Ignoring EPCRA Reporting Can Be Expensive

By Richard P. Schweitzer, Esq.

One GAWDA distributor recently found out that failing to comply with the Environmental Protection Agency's inventory reporting requirements is expensive and much more burdensome to fix after the fact than it would have been to meet the requirements in the first place.

The distributor has bulk tanks of argon, nitrogen, oxygen and carbon dioxide on his property, and all of the tanks are over the 10,000-pound minimum threshold for reporting under the Emergency Planning and Community Right-to-Know Act (EPCRA). Section 311 of EPCRA requires the distributor to submit a copy of its Material Safety Data Sheet (MSDS) for each of these products to three entities: (1) the State Emergency Response Commission (SERC); (2) the Local Emergency Planning Commission (LEPC); and (3) the local fire department with jurisdiction over the facility where the product is stored. (The MSDS submission under section 311 is a one-time requirement unless you add a new product or additional product, so that the total amount of the product stored on the premises exceeds the 10,000-pound reporting threshold.)

In addition, Section 312 of EPCRA requires the distributor to submit an annual hazardous chemical inventory report to the SERC, LEPC and local fire department. The inventory form is due on March 1 of each year, and may either be aggregate information by hazard category (Tier I forms) or specific information by product (Tier II forms).

The distributor in question had failed to submit MSDSs for each of his four reportable products (argon, nitrogen, oxygen and carbon dioxide) to the three reporting locations, and had also failed to file Tier II inventory reports for the years 1999, 2000 and 2001 (although he had reported in prior years).

The EPA noticed the violations as a result of a compliance audit and issued a proposed penalty under the EPA administrative penalty guidelines. The penalty guidelines consider the nature, extent, gravity and circumstances of the violations in establishing a base penalty, and then allow adjustment of the base penalty up or down, depending on other factors such as a record of prior violations, whether the current violations were willful, whether the company cooperated in the investigation, and whether immediate steps were taken to come into compliance after the company was notified of the violations.

Penalties and Fines
Based on these factors, the EPA initially proposed for the distributor a maximum penalty of $60,756. This included three penalties of $5,501 each for the MSDS violations under section 311 (failure to provide an MSDS to SERC, LEPC and fire department were considered three separate offenses) for a total of $16,503. The base penalty for the section 311 violations could have been less than $5,501 except that the distributor had more than five times the reportable quantity of one of the products—his bulk tank of argon held over 67,000 pounds of product—and therefore this violation was ratcheted up to the next penalty level.

For the Tier II inventory violations, the EPA proposed a flat $1,500 penalty for each of the prior years of 1999 and 2000. For the current reporting year, the EPA proposed three fines of $13,751 (one for each reporting location) for a total of $41,253. Once again, exceeding more than five times the reportable quantity for one of the products pushed the violations into the next highest penalty grade.

Because the distributor had previously filed Tier II inventory reports for years 1997 and earlier, the EPA was willing to waive the entire $16,503 fine for the MSDS violation on the assumption that the SERC, LEPC and fire department at least had some indication of the nature and amounts of products stored at the facility based on the prior Tier II reports.

As to the proposed $41,253 in Tier II violations for 2001, the EPA was willing to view that as a single violation, even though three reporting locations were involved, and reduced the fine to $13,751. Adding the two flat fines of $1,500 for 1999 and 2000 to the $13,751 for 2001 brought the total base penalty for the Tier II violations to $16,751.

The EPA then further reduced the base penalty by one-half, to $8,375, based on several factors:

• The distributor had no prior Tier II violations, and had previously complied;
• There was no evidence of any willful violation (the distributor had let some employees go in the economic downturn and this compliance task slipped through the cracks);
• The distributor received no economic or competitive advantage due to its non-compliance;
• The distributor cooperated during the investigation, took immediate steps to comply when the violations were pointed out, and gave evidence of this new compliance to the EPA; and
• The distributor was a small business with fewer than 100 employees and less than $20 million in sales, and had a diminished ability to pay a large fine.

Still, the distributor is now faced with paying the EPA $8,375 in fines because of this inattention to detail. The distributor must also pay attorney's fees, has suffered several sleepless nights and has had to divert his attention from his business to deal with this investigation and penalty proceeding. It would have been much cheaper and easier to meet his compliance obligations in the first place.