EPA Urged Back to the Drawing Board on Electronic Reporting and Recordkeeping: Voluntary Proposal “Anything But”

Date: Nov 27, 2001

EPA'scomment period on the "CROMERRR" proposal is extended for an additional 60 days.EPA plans to discuss the proposal at its next Small Business Roundtable on Dec. 7th.

In August, the Environmental Protection Agency (EPA) announced new opportunities forbusinesses to submit reports to the agency electronically on a voluntary basis.[1] However, the recordkeeping obligations associatedwith filing these reports are a "sleeping giant," according to the businesscommunity. Because the obligation to complywith the recordkeeping aspects of the proposal would apply even if companies choose not tosubmit electronic reports to EPA, the proposal is the focus of increasing criticism.

That criticism was apparent during an informal hearing held by EPA on October 29, justone month before the comment deadline of November 29. Commenter after commenter asserted that the proposed rule was mandatory rather thanvoluntary, and would cost American businesses billions of dollars in software and hardwareupgrades.

The proposal would govern "electronic records," defined as "anycombination of text, graphic, data, audio, pictorial, or other information presented in adigital form that is created, modified, maintained, archived, retrieved or distributed bya computer system." Companies that useelectronic systems (including personal computers) to handle records to comply with federalenvironmental recordkeeping requirements will need to implement significant changes totheir existing computer networks. Commentersargued that this requirement affects every company regulated by the EPA - estimatedat 1.2 million entities - since every business uses a computer at some stage to keepcompliance records associated with EPA's programs.

Estimated Costs of Network Changes

At the hearing, the business community argued that the proposal contains hidden costs notacknowledged by EPA. A representative of DowChemical Company, Mark Duvall, quoted EPA's estimate that each regulated businesswould incur $40,000 in costs to comply with the system. Using the estimate that 1.2 million businesses are potentially affected by theproposal, he said the proposed rule would cost the business community 48 billiondollars. Because EPA believes this rule isvoluntary (something challenged by every commenter during the October 29 hearing), itnever completed a Regulatory Flexibility Analysis. Therefore,the true cost of the proposed regulation is not known.

Commenters familiar with a similar rule administered by the Food and DrugAdministration (FDA) (21 CFR part 11) stated that their companies have spent millions ofdollars to date in a process to comply with the FDA requirements - a process thatcould continue for several more years. Businesseswould need similar if not more extensive resources to upgrade all computer programs thatdeal with EPA recordkeeping. One commenterpredicted the process would rival Y2K.

Robert D. Bessette, President of the Council of Industrial Boiler Owners, said the EPAproposal could actually drive the companies his organization represents in the wrongdirection, forcing them "back to using paper."

EPA's Proposal

The anticipated costs would flow from the inevitable computer software upgrades necessaryto comply with the function-based capabilities required by the proposal. Computer networks where environmental compliancerecords are created and maintained would need to have:

    1. the ability to generate and maintain accurate and complete copies of records to prevent alterations of the documents without detection;

    2. provisions to ensure that records are not altered during the records' retention period;

    3. the ability to produce accurate and complete copies of the records as required during the entire retention period;

    4. retention of records associated with electronic signatures, including the name of the signatory, the date and time of the signature, information explaining the meaning of the signature, and protections that ensure that electronic signatures cannot be detached, copied or compromised;

    5. secure, computer-generated time stamp "audit trails" to record the time of entries and the creation, modification or deletion of electronic records, and archiving that preserves the audit trail;

    6. the ability to search and retrieve records as required;

    7. the ability to open the computer system controls and attendant documentation for EPA inspection.

With respect to the reporting aspects of EPA's proposal, except for hazardouswaste manifesting (which EPA is addressing in a separate electronic reporting rule), thescope of the program is not clear. Only twotypes of reports are mentioned by EPA as being at the forefront of its initiative: discharge monitoring reports (e.g., frompublicly-owned treatment works (POTWs)) and test result reports from public drinking watersystems. Moreover, nothing in the proposalwould prohibit states and local governments from removing any appearance of choice by requiringthese electronic filings.

Records Affected

Whether or not companies will choose to submit documents electronically, almost allbusinesses electronically store or manage records associated with environmentalrecordkeeping. If the proposal is not scaledback, each part of an internal network that touches an electronic record used to complywith federal environmental laws would have to be in compliance with the seven characteristics identified above.

In its proposed rule, EPA states "any requirement . . . that a record bemaintained may be satisfied by maintaining an electronic record, in lieu of a paper recordprovided that: (1) the electronic record satisfies the requirements of [the proposal] . . ."66 Fed. Reg. at 46,189 (to becodified at 40 C.F.R. ยง 3.2(b)). Thus, thesimple act of storing and managing documents associated with a recordkeeping obligationelectronically will draw a company into this rule, with all of its attendant costs andobligations, including the prospect of opening up its network for inspection by EPA.

Further, this proposal would allow electronic recordkeeping only after "EPA haspublished a notice in the Federal Register announcing that EPA is prepared to receive inelectronic form documents required or permitted by the named Part of Subpart of thisTitle." 66 Fed. Reg. at 46,189. This language implies that companies will have tocease submitting and storing documents electronically, and face the prospect of resumingelectronic recordkeeping activities in a haphazard fashion as each Federal Register noticeis issued. As computer systems are upgraded,it is unclear whether companies would need to preserve data on their old systems or bepermitted to migrate all environmental records to the new system. At the hearing, EPA officials said the agencywould have to clarify the effects of the proposal on existing industry recordkeepingpractices.

This proposal raises concerns associated with due process, since EPA announcementsrelated to specific records and reports could take place years from today, long after thecomment period for this proposed rule has closed.

Surprisingly, the proposal gives relatively short-shrift to scenarios involvingconfidential business information (CBI) filings. Insteadof focusing on establishing procedures for handling CBI, identifying the criteria formaking a CBI claim and the like, establishing procedures for maintaining and accepting CBIappears to be last on EPA's list. ProtectingCBI, both in transmitting and storing confidential information, should be a key prioritygiven past agency lapses.

EPA is accepting public comments on this proposal through the month of November. For more information, please do not hesitate tocontact any one of us at Keller and Heckman. Mr.Duvall has agreed to make available a copy of his public comments for your furtherreference as well.

[1] Establishment of Electronic Reporting; Electronic Records, 66 Fed. Reg. 46162 (2001) (to be codified at 40 C.F.R. pts. 3, 51, 60, 63, 70, 123, 142, 145, 162, 233, 257, 258, 271, 281, 403, 501, 745 and 763) (Proposed August 31, 2001).