NCPA - National Center for Policy Analysis

Opposition to Self Audits within the EPA

April 1, 1997

Audit laws shield companies from sanctions if they report and correct violations of environmental regulations. State laws vary, treating the audit reports as privileged, meaning that they can't be used in legal proceedings, or giving the companies immunity for reported violations.

In 1993 Oregon became the first of 19 states to pass environmental audit laws, and such legislation has been considered or is pending in 25 others. Supporters believe this carrot extended to industry encourages more compliance with environmental laws than the stick of threatening prosecution.

The Clinton administration opposes state audit laws and congressional efforts to enact a federal counterpart. The Environmental Protection Agency says the laws fail to deter violations or improve environmental protection, but do interfere with its enforcement efforts.

The EPA has told Texas, Michigan and Idaho that it will only give their state regulatory programs temporary approval due to their audit laws. And environmental groups in Ohio and other states are suing to have the EPA take over programs it has delegated under clean air and water acts.

A 1995 survey by the accounting firm Price Waterhouse suggests that audit laws may be having a beneficial effect:

  • Of the 25 percent of companies that do not conduct environmental audits, 20 percent said that fear of the information being used against them was the reason they didn't.
  • Of companies that audit, 45 percent said that fear audit information would be used against them made them reluctant to expand their audit programs.
  • Nine percent said that an audit report has been used against them by the government.
  • Twenty-five percent reported attempts by outside parties to obtain audit information.

Policy analysts say it is too early to tell how well the state laws work, but that some violations have been corrected that otherwise would have gone unnoticed. For example, Sterling Chemicals conducted an extensive audit of a facility in Texas. It found equipment was in noncompliance and shut down the facility -- even though five previous state inspections hadn't uncovered the problem.

Source: Ben Lieberman, "Environmental Audits: State Carrots Versus Federal Sticks in Environmental Enforcement," March 1997, Competitive Enterprise Institute, 1001 Connecticut Avenue, NW, Suite 1250, Washington, DC 20036, (202) 331-1010.


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