EPA’s “Compliance First” Orientation Offers Opportunity for Regulated Entities to Obtain Significant Penalty Relief for Voluntary Disclosures of Environmental Violations

On December 5, 2025, the Acting Assistant Administrator of the U.S. Environmental Protection Agency (EPA) Office of Enforcement and Compliance Assurance issued a memorandum to enforcement and compliance assurance staff signaling a return to a “Compliance First” orientation. As discussed in a previous post, this memorandum marks a significant shift in EPA’s approach to federal environmental enforcement, namely, by prioritizing the use of compliance assistance tools to bring regulated entities back into compliance with federal environmental laws instead of pursuing aggressive, protracted enforcement actions. In other words, EPA wants to be a partner, not a prosecutor, in helping bring regulated entities into compliance.

Chief among the various compliance assistance tools touted by EPA is its Self-Audit Policy, which encourages regulated entities to “find-and-fix” their environmental noncompliance in exchange for substantial civil and criminal penalty protections if certain criteria are met. Considering this sea change in EPA enforcement policy, Tennessee entities should be thinking about how to enhance and utilize their environmental audit programs to take advantage of the protections afforded by EPA’s Self-Audit Policy by making disclosures to Region 4 while EPA remains in this “Compliance First” orientation. Doing so may also allow regulated entities in Tennessee to obtain similar penalty protections for disclosing violations of state environmental laws, enforceable by the Tennessee Department of Environment and Conservation (TDEC).

EPA’s Self-Audit Policy

EPA’s Self-Audit Policy, formally called “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations,” establishes certain criteria (as discussed below in detail) that, if met, provide regulated entities with civil and criminal protections for environmental noncompliance. Specifically, regulated entities that successfully invoke EPA’s Self-Audit Policy are eligible to receive the following incentives:

• Significant Penalty Reductions: 100% reduction of gravity-based penalties (if all conditions are met), or 75% reduction of gravity-based penalties (if all conditions are met, except the violation was not detected through a systematic discovery process).

• No Criminal Referral: No recommendation for criminal prosecution for regulated entities that meet all criteria (“systematic discovery” of a criminal violation is not required for a regulated entity to be eligible for this incentive), but the entity must be acting in good faith and adopt a systematic approach to prevent future violations.

• No Routine Requests for Audit Reports: EPA will refrain from making routine audit requests of the regulated entity making a voluntary disclosure.

To obtain the foregoing incentives, regulated entities must satisfy the following criteria:

1. Systematic Discovery: The violation is discovered through an environmental audit or through the implementation of a compliance management system.
2. Voluntary Disclosure: The violation was not detected because of a legally required monitoring, sampling, or auditing procedure.
3. Prompt Disclosure: The violation is disclosed to EPA within 21 days of discovery, or within any shorter time required by law (“discovery” occurs when an officer, director, employee, or agent of the facility has an objectively reasonable basis for believing that a violation has, or may have, occurred).
4. Independent Discovery and Disclosure: The violation is discovered before EPA or another regulator would likely have identified it through its own investigation or based on information provided by a third party.
5. Correction and Remediation: The violation is corrected within 60 calendar days of its discovery (in most cases).
6. Prevent Recurrence: The regulated entity prevents the violation from recurring.
7. Repeat Violations are Ineligible: The violation must not be the same (or closely related to) violations that have occurred at the facility within the past 3 years, or that have occurred as part of a pattern at multiple facilities owned or operated by the same entity within the past 5 years (this exclusion does not apply to newly acquired facilities).
8. Certain Types of Violations are Ineligible: The violation must not result in serious actual harm, present an imminent and substantial endangerment, or violate the specific terms of an administrative or judicial order or consent agreement.
9. Cooperation: The regulated entity must fully cooperate with EPA.

TDEC’s Policy Self-Policing and Voluntary Correction Policy

Like EPA’s Self-Audit Policy, the TDEC Policy Encouraging Self-Policing and Voluntary Correction is an essential tool for obtaining protections against civil and criminal penalties for violations of Tennessee environmental laws. Notably, the criteria that Tennessee entities must satisfy to be eligible for civil and criminal penalty protections largely mirror the nine criteria enumerated in EPA’s Self-Audit Policy above; however, the federal and state policies differ slightly, primarily in terms of the incentives provided to regulated entities making qualifying disclosures. Specifically, TDEC offers the following incentives for voluntary disclosures:

• Significant Penalty Reductions: TDEC will not seek non-contingent penalties against a regulated entity that satisfies all nine criteria unless the regulated entity made a significant economic gain from the violation. Even if a regulated entity does not discover a violation through systematic discovery or fails to disclose a violation promptly, TDEC may still consider the entity’s actions when assessing a civil penalty.

• No Criminal Referral: Differing slightly from EPA, TDEC will not make a criminal referral against a regulated entity that satisfies all nine criteria, so long as the violation does not demonstrate or involve: (1) a prevalent management philosophy or practice that concealed or condoned environmental violations, or (2) high-level corporate officials’ or managers’ conscious involvement in, or willful blindness to, the violations.

• No Routine Requests for Audit Reports: TDEC will not make routine requests for audit reports, nor will it request an audit report during routine inspections.

Disclaimer: Protections Not Guaranteed by Law

EPA’s and TDEC’s self-policing policies are attractive risk-management tools for mitigating civil and criminal liability for environmental violations, but it is worth underscoring that these protections are not enshrined in law. In other words, these guidance documents do not create enforceable legal rights but are intended to guide how these agencies will exercise their enforcement discretion if certain criteria are met. While EPA and TDEC generally honor their self-policing policies, regulated entities should be aware that the agencies reserve the right to deviate from them, may choose not to follow them and may even modify or rescind them. Therefore, it is important for regulated entities to carefully consider whether they make a voluntary disclosure to EPA and/or TDEC in consultation with an environmental attorney.

For regulated entities operating in states outside of Tennessee, it is also important to consult with an environmental attorney to determine whether the state in which they operate has a similar policy. For example, several states, such as Mississippi and Colorado, have enacted laws codifying reductions in civil and criminal penalties (as well as audit and testimonial privileges) for making qualifying disclosures of state environmental violations. By contrast, states like Alabama and Louisiana offer no protections for voluntary disclosures, either in law or guidance.

Conclusion

Voluntary disclosure under a federal or state self-policing policy is a valuable tool for regulated entities to mitigate their exposure to civil and criminal penalties for environmental violations discovered during voluntary self-audits. This is especially true in this moment as EPA enforcement and compliance assurance staff are encouraging regulated entities to conduct self-audits and disclose environmental violations as part of its new “Compliance First” orientation.

Accordingly, companies operating in Tennessee should consider ways to develop and utilize their internal audit programs to identify environmental violations. By proactively identifying and disclosing environmental violations, Tennessee companies can generally resolve their noncompliance without fear of civil and/or criminal penalty exposure, significantly reducing the potential financial and reputational harm associated with environmental enforcement. 

Butler Snow’s Environmental Regulatory Team is here to assist regulated entities in navigating the complex nature of federal and state environmental regulations and agency guidance. If you have any questions about how these policies might affect your business, please contact J.W. Luna, B. Hart Knight, or Tim Roth for additional information.