WAC 173-424-850

(1) Conflict of interest evaluation. Before verification services may begin, each responsible entity must coordinate with the verification body with which it has engaged to perform verification to conduct a conflict of interest evaluation between itself and any verification bodies, verifiers, lead verifiers, sector-specific verifiers, independent reviewers, and subcontractors intending to perform verification under the requirements of this chapter.

(2) High conflict of interest. The potential for a conflict of interest must be deemed to be high where:

(a) The responsible entity and the verification body share any management staff or board of directors membership, or any of the senior management staff of the responsible entity have been employed by the verification body, or vice versa, within the previous five years;

(b) Any employee of the verification body, or any employee of a related entity or subcontractor who is a member of the verification team, has provided to the responsible entity any of the following services within the previous five years:

(i) Designing, developing, implementing, reviewing, or maintaining an information or data management system for data submitted under this chapter or chapter 173-441 WAC unless the review was part of providing independent quality assurance audit services, attestation engagement services, verification services according to the U.S. EPA RFS or EU RED, or third-party engineering services according to the U.S. EPA RFS;

(ii) Developing CI or fuel transaction data or other greenhouse gas-related engineering analysis that includes facility-specific information;

(iii) Preparing or producing CFP fuel pathway application or CFP reporting manuals, handbooks, or procedures specifically for the responsible entity;

(iv) Owning, buying, selling, trading, or retiring CFP credits, RINs, Climate Commitment Act allowances, or credits in any carbon or greenhouse gas-related markets;

(v) Dealing in or being a promoter of credits on behalf of the responsible entity;

(vi) Designing or providing consultative engineering or technical services in the development and construction of a fuel production facility; or energy efficiency, renewable power, or other projects which explicitly identify greenhouse gas reductions as a benefit;

(vii) Any service related to the development of information systems, or consulting on the development of environmental management systems, except for accounting software systems and systems that will not be part of the validation and verification process;

(viii) Verification services that are not provided in accordance with, or equivalent to, the requirements of this chapter, unless the systems and data reviewed during those services, as well as the result of those services, will not be part of the verification process;

(ix) Reporting under this chapter or chapter 173-446 WAC, or uploading data for ecology, on behalf of the responsible entity;

(x) Bookkeeping and other nonattest services related to accounting records or financial statements, excluding services and results of those services that will not be part of the verification process;

(xi) Designing, developing, implementing, conducting an internal audit for, consulting, or maintaining a greenhouse gas emissions reduction or greenhouse gas removal offset project as defined in chapter 173-446 WAC, or a carbon sequestration project report submitted under this chapter;

(xii) Directly managing any health, environment, or safety functions for the responsible entity;

(xiii) Appraisal services of carbon or greenhouse gas liabilities or assets;

(xiv) Brokering in, advising on, or assisting in any way in carbon or greenhouse gas-related markets;

(xv) Appraisal and valuation services, both tangible and intangible;

(xvi) Any actuarially-oriented advisory services involving the determination of amounts recorded in financial statements and related accounts;

(xvii) Any internal audit service that has been outsourced by the responsible entity that relates to its internal accounting controls, financial systems, or financial statements, unless the result of those services will not be part of the verification process;

(xviii) Fairness opinions and contribution in-kind reports in which the verification body has provided its opinion on the adequacy of consideration in a transaction, unless the resulting services will not be part of the verification process;

(xix) Acting as a broker-dealer (registered or unregistered), promoter, or underwriter on behalf of the responsible entity;

(xx) Any legal services;

(xxi) Expert services to the responsible entity, a trade or membership group to which the responsible entity belongs, or a legal representative for the purpose of advocating the responsible entity's interest in litigation, regulatory or administrative proceedings, or investigations;

(c) Any member of the verification body or verification team has provided verification services for the responsible entity except with the time periods in which the responsible entity is allowed to use the same verification body or team members as specified under WAC 173-424-810(5).

(d) Any member of the verification body provides any type of incentive, monetary or otherwise, to the responsible entity to secure a contract for verification contract, influence verification documentation, or influence verification findings.

(3) Low conflict of interest. The potential for a conflict of interest must be deemed to be low where:

(a) No potential for a high conflict of interest is identified under subsection (2) of this section;

(b) No potential for a medium conflict of interest is identified under subsection (4) of this section; and

(c) Any services provided by any member of the verification body to the responsible entity within the last five years are valued at less than 20 percent of the fee for the proposed CFS verification services. Any verification services provided in programs outside ecology's jurisdiction that are conducted in accordance with, or substantially equivalent to, the requirements in WAC 173-424-800 through 173-424-850 are exempt from this financial assessment, but must be disclosed to ecology as part of the conflict of interest submittal under subsection (6) of this section.

(d) Verification services unrelated to the CFS are excluded from the conflict assessment if the services are conducted in accordance with, or are substantially equivalent to, the requirements in WAC 173-424-800 through 173-424-850. These services include, but are not limited to, auditing services provided under the EPA Renewable Fuel Standard, third-party certification of environmental management systems under ISO 14001, energy management systems under 50001 standards, or certification systems recognized by other governmental agencies, including the European Commission. Verification services provided under the Climate Commitment Act Program Rule, chapter 173-446 WAC, are also excluded from this risk assessment for potential conflict of interest.

(4) Medium conflict of interest. The potential for a conflict of interest must be deemed to be medium where:

(a) The potential for a conflict of interest is not deemed to be either high or low; or

(b) No potential for a high conflict of interest is identified under subsection (2) of this section, but there are instances of personal, employment, or familial relationships between a member of the verification body and a member of the responsible entity. For purposes of this subsection only, "employment" means the condition of having been paid for work as documented in a W-2 form.

(5) Conflict of interest mitigation plan and submittal requirements.

(a) If a medium potential for conflict of interest is identified and the responsible entity intends to engage the verification body for verification, the responsible entity must coordinate with the verification body with which it has engaged to perform verification to submit a plan to ecology to avoid, neutralize, or mitigate the potential conflict of interest situation, in addition to the evaluation submittal requirements specified under subsection (6) of this section. At a minimum, the conflict of interest mitigation plan must include:

(i) A demonstration that any individuals with potential conflicts have been removed and insulated from working on or discussing the project;

(ii) An explanation of any changes to the organizational structure or verification body to remove the potential conflict of interest, including a demonstration that any unit with potential conflicts has been divested or moved into an independent entity or any subcontractor with potential conflicts has been removed; and

(iii) Any other circumstance that specifically addresses other sources for potential conflicts of interest.

(6) Conflict of interest self-evaluation plan and submittal requirements.

(a) Before verification services are performed under the requirements of this chapter, the responsible entity, verification body, and any related entities must submit to ecology a conflict of interest self-evaluation that includes the following:

(i) Identification whether the potential for conflict of interest is high, low, or medium based on the factors specified under subsections (2) through (4) of this section;

(ii) Identification of whether the verification body, related entities, or any member of the verification team has previously provided verification services for the responsible entity or related entities and, if so, a description of the work and years of service;

(iii) Identification of whether any member of the verification team, verification body, or related entity has engaged in services of any nature with the responsible entity or related entities either within or outside Washington during the previous five years. If services other than ecology verification under this chapter have previously been provided, the following information must also be submitted:

(A) The nature and location of the work performed for the responsible entity or related entity and whether the work is similar to the type of work to be performed during verification, such as emissions inventory, auditing, energy efficiency, renewable energy, or other work with implications for the responsible entity's greenhouse gas emissions;

(B) The nature of past, present, or future relationships of any member of the verification team, verification body, or related entities with the responsible entity or related entities including:

(I) Instances when any member of the verification team, verification body, or related entities has performed or intends to perform work for the responsible entity or related entities;

(II) Identification of whether work is currently being performed for the responsible entity or related entities, and if so, the nature of the work;

(III) How much work was performed for the responsible entity or related entities in the last five years, in dollars;

(IV) Whether any member of the verification team, verification body, or related entities has contracts or other arrangements to perform work for the responsible entity or a related entity; and

(V) How much work related to greenhouse gases the verification team has performed for the responsible entity or related entities in the last five years, in dollars;

(C) Explanation of how the amount and nature of work previously performed is such that the credibility and lack of bias of any member of the verification team should not be under question;

(iv) A list of names of the staff that would perform verification services for the responsible entity, and a description of any instances of personal, employment, or familial relationships identified that potentially represent a conflict of interest under subsection (4)(b) of this section;

(v) Identification of any other circumstances known to the responsible entity or verification body that could result in a conflict of interest; and

(vi) Attestation, in writing, to ecology as follows:

"I certify under penalty of perjury of the laws of the State of Washington the information provided in the conflict of interest self-evaluation is true, accurate, and complete."

(7) Approval of conflict of interest submittals.

(a) Ecology will review the conflict of interest self-evaluation and conflict of interest mitigation plan, if applicable, submitted by the responsible entity and will notify the responsible entity in writing whether the verification body is authorized to proceed with verification services.

(b) If ecology determines the verification body or any member of the verification team meets the criteria for a high conflict of interest pursuant to subsection (2) of this section, verification services may not proceed. Ecology may, at its discretion, determine that a high conflict of interest exists when a member of the verification team provided services within the previous five years, but the services were not services that result in a high conflict of interest under subsection (2) of this section. If ecology makes such a determination, it must explain in writing why it believes the work performed creates a high conflict of interest.

(c) If ecology determines that there is a low potential conflict of interest pursuant to subsection (3) of this section, verification services may proceed.

(d) If ecology determines that the verification body and the verification team have a medium potential for a conflict of interest, ecology will evaluate the conflict of interest mitigation plan submitted and may request additional information from the applicant to complete the determination. In determining whether verification services may proceed, ecology may consider factors including, but not limited to, the nature of previous work performed, the current and past relationships between the verification body, related entities, and its subcontractors with the responsible entity and related entities, and the cost of the verification services to be provided. If ecology determines that these factors when considered in combination demonstrate an acceptable level of potential conflict of interest, ecology will authorize the verification body to proceed with verification services.

(8) Monitoring conflict of interest situations.

(a) After commencement of verification services, both the verification body and the responsible entity must each:

(i) Monitor and immediately make full disclosure in writing to ecology any potential conflict of interest situation that arises. This disclosure must include a description of actions that the verification body and the responsible entity have taken or propose to take to avoid, neutralize, or mitigate the potential for a conflict of interest;

(ii) Continue to monitor arrangements or relationships that may be present for a period of one year after the completion of verification services. During that period, within 30 days of the verification body or any verification team member entering any contract with the responsible entity or related entity for which the body has provided verification services, the responsible entity must notify ecology of the contract and the nature of the work to be performed. Ecology will determine whether the relationship constitutes a conflict and, if it does, whether the responsible entity must reverify its reports or fuel pathway applications, and if modification, suspension, or revocation of ecology approval of the verification body or any verification team is warranted; and

(iii) Notify ecology within 30 days of any conflicts of interest that arise after verification services begin and until one year after verification services are completed. When such notification is made:

(A) If ecology determines that a disclosed potential conflict of interest is medium risk and the responsible entity and verification body agree to mitigate this risk in a manner acceptable to ecology, the verification body may continue to provide verification services to the responsible entity and will not be subject to suspension or revocation of ecology accreditation; and

(B) If ecology determines that a disclosed potential conflict of interest is medium or high risk and this risk cannot be adequately mitigated, the verification body may not continue to provide verification services to the responsible entity and may be subject to suspension or revocation of ecology accreditation based on conflict of interest.

(b) Each verification body must report to ecology any changes in its organizational structure, including mergers, acquisitions, or divestitures, that occur within one year after completion of offset verification services.