New EPA Rule Requires Board Updates
Client Updates
On March 1, 2024, the U.S. Environmental Protection Agency (“EPA”) released a final rule making significant amendments to the agency’s Risk Management Program (“RMP”) regulations, including mandatory board oversight communications, new and expanded prevention program requirements, enhancements to emergency preparedness requirements and increased public availability of chemical hazard information.
One of the final rule’s new requirements relates to third-party auditing. While the RMP regulations already included a requirement to conduct a compliance audit every three years, the new rule expands on this requirement by specifying that the next scheduled audit must be performed by a third-party auditor if (i) the facility has experienced an accidental release that results in significant onsite or off-site impacts; or (ii) an implementing agency, such as EPA, makes a determination that a third-party audit is required based on site conditions. Potential third-party auditors must meet requirements relating to knowledge and independence, and the audit reports must be in writing.
EPA’s new rule also requires board reporting of these third-party audit findings. Under the new rule, the findings and recommendations from third-party audits must be submitted directly to the audit committee of the board of directors (or the equivalent governance committee, if one exists), along with the company’s response to each finding and a schedule for responding to any deficiencies. EPA has previously stated that it “believes that providing the audit committee of the board of directors with third-party audit findings will ensure the committees and their boards of directors are aware of any deficiencies and have the opportunity to properly budget for any required corrective actions in a timely manner.”
Regulated facilities have three years, or until May 10, 2027 to implement the third-party auditing provisions, including the board reporting requirements.
EPA’s RMP regulations, including the 2024 amendments, apply to a broad range of facilities that store regulated substances in excess of specified thresholds. These facilities include chemical plants and refineries, but may also include gas processing facilities, terminals, warehouses, and other facilities with large chemical inventories. Additional information regarding EPA’s RMP amendments is available on the agency’s Fact Sheet.
One of the final rule’s new requirements relates to third-party auditing. While the RMP regulations already included a requirement to conduct a compliance audit every three years, the new rule expands on this requirement by specifying that the next scheduled audit must be performed by a third-party auditor if (i) the facility has experienced an accidental release that results in significant onsite or off-site impacts; or (ii) an implementing agency, such as EPA, makes a determination that a third-party audit is required based on site conditions. Potential third-party auditors must meet requirements relating to knowledge and independence, and the audit reports must be in writing.
EPA’s new rule also requires board reporting of these third-party audit findings. Under the new rule, the findings and recommendations from third-party audits must be submitted directly to the audit committee of the board of directors (or the equivalent governance committee, if one exists), along with the company’s response to each finding and a schedule for responding to any deficiencies. EPA has previously stated that it “believes that providing the audit committee of the board of directors with third-party audit findings will ensure the committees and their boards of directors are aware of any deficiencies and have the opportunity to properly budget for any required corrective actions in a timely manner.”
Regulated facilities have three years, or until May 10, 2027 to implement the third-party auditing provisions, including the board reporting requirements.
EPA’s RMP regulations, including the 2024 amendments, apply to a broad range of facilities that store regulated substances in excess of specified thresholds. These facilities include chemical plants and refineries, but may also include gas processing facilities, terminals, warehouses, and other facilities with large chemical inventories. Additional information regarding EPA’s RMP amendments is available on the agency’s Fact Sheet.
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