial in several recent scenarios.  For example, a state agency conducted an inspection at one facility one month after an air compliance audit was performed there.  The facility was able to use the applicable sections of the audit report to demonstrate to the agency that the company had proactively identified regulatory findings and was actively working on corrective actions.  As a result, the state agency did not levy any civil penalties to the facility as part of the enforcement action since no economic benefit was gained by the company due to the non-compliance issues.

An additional benefit of conducting an air compliance audit is Auditing_enlarged quotereducing risk and liability from regulatory findings.  Once an auditee has identified areas of non-compliance or opportunities to improve its process, monitoring systems, and efficient operation of emission units and control device equipment, the company is able to take the necessary next steps to mitigate ensuing risk and liability from regulatory findings.

Benchmarking for Improvement

A thorough air compliance audit will also provide an auditee with the tools to track and benchmark environmental goals.  When an auditee periodically evaluates a facility’s compliance status, the company can determine whether internal goals related to environmental compliance are achieved.  Some companies set goals for their environmental compliance audits.  However, air compliance audit benchmarks should be focused on the importance of the timeliness of action item closure, rather than the number of findings.  The implications of regulatory findings can vary in that the severity may differ significantly between any two (or more) findings.  Also, senior management must avoid sending the wrong message by setting a benchmark for an audit with wording such as “no more than three findings.”  Successful audits keep the focus on the timeliness of closure of any regulatory findings.  This positions the air compliance audit as a learning process for the facility personnel and promotes a culture of “find and fix” rather than “find and count.” 

Driving Operating Efficiency

An experienced air compliance auditor can quickly determine inefficiencies from past permitting that are unnecessarily limiting operations.  Some examples identified during recent air compliance audits are listed below.

  • Permitted emission units no longer in operation – resulted in incorrect potential emissions and potentially limited future projects due to permitting requirements
  • Operating rate during performance testing – limited operations due to not operating within 90% of capacity that could be unlimited by re-completing performance testing at higher operating levels
  • Unneeded synthetic minor limitations – operation changes resulted in potential emissions no longer needing to be limited to avoid major source classification and no longer requiring operating limitations (fuel usage, process throughput, or product generated)
  • Erroneous identification of a unit as an air pollution control device – led to many operation monitoring requirements and limitations for cyclones and filters due to an agency incorrectly identifying the equipment as an air pollution control device rather than recognizing its primary purpose was material and air separation 

Training on Regulatory Requirements

A final critical benefit to conducting air compliance audits is the guidance and training provided to the auditee as a natural byproduct of the audit process.  An experienced auditor will involve the auditee in the entire audit process, including participation in site observations, interviews, and document review.  The auditor should keep the auditee (typically the point of contact or escort) updated regarding any compliance issue identified during the audit.  By engaging with the auditor and participating in the audit process, the auditee will gain a better understanding of the requirements pertaining to the facility.  In this way, audits provide training for auditees who are unfamiliar with regulatory requirements, new to the organization or their role at the facility, or just looking to shore up their understanding of the current regulatory requirements.

There are numerous challenges that can arise during an air compliance audit.  Simply put, air regulations are numerous and quite complex.  A comprehensive audit will take time to thoroughly evaluate the compliance status of each applicable air regulation.  The nuances of the regulations must be explored to confirm compliance, and the facility must be assessed with respect to its air permit.  Operating permits typically include federal, state, and local requirements and are often bulky documents which need thorough evaluation.  An auditor with air expertise is invaluable during an air compliance audit, especially due to the number of Clean Air Act regulations and the volume of compliance conditions included in air operating permits.

Electronic Disclosure

If a significant compliance issue is determined during an air compliance audit, companies now have a new option for disclosing to EPA under the Audit Policy.  To modernize the self-disclosing method, a central web-based portal, eDisclosure, became available on December 9, 2015, for companies to electronically self-disclose civil violations under environmental law.

The eDisclosure portal is accessible via EPA’s Central Data Exchange (CDX).  The disclosure of potential compliance violations through the portal will qualify for one of two types of automated treatment:  Category 1 or Category 2.  Category 1 disclosures are violations of the Emergency Planning and Community Right-to-Know Act (EPCRA) (except for chemical release reporting violations or violations with significant economic benefit) as well as EPCRA violations that meet all Small Business Compliance Policy conditions.  Category 2 disclosures are all non-EPCRA violations, EPCRA violations where discovery was not systematic, and EPCRA and Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) violations where chemical release reporting violations or violations with significant economic benefit occurred.

Category 1 disclosures are treated differently than Category 2 disclosures via the eDisclosure system.  For Category 1 disclosures, an electronic Notice of Determination (eNOD) is issued automatically by the eDisclosure system; this eNOD states that the violations disclosed do not result in an assessment of civil penalties.  For Category 2 disclosures, the eDisclosure system generates an Acknowledgement Letter (AL) which states that EPA has received the disclosure and will make a determination as to whether the company would be eligible for penalty mitigation if the violation results in enforcement action. 

In using the eDisclosure system, there are two important considerations.  The first is that the deadline for correcting a self-disclosed violation is determined from the date the violation was discovered, not the date it was disclosed.  The second is that no confidential business information can be included in an eDisclosure submittal.  If a company must submit a disclosure under the EPA Audit Policy that includes confidential information a public version should be submitted manually to EPA in accordance with 40 CFR Part 2.

Enforcement Priorities - HAPs

One of EPA’s enforcement initiatives for the 2017-2019 fiscal years is to reduce emissions of hazardous air pollutants (HAP).  Specifically, EPA will be focusing on HAP emissions from product storage tanks, hazardous waste tanks, hazardous waste treatment equipment, and hazardous waste containers.  Companies should evaluate their compliance against these requirements, including applicable National Emission Standards for Hazardous Air Pollutants (NESHAP), in order to be prepared in the event of an EPA air compliance inspection.

Whether a company has a mature audit program in place, relatively little auditing activity, or has never conducted an air compliance audit, most can benefit from engaging an external auditor who can bring a fresh perspective on your operations.  Outside auditors can also assist your existing audit team in assessing compliance with some of the most rigorous and complex regulatory requirements in the history of air regulations.