1. Stephen Neighbours November 13, 2014

2. Agenda Introduction and Background Audit Process Case Studies Discussion of Selected Best Practices Questions from the Audience

3. Stephen Neighbours Introduction Compliance Leader for The Dow Chemical Company Worked for Dow for 25 years Operations, Logistics, EHS, Coaching (Performance), & Regulatory 24 years in the Texas Army National Guard – Retired as a Sergeant First Class (Platoon SGT) with 2 tours in Iraq Truck Driver, Ammunitions Specialist, Tanker, Cavalry Scout

4. Background to Texas Audit Act Texas Statute – http://www.statutes.legis.state.tx.us/Docs/CV/htm/CV.71.1.htm http://www.statutes.legis.state.tx.us/Docs/CV/htm/CV.71.1.htm Official Name is the Texas Environmental, Health, and Safety Audit Privilege Act –Section 1 Known as “The Audit Act” “The purpose of this Act is to encourage voluntary compliance with environmental and occupational health and safety laws.” - Section 2 Provides no fines and lack of admissibility of audit document in state courts or agencies – Section 10 A regulatory agency may not adopt a rule or impose a condition that circumvents the purpose of this Act. – Section 11

5. Audit Process Declare Intent to Audit (Certified Mail) Audit First disclosure of violations (Certified Mail) No obligation to disclose Can’t be required to disclose at that time Disclosure includes Compliance Plan (CP) May have optional additional disclosures/CP Restore Compliance/Inform Agency Privileged Status Confirmed

6. Scope Applies to all Texas Environmental Health and Safety Agencies TCEQ receives most of the audits Legislature expanded scope to favor new owners of operating facilities Agencies see this as a very favorable self- inspection/correction They have plenty to inspect We can find more than they can They overview and ensure violation is corrected

7. Agencies Texas Audit Used by Dow Texas Commission on Environmental Quality - TCEQ Texas Railroad Commission - RRCT Texas General Land Office Texas Department of Public Safety - DPS Texas Parks and Wildlife

8. TCEQ Audits and NOVs/10

9. Deer Park-Case Study, p1 Case Study 1 – Deer Park, following Dow’s Acquisition of Rohm and Haas Actually three sites, but near each other Many “upgrades” to Dow standard methods – listed as violations Saved Dow the need to examine the compliance of these heritage Rohm and Haas methods Cut off any potential for Dow or TCEQ ever having to examine this historical methods

10. Deer Park-Case Study, p2 Discussed with TCEQ before disclosure mailed Many changes or “violations” referenced No specifics of any violations were discussed First disclosure was promptly mailed by Certified Mail Compliance was restored for all violations ahead of schedule

11. Dow Freeport – Audits 100 No Findings Audits 630 Violations found and fixed YTD data for 2014

12. Best Practices 1 Submit the notification by certified mail Reporting violations found during the audit Specify the scope of the EHS Audit to include the entire scope of potential non-compliance findings – Use focus language Suspend auditing activities during audit gaps Applicable to Non TCEQ agencies

13. Best Practices 2 Complete the audit before any disclosure or auditing is required, such as under RRCT, Title V, TPDES or NESHAP Compliance is restored as soon as the organization is no longer in non-compliance Conduct Texas EHS Audits promptly and disclose violations before scheduled agency inspections

14. Best Practices 3 Combine Texas EHS Audits and Attorney Client Privilege Audits Audits for non-delegated Federal EHS Laws

15. Questions What do you want to talk about?

16. Example Letters Starting a Texas EHS Audit Audit over - No Violation Disclosed Interim Disclosure of Violation(s) Final Disclosure of Violation(s) Final Disclosure of Violation(s) – ongoing Corrective Action