An Excerpt From:
K&L Gates Global Government Solutions ® 2011: Mid-Year Outlook
July 2011
Energy and Environment
EPA Focuses its Enforcement Lens on the Oil and Gas Industry
When the U.S. Environmental Protection Agency (“EPA”) decides to aggressively
target the environmental impacts associated with a particular industry, the result
is often a formalized enforcement campaign known as a “National Enforcement
Initiative,” or “NEI.” NEIs, according to EPA, are established “every three years to
address some of the more complex pollution problems, especially those confined
to a particular sector or source type, and can be most effectively addressed
through a concentrated enforcement initiative led by national enforcement teams.”
On February 22, 2010, EPA announced its NEIs for 2011 through 2013. Among
them is an NEI for the “Energy Extraction Sector,” which includes the oil and gas
industry. As a result, the industry can expect to see a heightened level of EPA
enforcement activity in the coming months and years.
In justifying the Energy Extraction NEI,
EPA states: “Some energy extraction
activities, such as new techniques for
oil and gas extraction and coal mining,
pose a risk of pollution of air, surface
waters and ground waters if not properly
controlled.” According to EPA, the
recent spike in oil and gas leasing and
development has “led to a significant
rise in the level of air pollution” in the
West, as well as “concerns about
ground water pollution and the safety of
drinking water supplies in various parts
of the country.” EPA, therefore, will make
zealous enforcement efforts in all areas
of the country “where energy extraction
activities are concentrated.”
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EPA is candid about its plan to pursue
NEIs. For example, in justifying its fiscal
year 2011 enforcement budget—which
is $18 million higher than the 2010
budget—it listed six high priority areas
for criminal enforcement and placed NEIs
at the top of the list. It also noted that it
will expand its special agent workforce
to 200 or more criminal investigators.
In describing its NEIs, moreover, EPA
emphasizes that, for each, it will develop
specific enforcement goals and a strategy
to achieve them, including the formation
of “teams of EPA and regional staff and
management to direct work and monitor
progress.” The overarching enforcement
objectives, according to EPA, are clean
water, clean air, compliance with climate-
K&L Gates Global Government Solutions ® 2011 Mid-Year Outlook
change and clean energy rules, and
protection of people from exposure to
hazardous chemicals.
EPA’s enforcement efforts under an NEI
differ from its typical enforcement efforts
in a number of ways. For example,
unlike a typical inspection, which focuses
primarily on whether a regulated entity is
complying with the permits that it holds
and the laws that pertain to them, an
NEI inspection focuses significantly on
whether the entity has acquired all of
the permits and other authorizations that
it needs and has properly documented
its activities under those authorities.
Moreover, contrary to its usual approach
to enforcement, under an NEI, EPA
assembles a team of national experts,
engages in pre-inspection information
gathering activities (including highly
detailed requests for information),
conducts process-related inspections
(which include interviews of the
operational staff of regulated entities, not
just their environmental staff), and focuses
on areas of inquiry that are not typically
explored by state enforcement agencies.
Energy and Environment
Among the most prolific tools that
EPA uses are requests for information,
including requests under Section 308
of the Clean Water Act, Section 114
of the Clean Air Act, Section 104(e)
of the Comprehensive Environmental
Response, Compensation and Liability
Act (“CERCLA”), and Section 3007(a)
of the Resource Conservation and
Recovery Act. These provisions give EPA
authority to request a wide variety of
information from those who are subject
to its regulatory jurisdiction. Relying on
this authority, EPA, when administering
NEIs in the past, has sent sweeping initial
requests for information to regulated
entities, sometimes identifying dozens of
categories for production and, for some
categories, seeking ten or more years’
worth of data. These initial requests have
often been followed by subsequent, more
specific requests that focused on key
issues and have been accompanied by
offers to enter into global settlements.
The scope of some of EPA’s information
requests has not been without some
controversy, and industry recipients have
not infrequently interposed objections,
while still attempting in good faith to
respond to EPA’s questions. For example,
while Section 104(e) of CERCLA provides
EPA will make zealous enforcement efforts
in all areas of the country.
that the information gathering “authority of
[Section 104(e)] may be exercised only
for the purposes of determining the need
for response, or choosing or taking any
response action under this subchapter,
or otherwise enforcing the provisions of
this subchapter,” EPA has attempted to
use 104(e) requests to seek information
relating to compliance with other
programs, such as the Emergency Planning
and Community Right to Know Act.
The results of EPA’s past NEIs have been
considerable. For example, EPA touts that,
as a result of its NEI for the petroleum
refinery sector (effective from 19962003), U.S. companies that account
for over 90 percent of the nation’s
refining capacity entered into settlement
agreements, promising to “invest more
than $6 billion in control technologies,”
pay “civil penalties of more than $80
million,” and “perform supplemental
environmental projects over $75 million.”
The precise components of the new
Energy Extraction NEI, and the precise
issues that will be its focus, are still being
developed by EPA. Members of the oil
and gas industry, however, should take
steps to respond to heightened EPA
enforcement efforts in the most effective
manner possible. This includes, among
many other matters, ensuring that all
necessary permits have been acquired
and that regulated activities are being
conducted in compliance with them.
David R. Overstreet (Harrisburg and Pittsburgh)
david.overstreet@klgates.com
Anthony R. Holtzman (Harrisburg)
anthony.holtzman@klgates.com
K&L Gates Global Government Solutions ® 2011 Mid-Year Outlook
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