Emerging Trend: The Criminalization of Violations of Environmental Regulations Related to Training, Reporting, Recordkeeping and other "Technical" Issues

Lara Mathews and Allison Fennell
Dyer Ellis & Joseph

As prosecutors continue to aggressively pursue criminal environmental enforcement actions, recent developments indicate that what have historically been viewed as regulatory violations, with enforcement limited to administrative and civil penalties, may also give rise to criminal charges. Because the criminal provisions in a number of the major environmental statutes are extremely broad, many "knowing or willful" (or in some cases, negligent) violations of regulatory requirements can give rise to criminal charges against a corporation and its individual officers or employees. Often these violations are classified as felonies, with potential penalties including substantial fines and lengthy prison sentences. A few recent examples illustrate how broad these criminal provisions are, and the types of regulatory violations, including reporting, recordkeeping and training requirements and equipment standards, that are giving rise to criminal enforcement.

Leading this trend at the federal level, in December 1999, is a case where two former plant managers were convicted for violations of the Clean Air Act National Emission Standard for Hazardous Air Pollutants for benzene waste operations (benzene NESHAP) in connection with a fire at the Huntsman Chemical Plant in Port Arthur, Texas, and the resulting release of benzene and other hazardous chemicals. The government alleged that the liquid was not kept in contact with the tank roof, as required by the benzene NESHAP regulations, allowing pockets of benzene gas to form within the tank. On Nov. 2, 1995, lightning struck the tank, causing the fire and subsequent release of hazardous chemicals. The plant?s former employees were charged and found guilty in the Eastern District of Texas, Beaumont Division, of violating the benzene NESHAP, conspiracy to commit those violations, and making false statements in reports they submitted to the EPA. These individuals have not yet been sentenced.

The next year, following a four-year investigation, a federal grand jury in Corpus Christi returned a 97-count indictment against Koch Petroleum Group, L.P., (KPGLP), its parent company Koch Industries, Inc., and four individual employees, which included charges of violations of a number of "technical" requirements under the benzene NESHAP, such as specific equipment standards and monitoring requirements, as well as reporting requirements. KPGLP ultimately pled guilty to one count of concealment relating to a report filed with the Texas Natural Resource Conservation Commission.

Most recently, on Sept. 13, 2001, a federal grand jury in Seattle returned an indictment charging Olympic Pipe Line Company; Equilon Pipeline Company; and Olympic's vice president/manager, supervisor of Products Movement, and Operations controller, with violations of the Clean Water Act and Hazardous Liquid Pipeline Safety Act (HLPSA). The charges arose from a pipeline rupture in June 1999 that resulted in the release of approximately 236,000 gallons of unleaded gasoline into two creeks in Bellingham, Washington. The release and subsequent fire caused three deaths, as well as environmental and property damage in the area.

The seven-count indictment alleges that Olympic and its officers negligently discharged oil in violation of the Clean Water Act, and knowingly and willfully violated the HLPSA's "minimum safety standards" for hazardous liquid pipelines. The HLPSA counts allege felony violations. The corporate defendants face up to $3.5 million in criminal fines, and the individuals, if convicted, could be sentenced to prison terms up to sixteen years. All defendants pled not guilty to the charges. Trial was set for Oct. 7, 2002, with a back-up date of Jan.13, 2003.

According to the Indictment, Olympic failed to adequately supervise maintenance performed on its pipeline by an independent contractor; failed to address evidence of possible defects in the pipeline, as required by the company's spill prevention plan and internal manuals; constructed and operated a pumping station without ensuring the effectiveness of safety devices; ignored a malfunctioning safety device; disregarded a number of unintended shutdowns of the facility; and continued to operate the pipeline without investigating the cause of the shutdowns. Specifically, the Indictment charges the defendants with violating the HLPSA's minimum safety standards by failing to establish and conduct a training program for its employees and to periodically review the employees' knowledge and performance, as required by the regulations. Other alleged violations of regulatory minimum safety standards include violations of requirements regarding equipment maintenance, procedural and operations manuals, and safety device operation and testing. This is the first time regulatory training requirements have formed the basis for criminal prosecution of environmental violations at the federal, and likely at the state, levels.

These three cases likely signal the emergence of a significant trend in the criminal environmental enforcement arena. A number of environmental statutes include broad criminal provisions that incorporate by reference fairly technical regulatory requirements, including those relating to monitoring, maintenance, training, and recordkeeping. For example, the Clean Air Act provides criminal penalties for knowing violations of Chemical Accident Prevention/Accidental Release training requirements. See 42 U.S.C. § 7413(c)(1); 40 C.F.R. Part 68. All NESHAPs requirements, including those relating to recordkeeping, training, and maintenance, are also criminally enforceable. See 42 U.S.C. §7413(c)(1). Other statutes that have criminal provisions encompassing regulatory violations include the Safe Drinking Water Act, 42 U.S.C. § 300h-2(b)(2); the Ports and Waterways Safety Act, 33 U.S.C. §1232(b)(1); the Hazardous Materials Transportation Act, 49 U.S.C. §5124, the Occupational Health and Safety Act, 29 U.S.C. §§ 666(e), and the Toxic Substances Control Act, 15 U.S.C. §2615(b).

In light of the increased attention on criminal enforcement of regulatory violations in the environmental arena, it is more important than ever for companies to establish and ensure implementation of crucial preventive measures. For example, companies should establish and implement a rigorous environmental compliance program that includes, among other things, training and audits. With respect to training, documentation of program implementation is essential. With respect to audits, prompt correction of noted deficiencies, verification systems, and documentation are necessary. While none of these measures are fail-safe, particularly when incidents result in catastrophic consequences, they can help to ensure compliance with environmental, health and safety laws, including complex and detailed regulatory requirements.