Maryland entities that voluntarily discover and disclose environmental violations can still receive penalty reductions, or even complete forgiveness, under the rarely invoked Maryland Department of the Environment (MDE) self-disclosure policy.

A Ballard Spahr client looking to purchase a manufacturing concern conducted a pre-acquisition environmental audit and discovered the seller had been discarding hazardous materials into its non-hazardous waste stream since 2007. Following the client's acquisition of the company, a more detailed investigation confirmed that practice had ceased in early 2014 after the seller learned that the material should be managed as hazardous waste. The investigation, however, also uncovered other ongoing violations of hazardous waste management requirements.

Concerned about the potential penalty exposure, but also wishing to take advantage of its relative lack of culpability, the client agreed with a recommendation to voluntarily disclose the violations, and to seek favorable treatment under the policy. Patterned after the U.S. Environmental Protection Agency's policy, Maryland's Environmental Audit Guidance policy encourages the regulated community to continuously evaluate compliance with federal and state environmental requirements through self-audits and compliance management systems, and rewards self-disclosure of violations. Surprisingly, the client learned that from 2008 until 2016, only one other entity had approached MDE seeking the protection under the policy. 

To be eligible for a penalty reduction for self-disclosed violations, the policy requires the party seeking the protection to:

  • Discover the violation during an environmental audit or as a result of an entity's use of compliance management system;

  • Disclose the violation to MDE within 21 days after the violation is discovered, or sooner if otherwise required by statute or regulation;

  • Correct or eliminate the violation and remedy all harm arising from the violation within 60 days, or if unable to do, submit a compliance plan to MDE within 60 days of discovery;

  • Provide MDE with a plan to prevent recurrences; and

  • Cooperate with MDE.

On the other hand, a party could not count on the protection where:

  • The violation was discovered through a required monitoring or sampling requirement or was not otherwise discovered voluntarily;

  • MDE or a third party discovered the violation first, or had already commenced an inspection, investigation, or request for information;

  • MDE determines that the violation was committed willfully;

  • The violation caused significant environmental harm or had a significant effect upon public health; or

  • The violation is part of a recurrent pattern of violations or is the same or related to one that has occurred within the past three years.

Our client was able to demonstrate that it met all the conditions. MDE responded favorably to the client’s self-disclosure, declining to pursue enforcement or penalties for any of the events described in the self-disclosure letter.

MDE remains willing to exercise its enforcement discretion favorably when violations are self-disclosed, promptly corrected, and do not recur. Accordingly, entities that identify violations of Maryland environmental laws through an audit or other voluntary means would be well-advised to consider self-disclosure under the policy.

Ballard Spahr's Environment and Natural Resources Group advises on national and regional compliance, permitting, rulemaking, development, business planning, and contamination matters. The Group also provides representation in litigation, during investigations, and for transactions.

Copyright © 2016 by Ballard Spahr LLP.
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