In the first few weeks of 2018, the federal government released a series of memoranda officially announcing a host of significant changes in how it will enforce violations of environmental laws – ranging from restricting payouts to “settle” lawsuits outside of court, to deferring to states on enforcement matters, to limiting the practice of regulating through guidance. In addition, the U.S. Environmental Protection Agency (EPA) finalized its 2018 penalty rule that increased the maximum civil penalties per violation of an environmental statute or agency regulation.
Higher Fines for Environmental Violations
EPA has again issued final regulations adjusting the maximum civil penalty dollar amounts for violations of various environmental regulations. 83 Fed. Reg. 1190 (Jan. 10, 2018). EPA will adjust its civil penalties annually, as required by the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 (2015 Act). Below are the new 2018 penalty maximum levels to account for inflations. But keep in mind that in most cases, actual fines track the perceived or actual economic benefit derived from the violation(s) – consistent with applicable EPA penalty policies.
- Clean Water Act (permits effluent limits): Violations up to $53,484 per day, per violation (up from $52,414); for purposes of Section 404, a day of violation may be a day that actual discharge of dredged or fill material takes place or may also include any day that such dredged or fill material remains in the waters or wetlands.
- Clean Water Act (oil and hazardous substance discharges): Violations up to $46,192 per day, per violation (up from $45,268).
- Resource Conservation and Recovery Act (hazardous waste storage, management, and disposal requirements): Violations up to $72,718 per day, per violation (up from $71,264).
- Toxic Substances Control Act (chemical management, reporting, and recordkeeping): Violations up to $38,892 per day, per violation (up from $38,114).
- Emergency Planning and Community Right-to-Know Act: Violations up to $55,907 per day, per violation (up from $54,789).
As instructed by the 2015 Act and as explained in EPA’s 2018 penalty adjustment rule, EPA calculated the new penalty amounts by multiplying the cost-of-living multiplier by the previous statutory penalty amount as adjusted by the 2017 rule. The result is the amount listed in the farthest column on the right in Table 2 of 40 C.F.R. § 19.4 and the Federal Register notice. This amount applies to violations occurring after November 2, 2015.
The head of EPA’s Office of Enforcement and Compliance Assurance Susan Bodine circulated a memo to the regional offices on Jan. 11, 2018, that clarifies the differences between the EPA's statutory maximum and minimum civil penalties and the EPA's penalty policies.
Restricting Settlement Payments to Third Parties (in addition to recent ban on “Sue & Settle”)
This administration has taken actions that seemingly aim to remedy the claims that legal settlements have been abused in the past by both federal agencies and environmental groups. On Jan. 9, 2018, the U.S. Department of Justice (DOJ) issued a clarifying memo, “Settlement Payments to Third Parties in ENRD Cases,” detailing limited exceptions to the ban Attorney General Jeff Sessions imposed last year on third-party payments as part of legal settlements. For example, such payments are allowed for environmental projects, including when payments directly remedy the environmental harm alleged in the complaint the settlement seeks to rectify. When Sessions first announced the new policy in a June 2017 memo, prohibiting DOJ from entering settlements “directing or providing” payments to non-governmental third parties not a party to the enforcement action, it raised a lot of questions regarding how the new policy might affect settlements in environmental cases, particularly the availability of Supplemental Environmental Projects (SEPs) in consent decrees. DOJ’s subsequent Jan. 9, 2018, memo explains how DOJ will implement the policy in environmental cases.
Similarly, EPA Administrator Pruitt recently placed strict limits on the agency’s lawsuit settlement practices when he issued an AGC-supported directive (and accompanying memorandum) imposing steps to end the practice known as “sue and settle.” As previously reported by AGC, the directive also sets a deadline of 15 days for EPA to publish public notice of legal complaints against EPA. It also calls for improved outreach to those affected by consent decrees or settlements and aims to block attorney fees/litigation costs from inclusion in any deals. “Sue and Settle” refers to when a federal agency agrees to a settlement agreement in a lawsuit from special interest groups, to create priorities/regulations outside of the normal, public rulemaking process.
AGC will monitor how these policies play out in practice. But the irony may be that if the agency becomes less willing to settle, then its rulemaking agenda and schedule will be set by which lawsuits are brought and what judges decide. Courts often force strict timelines. On Dec. 27, 2017, for example, the U.S. Court of Appeals for the Ninth Circuit gave EPA 90 days to update its regulations defining lead-based paint and how much lead in dust represents a hazard. The agency must finalize the rule a year after it is proposed; EPA had asked the court for six years.
Deferring Enforcement to States with Authorized Programs
EPA’s Office of Enforcement and Compliance Assurance (OECA) issued a memo on Jan. 22, 2018, “Interim OECA Guidance on Enhancing Regional-State Planning and Communication on Compliance Assurance Work in Authorized States,” to all Regional Offices in order “to immediately begin the movement toward a more collaborative partnership between the EPA and authorized States.” The Guidance directs EPA regions to “generally defer to authorized States as the primary day-to-day implementer of their authorized/delegated programs.” But there are noted exceptions, including where states have not addressed a significant issue, in emergency situations or when there is a significant threat to public health; and to address widespread noncompliance problems.
This shift is consistent with EPA’s overall strategic plan for 2018-2022, which identifies three goals: “(1) refocus the agency back to its core mission; (2) restore power to the states through cooperative federalism; and (3) lead the agency through improved processes and adhere to the rule of law.”
Limiting Use of Agency Guidance in Enforcement
On Jan. 25, 2018, DOJ issued a new policy memo, “Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases,” to prohibit the department from using its civil enforcement authority to compel compliance with agency guidance documents. The new policy states: “[g]uidance documents cannot create binding requirements that do not already exist by statute or regulation” and so it inhibits DOJ lawyers from using noncompliance with agency guidance documents (which do not have the force of law of statute or regulations) as a basis for bringing enforcement actions. The practice of agencies, such as EPA, pursuing enforcement actions against companies who have failed to comply with “guidance” has long been a concern of the regulated community. Legal experts indicate that EPA will need to closely assess whether it can continue to rely on the guidance when issuing notices of violation, in settlement discussions or in administrative enforcement proceedings.
This is consistent with a separate memorandum dated Nov. 17, 2017, in which the U.S. Attorney General prohibited DOJ from implementing guidance documents that change the law or impose additional standards. Because guidance documents do not result from the notice-and-comment rulemaking process required by the Administrative Procedure Act.
For more information, please contact AGC’s Leah Pilconis at firstname.lastname@example.org.