Audit, Compliance and Risk Blog

Response to Criminal Violations in the Deepwater Horizon Disaster

On November 28, the Environmental Protection Agency (EPA) announced that it was temporarily suspending BP from all new contracts with the U.S. government. EPA acted two weeks after BP agreed to plead guilty to 14 criminal counts, including manslaughter, obstruction of Congress and other criminal charges stemming from the 2012 Deepwater Horizon blowout and oil spill. BP also agreed to pay $4.5 billion in penalties. Federal agencies have authority to issue temporary suspensions and longer-term “debarments” to parties that violate criminal laws (over three thousand were issued in the last fiscal year). EPA is the lead agency doing so for violations of national water and air laws. The effects on BP could be significant: BP is currently the largest lease-holder in deep water portions of the Gulf of Mexico, and in 2011 was the largest supplier of fuels to the U.S. military. Its existing contracts are not affected, but it is ineligible for new ones (for example, the company has already had to skip a round of deep water leasing by the Department of the Interior).

While we watch negotiators in Doha, Qatar continue to struggle to find international agreement on effective climate change minimization measures, it's useful to look at one part of the planet where aggressive actions are underway.  No, not the U.S. federal government, which took time out of preparations for “fiscal cliff” negotiations to pass a law on November 27 empowering the Department of Transportation to prohibit U.S. airlines from participation in the European Union’s Emissions Trading Scheme (Public Law No. 112-200).  This month's prime example of action is California, which just held its first auction of greenhouse gas (GHG) emission allowances to inaugurate a statewide cap-and-trade program.

The presence of “hazardous” materials in your workplace can trigger a wide variety of environmental health and safety requirements and hazardous waste regulations.  The Occupational Safety and Health Administration (OSHA) and state worker protection agencies issue standards to protect workers during occupational handling and storage.  The US Environmental Protection Agency (EPA) and state environmental agencies issue requirements governing the management of hazardous wastes, and emissions to a variety of environmental media (air, water and land).

Do you know what happened to any paints, coatings and surface preparation materials left over after the last project at your facility?

Environmental compliance has been an important issue for large, multi-national companies for many years, and in recent years it has taken on added importance for their suppliers. Case in point: Walmart, Procter & Gamble, IBM – many Fortune 500 companies – are requiring that their vendors audit and quantify the greenhouse gas (GHG) emissions in their supply chains. Indeed, many of these high-profile organizations have undertaken ambitious plans for reducing their carbon footprint. (A big driver of this activity is stronger environmental regulation and pressure from environmental organizations, customers, investors and the like.) For example, in early 2010 Walmart announced a goal to eliminate 20 million metric tons of GHG emissions from its global supply chain by the end of 2015. Procter & Gamble has the stated objective of generating 100% of its energy from renewable resources – with a target of generating 25% of that by 2020.

A picture may be worth a thousand words. But words – or lack thereof – can be worth millions. Never more so than when courts are deciding the level of coverage and the amount of payout policyholders are entitled to from insurance companies. So, when it comes to understanding insurance law you need to make sure you understand rule number one: words rule.

The Occupational Safety and Health Administration (OSHA) establishes national standards that employers must meet in order to protect workers. Employers who fail to meet OSHA audit and compliance requirements are subject to enforcement actions by OSHA or delegated state agencies. Employers who perform the worst can be subject to OSHA’s Severe Violator Enforcement Program (SVEP), established in 2010 as the latest in a series of enhanced enforcement programs for those employers that OSHA considers the most dangerous and/or recalcitrant. SVEP has always offered the possibility that an employer can demonstrate its rehabilitation and exit the program, and just last month OSHA finally published clear guidelines for doing so.

This month the Securities and Exchange Commission (SEC) published new environmental compliance rules (Rule 13q-1 and associated Form SD), requiring annual disclosures by publicly listed “resource extraction issuers” of payments they make to the U.S. federal government, or foreign governments, related to commercial development of oil, natural gas or minerals. SEC’s rules implement a Congressional mandate contained in 2010’s massive Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

Environmental compliance can be a complex business.  In fact, in certain situations, the Resource Conservation and Recovery Act (RCRA), and other legislation, may actually deter use of innovative waste management technologies and best practices. Here are three questions to ask about your organization:

On July 6, 2012, President Obama signed into law the “Moving Ahead for Progress in the 21st Century Act (MAP-21)”.The 584-page legislation revises and adds many sections to the U.S. Code, intending to “create a streamlined, performance-based, and multi-modal program to address the many challenges faced by the US transportation system, including improving safety, maintaining infrastructure condition, reducing traffic congestion, improving efficiency of the system and freight movement, and protecting the environment” (USDOT, Federal Highway Administration).