EPA and NJDEP Encourage Y2K Testing: New Policy Waives Penalties

From Riker Danzig Environmental UPDATE

The U.S. Environmental Protec-tion Agency (.EPA.) Office of Enforcement and Compliance Assurance recently issued a Year 2000 (.Y2K.) Enforcement Policy to encourage facilities to investigate and remedy Y2K problems that may result in unauthorized discharges of hazardous substances or failure of environmental monitoring systems. 64 Fed. Reg. 11881 (Mar. 10, 1999) (containing minor revisions to policy issued November 30, 1998). Under EPA.s Y2K policy, EPA will exercise its enforcement discretion to waive 100% of any civil penalties and recommend against criminal prosecution for violations resulting from Y2K testing if the facility meets specific criteria. EPA Region II currently is in the process of mailing out an informational letter about the Y2K policy to approximately 10,000 regulated facilities in New York and New Jersey, including permittees and principal sources under the major federal programs.

The New Jersey Department of Environmental Protection (.NJDEP.) has indicated that it will follow the EPA policy in its environmental programs with some exceptions, discussed below.

The Y2K problem arises from the widespread use of a two-digit field to represent the year in computer databases, software applications and hardware chips. On January 1, 2000, computer software, embedded systems and processor chips afflicted by the Y2K .millennium bug. may recognize .00. not as the year 2000, but as 1900, causing some systems to stop functioning or to function improperly by creating and reporting incorrect data. Technical experts estimate that as many as a dozen other Y2K problem dates exist as well. For example, September 9, 1999, or .four 9s,. may be interpreted as the end of a file or infinity.

If left unchecked, Y2K problems could significantly affect the environment by potentially impacting air and drinking-water supplies. Further, the regulated community faces a real challenge in ensuring that Y2K problems do not result in violations of environmental laws and regulations. For example, on January 1, 2000, or other Y2K dates, environmental control or monitoring systems associated with air emission points may cease functioning or generate useless data, causing a violation of permit conditions or air pollution control regulations. Similarly, process control, monitoring or wastewater treatment systems could cease to function, resulting in permit limit exceedences, the discharge of unauthorized pollutants, or system shutdowns.

In order to encourage the regulated community to test its systems for Y2K problems, EPA issued the Y2K testing policy that waives penalties under certain circumstances. In its new policy, EPA first encourages regulated facilities to use any existing regulatory or permit procedures for Y2K testing (e.g., RCRA trial burn testing, or research and development permits) if those procedures can provide a timely and effective process for testing. If, however, no existing procedures provide a timely resolution of Y2K issues, EPA will waive 100% of civil penalties and recommend against criminal prosecution for violations if the facility meets certain other criteria. The following nine criteria must be met to obtain the waiver of penalties for violations caused by Y2K testing:

  1. Facility prepared a written Y2K testing protocol, which was designed to address Y2K problems and prevent or limit violations, and obtained approval by responsible corporate official prior to testing;
  2. Y2K testing, not the millennium bug itself, caused the violation;
  3. Testing was necessary, was part of a comprehensive program to correct Y2K violations, and was conducted in advance of Y2K problem dates and for the shortest possible period of time (ordinarily not to exceed 24 hours);
  4. Violation did not create an imminent and substantial endangerment to public health or the environment;
  5. Violation ceased as soon as possible, not later than the end of the test or within 24 hours, whichever comes sooner;
  6. Releases or other problems were expeditiously remedied;
  7. Violation was reported within statutory timeframes and, in any event, no later than February 1, 2000;
  8. Retesting also met policy criteria and was reasonably designed to achieve compliance; and
  9. Information requested by EPA to determine whether waiver is appropriate was provided by the facility consistent with legitimate legal rights and privileges.

EPA recommends an aggressive schedule and six-step approach to help each regulated facility ensure normal operations on or before January 1, 2000. First, EPA recommends that each facility act now to raise Y2K awareness within its organization and establish a Y2K project team. Second, each facility should inventory and test its information systems for Y2K compliance as soon as possible. Third, any facility identifying problem areas should correct problems, including modifying, repairing, or replacing systems or components, by June 30, 1999. Fourth, each facility should prepare a draft contingency plan by June 30, 1999 (final plan by September 30, 1999), to deal with any unforeseen problems and emergencies. Fifth, each facility should run validation tests on new or modified systems or equipment by July 31, 1999, to ensure Y2K problems are solved. Sixth, and finally, each facility should retest systems by September 30, 1999.

In a statement contained in EPA Region II.s Y2K informational letter, NJDEP has indicated that it will apply the EPA Y2K policy in all delegated environmental programs except the water program. Within NJDEP.s water program, however, the WPCA provides an affirmative defense to liability for discharges associated with approved maintenance activities, such as Y2K testing, provided testing protocols are approved in advance by NJDEP and documentation is provided to NJDEP within five days of any upset. Thus, in order to avoid penalties for Y2K testing that may cause WPCA violations, members of the regulated community first must seek and obtain NJDEP approval of their Y2K testing protocol.

In addition to the penalty waiver under the policy and the affirmative defense under the WPCA, under certain circumstances New Jersey environmental statutes may provide statutory safe harbors or additional affirmative defenses for facilities whose Y2K testing programs cause minor violations. For example, see the Environmental Grace Act, N.J.S.A. 13:1D-125 et seq., and the APCA, N.J.S.A. 26:2C-19.1 and 19.2.

Finally, in an apparent effort to encourage Y2K testing, NJDEP also has put the regulated community on notice that, in the agency.s view, violations resulting from Y2K problems after December 31, 1999 that are not associated with Y2K testing (i.e., violations resulting from the millennium bug itself) do not meet the standards for affirmative defenses under either the Air Pollution Control Act, N.J.S.A. 26:2C-1 et seq. (.APCA.), or the WPCA.

When viewed together, EPA.s and NJDEP.s approach to Y2K testing under the new policy, and NJDEP.s statement that violations caused by the millennium bug do not meet standards for statutory affirmative defenses, provide a strong incentive to the regulated community to test process and environmental control equipment for Y2K problems. A conscientious, planned Y2K testing program is likely to aid the environmental compliance efforts of most regulated facilities with complex process and environmental control equipment, and to reduce the likelihood of enforcement actions brought to address violations caused by the millennium bug.

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