EP '-"901/9-76- 003a
ECONOMIC LAW
ENFORCEMENT
The Judges, (detail American woodcut, 19th Century).
VOLUME I
OVERVIEW
CONNECTICUT ENFORCEMENT PROJECT
U.S. ENVIRONMENTAL PROTECTION AGENCY
SEPTEMBER, 1975
-------
This report has been reviewed by EPA and
approved for publication. Approval does
not signify that the contents necessarily
reflect the views and policies of the
Environmental Protection Agency, nor does
mention of trade names or commercial pro-
ducts constitute endorsement or recommen-
dation for use.
Copies of this document are available in
limited quantities through the Connecticut
Department of Environmental Protection,
State Office Building, 165 Capitol Avenue,
Hartford, Connecticut, 06115.
-------
The Judges (detail)
John Andrew and Son (after W H Drake)
American, 19th Century
Wood engraving
Courtesy Museum of Fine Arts, Boston. Ma.
-------
EPA-901/9-76-003a
ECONOMIC LAW
ENFORCEMENT
VOLUME I
OVERVIEW
Final Report Submitted Under Purchase Order #WB6990547A
by: The Connecticut Enforcement Project
(Douglas Bateson, Volume Contract Officer)
Hartford, Connecticut 06115
to: The U.S. Environmental Protection Agency
Region I
Boston, Massachusetts 02203
September, 1975
-------
ECONOMIC
LAW ENFORCEMENT
VOLUME I - OVERVIEW
Preface and Acknowledgements i
Table of Contents (Volumes I - VI) v
An Introduction to Connecticut's Economic Approach to
Environmental Law Enforcement 2
Attachments:
(A) The Enforcement Act of 1973 36
(B) Representative Economic Enforcement Regulations 41
(C) The Economics of Economic Remedies 56
(D) Public Comment on Economic Law Enforcement in
Connecticut 72
-------
THE CONNECTICUT ENFORCEMENT PROJECT
Douglas Bateson Glen Gross
Sandee Blechman Kathleen Kores
David Bognar Blanchie McCarthy
Peter Connolly Robert Mosteller
Fred Dennehy Mary Nason
William Drayton Mildred Pevar
Deborah Pillion Phillip Reed
Philip Florkoski Steven Seidel
Sandi Foley Donald Shepard
Donald Gogel David Tundermann
Robert Gogel James Usdan
James Gomes Andrew Weissman
-------
PREFACE AND ACKNOWLEDGEMENTS
Those charged with administering the large number of
environmental statutes enacted in the late 1960's and early
1970's quickly learned how essential effective, equitable law
enforcement tools were. Without such tools they could not
force the inevitable few recalcitrants to comply; and, as long
as they could not do this, they could neither fairly demand
nor reasonably expect others to comply voluntarily. Without
general voluntary compliance, environmental goals would not be
met and the regulators' administrative costs would soar.
Connecticut's Department of Environmental Protection real-
ized in 1972, its first year of operation, that its enforcement
responsibilities far outstripped the tools available to it. The
Department created a special task force to think through and
design the tools it needed; and the General Assembly, after
considering and debating these recommendations at length, enacted
the Environmental Enforcement Act of 1973 authorizing the
Department to use the tools suggested by the task force. The
U.S. Environmental Protection Agency, recognizing the value of
the proposed approach as a model that would help other environ-
mental agencies, funded the substantial work required to develop
and implement this new system in Connecticut. The Connecticut
Enforcement Project (CEP), a task force of consultants and mem-
bers of the Department, was given responsibility for the design
and implementation of this work.
As is typically the case with any significant social
innovation, the development and introduction of this new approach
to enforcement required the work and active support of many people
Three Commissioners of both parties have been involved. Dan
Lufkin saw the need for effective enforcement and realized the
limitations of the existing tools. He gathered the resources to
develop the initial ideas, supported them, and saw them through
to legislative enactment. Douglas Costle helped define the
enforcement problem and the new approach, gathered together the
funds and people to turn the legislation into a working program,
carefully reviewed the proposed program personally, and launched
the first regulations, Joseph Gill, who succeeded Douglas Costle
in 1975, reviewed the program afresh and saw its program develop-
ment work through to completion.
Other members of the Department's top management under
these different Administrations played key roles. Eckhardt C.
Beck supervised and supported the CEP's work closely as Deputy
Commissioner in the Costle Administration; John Curry, Special
Advisor to Commissioner Gill and a true professional who has
served Connecticut since the Great Depression, immediately knew
the right questions to ask and, along with Deputy Commissioner
-------
11
Melvin Schneidermeyer, contributed critically to the program's
implementation.
Henry Seal, the Department's Director of Air Compliance in
the Costle and Gill Administrations and earlier a lawyer in that
Unit, has always had an especially close relationship with the
Enforcement Project. He was one of the three-person task force
that initially analyzed what was needed and that drafted the
Enforcement Act. His Unit bore the brunt of being the first to
install the new tools, and he and his staff worked long and hard
to make sure they were fully thought through.
Henry Seal's chief associates in Air Compliance Enforcement,
Gerald Brodsky and James Vickery, contributed a great deal of
their considerable skill, their time and energy, and their
patience. In particular, James Vickery did or supervised almost
all of the engineering work required, notably including the
development and verification of the cost curves used to determine
economically accurate assessments.
The CEP is indebted to a great many others in and out of
the Department: Theodore B. Bampton, Deputy Commissioner; Robert
Taylor, C. Zell Steever, and Ralph Adkins, Program and Administra-
tive Directors; and Mary Ann Callihan, Doreen Dryer, Michael
Harder (who did the engineering work for the Water Compliance Sub-
Project) , James Murphy, Beverly Mockus and the many other members
of the Department who helped us and tolerated our many demands;
Kenneth Willis, who provided offices for six months while the
State Public Works Department could do nothing; Charles McKinney
and the staff of the Coastal Area Management program, for generous
help during the Project's last months; the distinguished members
of the Connecticut bar who reviewed the Project's work so care-
fully as pro bono members of the Project's Legal Advisory Council;
the many outside economists, management experts, and legal scho-
lars who reviewed our work,-notably including Professors William
Baumol of Princeton, Ralph Brown and Marvin Chirelstein of Yale
Law School, Andrew Gold of Trinity College, Henry Hansmann of
Pennsylvania. Law School, Daniel Saks of Michigan State University,
Thomas Nelson of the University of Connecticut Law School,
Richard Stewart of Harvard Law School, Daryl Wycoff of Harvard
Business School, and Richard Zeckhauser of Harvard's Kennedy
School; Russell Brenemann, one of Connecticut's leading environ-
mental lawyers, who offered wise advice throughout the Project:
the Connecticut Business and Industry Association and other mem-
bers of the state's business community who studied the proposed
regulations closely and worked with the Project staff to define
and strengthen them; and Connecticut's public interest, conserva-
tion, and environmental groups who also studied and strengthened
the program and who provided it with critical support.
David Tundermann, Assistant Commissioner for Legal and
Governmental Affairs from the time the Department was established
until March, 1975, and now a member of the staff of the President's
Council on Environmental Quality, was the person charged with
-------
Ill
primary responsibility for the program within the Department.
He brought the original task force that prepared the initial
draft of the Enforcement Act of 1973 together, represented the
Department before the General Assembly as it considered these
proposals, and then prepared the funding proposal submitted to
the U.S. Environmental Protection Agency. Once the CEP was
created, he represented the Department on the Project. He
helped develop the program ultimately adopted, introduce the
Project's proposals in and outside the Department, run political
and administrative interference, and supervise such research
work, chiefly regarding legal problems, as his substantial on-
going commitments as Assistant Commissioner allowed. After he
left the Department and before joining the Council on Environ-
mental Quality, he assumed responsibility for finishing the
design and for helping the Department begin to implement the
operating and maintenance sub-project.
William Drayton, a lawyer, economist, and management con-
sultant with McKinsey and Company, conceived many of the
innovations embodied in the Connecticut approach and was respon-
sible for managing the CEP staff. Drawing on prior consulting
experience and his special interest in the design of regulatory
and incentive systems, he conceived, among other ideas, of the
use of capital budgeting economics as a standard for remedy-
setting, of the approach's gradually escalating multi-step
response to noncompliance, and of the flexible reserve escrow
device. He was a member of the original task force that
formulated the Enforcement Act; he drafted the Section 602/603
regulations, which served as the prototype for most of the CEP's
other regulations; he helped guide and quality control the work
of other members of the project; and he either wrote, rewrote,
or edited all of this final report. Temporarily on leave from
McKinsey, he is currently a visiting professor at Stanford Law
School.
Donald J. Gogel helped manage the Project during its early
and middle stages, surviving a commute from Harvard Law School
for most of this period to do so. In addition to„helping with
overall program development and implementation, he was responsi-
ble for managing the development and implementation of the
prototype CEP program in the Air Compliance Unit. Phillip Reed
had lead responsibility for developing the CEP program for the
Water Compliance Unit, and he assumed many of the general manage-
ment responsibilities Donald Gogel had to give up when he left
the Project to take up prior commitments in California.
The other members of the CEP staff (and their chief areas
of responsibility) were Douglas Bateson (Air Compliance and
managing production of the final report), Sandee Blechman (Water
Compliance), David Bognar (graphics), Peter Connolly (Water
Resources), Fred Dennehy (legal), Deborah Pillion (graphics),
Philip Florkoski (programming and Air Compliance), Sandi Foley
-------
IV
(secretarial), Robert Gogel (Water Compliance), James Gomes
(Water Resources), Glen Gross (Water Resources and legal),
Kathleen Kores (administrative and secretarial), Blanchie
McCarthy (legal secretarial), Robert Hosteller (Operations
and Maintenance and legal), Mary Nason (administrative and
executive secretarial), Mildred Pevar (legal/executive
secretarial), Steven Seidel (Air Compliance), Donald Shepard
(formulae), James Usdan (Water Compliance), and Andrew Weissman
(legal and Operating and Maintenance).
-------
V
ECONOMIC LAW ENFORCEMENT
TABLE OF CONTENTS
VOLUME I ECONOMIC ENFORCEMENT PROGRAMS: OVERVIEW
AN INTRODUCTION TO CONNECTICUT'S ENFORCEMENT APPROACH 2
ATTACHMENTS
A. The Enforcement Act of 1973 36
B. Representative Economic Enforcement Regulations 41
C. The Economics of Economic Remedies 56
D. Public Comment on Economic Law Enforcement in
Connecticut 72
VOLUME II STRENGTHENING ENVIRONMENTAL LAW ENFORCEMENT:
AIR POLLUTION
PART I. USING ECONOMIC CIVIL ASSESSMENTS 1-1
Chapter I Using Economic Civil Assessments to Ensure
Compliance with Emissions Standards and
Abatement Orders 1-2
Chapter II Using Economic Civil Assessments to Ensure
Compliance with Progress Report Requirements 1-12
PART II. BASELINE PROFILE II--1
Preface II-2
Chapter I General Enforcement II-8
Chapter II Order Overruns 11-27
Chapter III Most Difficult Cases 11-39
Conclusion 11-47
Appendix 11-48
PART III. CALCULATING ECONOMIC REMEDIES III-l
Chapter I Calculating Assessments ill-2
Chapter II Determining the Cost of Compliance 111-12
Chapter III Handling Inflation 111-16
Chapter IV Adjusting for Individual Income Tax Rates 111-18
Chapter V Using the Cost of Capital 111-22
PART IV. CIVIL ASSESSMENT REGULATIONS IV-1
Section 22a-6b-602 - Violating Emissions Standards IV-2
Section 22a-6b-603 - Violating the Terms of an Order IV-6
Section 22a-6b-601 - Violating Progress Report
Requirements IV-9
-------
VI
PART V.
Chapter
Chapter
Chapter
Chapter
Chapter
Chapter VI
Chapter VII
A.
B.
C.
D.
E.
OPERATING MANUAL FOR THE APPLICATION OF CIVIL
ASSESSMENTS
I The Connecticut Enforcement Program
II How to Apply Section 602 Assessments
III How to Apply Section 603 Assessments
IV How to Apply Section 601 Assessments
V How to Conduct Hearings in Civil Assess-
ment Cases
How to Use Surety Devices As Part of the
Total Enforcement Program
How to Use and Update Tools Employed in
Levying Civil Assessments
Calculating the Cost of Compliance
Determining the Applicable Cost of Capital
Using Inflation Indexes
Estimating the Source's Income Tax Rate
Operating the Wang Calculator
Chapter I
Chapter II
Attachments
The Impact of the Emissions and Order
Compliance Regulations on Administrative
Costs
The Impact of the Progress Report Regu-
lations on Administrative Costs
V-l
V-5
V-7
V-27
V-35
V-44
V-52
V-61
V-62
V-128
V-149
V-151
V--153
PART VI, REDUCING THE ADMINISTRATIVE COST OF ENFORCEMENT VI-6
VI-4
VI-12
VI-16
VOLUME III
PART I.
PART II,
STRENGTHENING ENVIRONMENTAL LAW ENFORCEMENT;
WATER POLLUTION
USING ECONOMIC CIVIL ASSESSMENTS
Chapter I
Chapter II
Using Economic Civil Assessments to Stop
Illegal'Discharges and to Enforce Water
Pollution Abatement Orders
Using Economic Civil Assessments to Enforce
Water Discharge Monitoring Requirements
BASELINE PROFILE
Chapter I
Chapter II
Chapter III
Chapter IV
Introduction
Orders
Permits
Monitoring Reports
PART III. CALCULATING ECONOMIC REMEDIES
Chapter I
Chapter II
Chapter III
Chapter IV
Chapter V
Calculating Assessments
Determining the Cost of Compliance
Handling Inflation
Adjusting For Individual Income Tax Rates
Using The Cost of Capital
1-1
1-2
1-21
II-l
II-2
II-7
11-45
11-49
III-l
III-2
111-13
111-24
111-26
III-2S
-------
vii
PART IV.
CIVIL ASSESSMENT REGULATIONS
Section 22a-6b-502 - Discharging Without A Permit
Section 22a-6b-503 - Violating The Terms of An Order
Section 22a-6b-504 - Violating Monitoring Report
Requirements
PART V. OPERATING MANUAL FOR THE APPLICATION OF CIVIL
ASSESSMENTS
Chapter I The Connecticut Enforcement Program
Chapter II How to Apply Section 502 Assessments
Chapter III How to Apply Section 503 Assessments
Chapter IV How to Apply Section 504 Assessments
Chapter V How to Conduct Hearings in Civil Assess-
ment Cases
Chapter VI How to Use and Update Tools Employed in
Levying Civil Assessments
A. Calculating the Cost of Compliance
B. Determining the Applicable Cost of Capital
C. Using Inflation Indexes
D. Estimating the Source's Income Tax Rate
E. Operating the Wang Calculator
PART VI. THE IMPACT OF ECONOMIC CIVIL ASSESSMENTS ON
THE ADMINISTRATIVE COSTS OF ENFORCEMENT
IV-1
IV-2
IV-12
IV-21
V-l
V-5
V-7
V-30
V-44
V-61
V-71
V-7 2
V-S7
V-108
V-110
V-112
VI-1
VOLUME IV
PART I.
PART II.
STRENGTHENING ENVIRONMENTAL LAW ENFORCEMENT:
ILLEGAL FILLING
USING ECONOMIC CIVIL ASSESSMENTS
SURVEY OF COASTAL FILL AND STRUCTURES VIOLATIONS
Chapter I
Chapter II
Chapter III
Chapter IV
Introduction
Coastal Structures
Coastal Fill
Conclusion
PART III. CALCULATING ECONOMIC REMEDIES
Chapter I Calculating Economic Assessments
Chapter II Determining the Cost of Compliance
Chapter III Handling Other Variables
PART IV.
CIVIL ASSESSMENT REGULATIONS
Section 22a-6b-411 -
Section 22a-6b-412 -
Section 22a-6b-413 -
Failure to Apply For A Permit
To Place Coastal Fill
Coastal Fill Without A Permit
Coastal Fill Not in Compliance
With the Terms of an Order or
Permit
1-1
II-3
II-4
II-7
11-11
III-l
III-2
III-9
111-21
IV-1
IV-2
IV-8
IV-18
-------
Vlll
PART V. OPERATING MANUAL FOR THE APPLICATION OF CIVIL
ASSESSMENTS V-l
PART VI. THE IMPACT OF ECONOMIC CIVIL ASSESSMENTS ON
THE ADMINISTRATIVE COSTS OF ENFORCEMENT vi-1
VOLUME V ENSURING PROPER OPERATION AND MAINTENANCE:
THE ENVIRONMENT'S NEXT PROBLEM
INTRODUCTION ii
PART I. A PROGRAM TO ENSURE PROPER OPERATION AND
MAINTENANCE 1-1
Chapter I O&M Enforcement Problems 1-3
Chapter II A Proposed Enforcement Program for O&M:
Administrative Tools and Economic Remedies I--15
Conclusion 1-31
Appendix: Model Stipulation 1-33
PART II. CALCULATING ECONOMIC REMEDIES FOR IMPROPER
OPERATION AND MAINTENANCE AND FAILURE TO
MONITOR • • IIr-1
Chapter I Calculating Assessments II-2
Chapter II Determining the Costs of Compliance n-4
Chapter III Handling Inflation 11-12
Chapter IV Adjusting for Taxes 11-13
Chapter V Using the Cost of Capital 11-16
Chapter VI Determining the Useful Life of Equipment 11-20
Appendix: Cost Curves for Monitors 11-22
PART III. OPERATION AND MAINTENANCE REGULATIONS III-l
Sections 19-508-100 to 19-508-105 - Operation and
Maintenance Standards III-3
Section 22a-6b-611 - Failing to Operate and Maintain
Properly 111-30
Appendix: - Economic Appendix 111-52
Section 22a-6b-612 - Operating Without Operation and
Maintenance Permit 111-61
Section 22a-6b-613 - Failing to Monitor 111-75
Section 22a-6b-614 - Violating a Monitoring Timetable 111-91
VOLUME VI LEGAL ISSUES
INTRODUCTION i
PART I. CONSTITUTIONAL ISSUES 1
A. Delegation of Judicial Authority 2
B. The Civil/Criminal Distinction (I) 20
C. The Civil/Criminal Distinction (II) 37
-------
IX
D. Self-Incrimination (I) 44
E. Self-Incriraination (II) 51
PART II. STATUTORY ISSUES 73
A. Statutory Authority and Rules of Construction 74
B. Cost of Compliance As The Basis For Civil
Assessments 80
C. Cost of Capital 88
D. Judicial Review of Formulae 93
E. Deferring the Calculation of Civil Assessments 101
F. The Interpretation of "Amount" as "Rate" 117
PART III. THE ASSESSMENT PERIOD ISSUE 122
A. Assessments for Past Delay 123
B. Assessments During Litigative Delay (I) 144
C. Assessments During Litigative Delay (II) 154
D. Due Process and the Assessment Period 175
PART IV. PROCEDURAL AND MISCELLANEOUS ISSUES 183
A. The Warning Letter , 184
B. Deferred Hearing and Partial Final Order 204
C. Water Compliance: Permit Liability 212
D. O&M Requirements: Scope of Review 222
E. O&M Requirements: Imposition of Class-Wide Orders 238
F. O&M Requirements: Sanctions Available to Hearing
Officers 250
APPENDIX
A. The Enforcement Act 272
B. Waukegan v. Pollution Control Board 291
C. H. Goldschmidt, "An Evaluation of the Present and
Potential Use of"Civil Penalties as a Sanction by
Federal Administrative Agencies" 300
-------
AN INTRODUCTION TO
CONNECTICUT'S ECONOMIC APPROACH
TO
ENVIRONMENTAL LAW ENFORCEMENT
-------
AN INTRODUCTION TO
CONNECTICUT'S ECONOMIC APPROACH TO ENVIRONMENTAL
LAW ENFORCEMENT
Connecticut's Department of Environmental Protection is
now implementing a new economic approach to enforcement. Several
of the innovations Connecticut is demonstrating are likely to
have significant value for other enforcement programs — in and
out of the environmental field. The Connecticut model
* provides an economic standard - how much a violator
has saved by not coming into compliance - for deter-
mining remedies that are
- just large enough to provide effective
incentives
- no larger than the unjust enrichment
violators realize from noncompliance
- fitted case by case to (1) the size of
the savings from noncompliance and (2)
the duration of the period of non-
compliance
- practicably useable because based on
clearly defined, readily measurable
criteria and therefore (1) objective,
not discretionary, and (2) demonstrably
equitable
- easy and inexpensive to administer
* allows program administrators to avoid having to
choose between the two extreme and generally in-
effective responses to noncompliance typically now
available — jawboning/extending orders (no real
bite) and going to court (costly, slow, and un-
certain) ; it provides an inbetween series of quick,
low-cost responses with escalating economic impact.
This economic approach to enforcement has been a success so
far. The first few cases to become subject to this new approach,
all companies with outstanding histories of noncompliance, experi-
enced dramatic performance turn-arounds. The Department obtained
these results simply by sending a warning letter accompanied by
a clear explanation of what liability for continued noncompliance
would be. No assessments were necessary. -This early experience
confirms Connecticut's expectation that its economic enforcement
-------
approach will not only greatly speed compliance, but that it will
achieve significant reductions both in the number of cases requir-
ing enforcement action and in the administrative cost required per
case.
The Department's new enforcement program has won broad
public support and, probably more important, business acceptance.
Academic experts, the press, and Connecticut's environmental and
public interest groups supported the program strongly. The
Connecticut business community, after close scrutiny, has not
opposed this strengthening of environmental law enforcement even
though it has opposed (and successfully blocked) other Department
programs during the same period. The equity of the program and
the fact that it is based on familiar, basic business economics
both contributed to this acceptance. So did the realization that
taxing away the savings of noncompliance would protect the law-
abiding majority of companies from the unfair competitive ad-
vantage now enjoyed by scofflaws.
This volume provides a brief, summary overview of the work of
the Connecticut Enforcement Project (CEP). It begins by explain-
ing how Connecticut's two major innovations, economic remedies and
a wide range of effective administrative responses short of going
to court, work. It then summarizes the application of these
tools: it reviews the enforcement problems that led to their
development; it describes how they have been fitted to the parti-
cular problems of the Department's Air, Water Compliance, and
Water Resources (coastal filling, wetlands, etc.) programs; and
it outlines how they can be used to enable environmental regula-
tors to get a handle on the generation of enforcement problems
they are now having to spend more and more time confronting —
ensuring that the control facilities installed with such effort
and cost in recent years are properly operated and maintained.
This volume concludes with several brief attachments: a copy of
the relevant provisions of the Enforcement Act; copies of repre-
sentative CEP regulations; a summary of the economics used in
calculating economic remedies; and some of the most important
testimony submitted in writing at the time of the initial CEP
Public Hearings, supplemented by several pages of representative
press comment.
This summary volume is followed by five detailed back-up
volumes: one each for the Air, Water Compliance, Water Resources,
and Operating and Maintenance enforcement applications developed
by the Project and a final, sixth volume that covers the legal
analysis underlying the design of these programs.
ECONOMIC ENFORCEMENT: TWO CRITICAL TOOLS
The Connecticut Enforcement Project has developed two inno-
vations that could have wide application both within the Depart-
ment of Environmental Protection and beyond: economic remedies
and a series of gradually escalating responses to noncompliance
that have economic bite but that do not require going to court.
-------
ECONOMIC REMEDIES
Regulation is typically required when the public decides
that a class of persons must do something that those people other-
wise would not do because they feel it is not in their economic
interest. Very few of the people who make asphalt would in-
stall baghouses (huge filters) on their batching plants unless
required to do so. Such an investment may well cost $50,000
and then require $13,500 a year to operate and maintain. For
this expenditure the batching company gets no revenue whatever;
it does not recoup its costs, let alone make a profit. Naturally,
the company would much prefer to spend its money on a profit-
making project. This preference is the source of most enforce-
ment problems.
Economic remedies remove the economic incentive to delay
or to avoid compliance. They do so by, in effect, guaranteeing
that those who comply will achieve a return on their investment
equal to the return they could achieve on an equal cost commercial
investment. This guaranteed return is the saving of not having
to pay the economic assessments imposed by the State for non-
compliance. For every month that the asphalt batching company
does not install a baghouse, it becomes liable to an economic
assessment equal to the value of that month's delay, roughly
$1666.
This charge is calculated using the same formula that
businessmen use to evaluate alternative investment opportunities,
the capital budgeting formula. The costs of the project are
estimated year by year over the project's life; these estimates
are adjusted for taxes and inflation; the resulting year-by-year
expenditure figures are then brought to a present value; and,
finally, a flat, monthly rate that will amortize the costs of
the project (including lost profits at the industry's average
cost of capital rate) is determined. (Attachment C gives a full
explanation, illustrated by several examples, of these calcula-
tions and their underlying mathematics.)
Such economic assessments are not effluent charges. They
accept the regulatory framework set forth in existing State and
Federal law — that performance standards are set by legislation
or regulation and that sources are required to comply with those
standards. Their objective is to remove the powerful economic
incentives that now work to discourage regulatees from complying.
While this approach to regulation is not the approach economists
would ideally prefer (because it forces sources to invest with-
out regard to the particular costs and benefits of their doing
so), it is both (1) practical and easily understood, and (2)
the law. And, in any case, there is generally a rough correla-
tion between the size of a source's impact on the environment
and what it must pay to lessen this impact to conform to publicly
legislated standards.
-------
The remedies calculated by the economic assessment formula
do more than neutralize existing disincentives to compliance;
they make compliance sufficiently attractive that the economically
rational businessman will want to comply — promptly. They make
compliance a good business investment because an investment in
abatement ensures complying companies savings (not having to pay
these assessments) as great as the income generated from an equal
cost, attractively profitable investment. In other words, com-
panies that comply are guaranteed a double-negative rate of return
on abatement investments equal to the rate of return they are ob-
taining on investments they have recently chosen to make. (In
fact, the return on their investment in abatement is much more
secure than the usual commercial investment; a monthly payment due
the government is not subject to changes in market conditions,
consumer tastes, or the host of other risks associated with com-
mercial investments.)
Economic remedies are fitted to the facts of each case.
The larger the benefits of noncompliance are, the larger the
assessment will be. Similarly, the longer the delay in coming
into compliance, the larger the forfeiture becomes. In other
words, any enforcement system whose incentives are calculated
according to this sort of economic criteria can be sure its in-
centives will always be just large enough to make compliance pay.
Using such criteria will also ensure that the size of such
incentives will not be unfair or excessive. Economic remedies
will always be just large enough to take away the economic bene-
fits of noncompliance and no larger.
Remedies That Are Useable
Because Equitable and Objective
Statute books bristle with an impressive array of penalties
for environmental infractions. They are, however, actually
employed rarely, and then only in a limited and erratic manner.
There are several basic reasons:
* Available remedies are generally too severe and,
consequently,they are not used.
- 'Injunctions are rare; enforced injunctions
even more so. Administrators, prosecutors,
and the courts are all reluctant to force
plants to close given the attendant severe
economic losses to the owners, their workers,
and local tax revenue.
Remedies that carry with them a criminal
stigma also seem excessive in environmental
cases, and both prosecutors and courts
consequently shy away from their use.
-------
* The laws that authorize these huge penalties almost
never provide clear and practically useable criteria
for determining individual assessments. This lack
of guidance presents prosecutors and courts with a
dilemma, especially in technically complex environ-
mental suits, that they are often ill-prepared to
handle and that they consequently either try to
avoid or that they handle with great, often ex-
cessive caution.
Tying assessments to an economic standard should overcome
most of these inhibitions. Connecticut's economic remedies are,
as we have seen, just big enough to ensure the legislature's
regulatory objectives will be achieved, and no bigger. They
entirely avoid the massive secondary effects of the injunction.
They merely tax away the benefits noncomplying firms have ap-
propriated to themselves by ignoring the law. Removing these
benefits has the useful additional effect of protecting comply-
ing competitors from being put at an unfair disadvantage. Al-
though the economic criteria for calculating incentives that
Connecticut uses in its civil assessments can be used in setting
criminal as well as civil remedies, they fit especially well
with the rapidly developing use of civil penalties; and, to the
extent they are used with civil assessments, would have no
criminal stigma.
The size of the economic remedy is likely to be accurate
in fact as well as in theory. Connecticut guarantees those sub-
ject to its economic civil assessments a right to a correction
hearing after they have come into compliance and can present
vouchers to document actual costs. Since the costs used to cal-
culate the assessments are easily measurable, and in fact are
generally already routinely measured and recorded by most bus-
inesses, it will be easy for those subject to regulation success-
fully to challenge overassessments should they occur. Any such
overassessment would be refunded with interest at the same cost
of capital rate used to calculate the assessment in the first place.
Administrators and courts consequently should have sufficient
confidence in the grounds for, and the reliability of economic
remedies to be willing to use them promptly when needed.
Administratively
Useable Remedies
How hard will it be to determine what the correct economic
remedy should be? This is a critical question because, if it is
too difficult, neither enforcement officials nor the courts will
use economic remedies — no matter how much confidence they have
in the approach. Existing staffs must be able to make this econ-
omic approach work easily, without having to undergo extensive
training.
Shortly after it came into being, CEP tested how long it
would take Air Compliance engineers to make accurate cost estimates.
-------
Engineers were given actual case files and asked to estimate
within 20 percent accuracy what it would cost the source to come into
compliance, specifically breaking out installed equipment costs
and expected annual operating and maintenance expenditures. Some
cases were relatively simple, others complex. Some folders had
only the materials that would be available after an initial field
inspection; others had all the materials that were in the folder
at the time that either the engineering report or plans and spec-
ifications were submitted to the Department. In every case, CEP
knew what the case's actual costs of compliance were and conse-
quently was able to control for accuracy.
The results of the test were most encouraging. Department
engineers demonstrated that they could make accurate estimates of
the costs of compliance in anywhere from one to sixteen hours
(depending on the complexity of the case and whether or not engin-
eering work done by the source was in the case file). (A survey
of private consulting engineers in Connecticut confirmed the re-
sults of this test. The private engineers consistently required
somewhat less time to make their estimates than did the DEP staff,
probably because they have to estimate costs for their clients
regularly whereas Department engineers are not otherwise required
to make cost estimates.)
Without Special Training or Aids, DEP Air Compliance Engineers
W£>re~Able to Estimate Costs Accurately in i_ to 1_6 Hours per Case
Asphalt Batching Case - Hours Required For Costing
b
M
Estimating after
Field Inspection
1 \77777X
4
1 3
Confirming Costs Confirming Costs
from Engineering from Plans and
Reports Specs
1
Checking
Vouchers after
Compliance
Complex Metal Processing Case - Hours Required For Costing
16
12
j|
8
5
%/fi/
Estimating after Confirming Costs
Field Inspection from Engineering
Reports
e
4 2
Confirming Costs Checking
from Plans and Vouchers after
Specs Compliance
KEY
- DEP Test
- Private estimates
In other words, if nothing was done to simplify the Depart-
ment's job, it would take five hours to estimate the costs of
compliance accurately in the typical Air Compliance case. Other
-------
steps, chiefly determining the appropriate cost of capital and
executing a series of calculations by hand, could take another
two hours. As long as increased voluntary compliance makes it
necessary to impose economic assessments in only a limited number
of cases per year, this administrative burden would probably be
acceptable.
The CEP has developed a series of tools that cut the time
required by 80-90 percent:
* Estimating the costs of compliance, which would
otherwise take five hours, has been reduced to
the simple step of reading reliable estimates
from one or more cost curves, a process that
requires only 10-20 minutes.
* Determining the cost of capital and other
necessary bits and pieces of information has
similarly been reduced to the quick and simple
task of consulting a few tables.
* Translating these bits of cost information into
a measure of the economic benefits of noncompli-
ance and thus the assessment is done with a simple
mathematical program useable on a simple desk
calculator that automatically adjusts for the
impact of taxes and inflation and that does all
the calculating required in seconds.
Clearly, the first of these time-saving devices, the cost
curves, is the most important. Starting from basic, known vari-
ables — the flow rate of waste gas and the type of air pollu-
tion control equipment, or the flow and nature of water pollu-
tant (s), Department staff need only identify the point on the
relevant curves for any given flow rate in order to be able
to read off a reliable cost estimate. Continuing the case of
the asphalt batching company once again, the relevant cost
curves for particulate control using baghouses (the appro-
priate control methodology for asphalt batchers) follows:
-------
Particulate Control Costs - Baghouse
KEY
Installed Costs -
EPA Cost Curve
* Actual Conn. Cases
- 0 & M Costs -
EPA Cost Curve
• Actual Conn. Cases
.4
1.6
6.2
25.0
100.0
Volume of Air
(in Thousands of Cubic Feet per Minute)
Source: EPA Publication AP-51, pp. 164, 175 (Dec. 1972);
Connecticut Tax and Registration Forms.
Assume that a Department inspector has reported that the asphalt
batcher's plant emits 20,000 cubic feet per minute of particulate-
laden air that must be processed through control equipment. Read-
ing up from this CFM level to the curves, a Department engineer
would determine that the batching company would have to pay
$50,000 for installed equipment costs and $13,500 per year in
operating and maintenance expenses. These curves, originally
developed by EPA, have been confirmed by actual Connecticut case
experience, as the chart indicates. (A complete set of curves for
most pollutants and control approaches in Air will be found in
Part V of Volume II; Part III of Volume III, explains a similar
time-saving method of estimating available for the Water Compliance
program area.)
With these three aids, all an engineer need do to determine
the right economic assessment for a particular case is (1) put the
small tape cassette containing the assessment formula in a desk
calculator, (2) type his estimates of the installed equipment
costs, the annual operating and maintenance expense, and the cost
of capital (read off the appropriate cost curves and tables) into
-------
10
the calculator, and (3) press the machine's "go" button. The calcu-
lator will produce the correct monthly charge after only a few
seconds. The process is simple and quick. It can also be a useful
negotiating aid. "And, now, Mr. Titanic, let's see how much we will
have to charge you if you fall further behind your compliance sche-
dule. ..."
With the exercise of a little care to avoid potential legal
problems, using economic assessments can be simplified even further.
The initial test of the time it took Department staff to
make reliable cost estimates demonstrated that delaying when the
estimate has to be made (or defended) until after the source pro-
vides either detailed engineering information or actual expense
vouchers can cut the amount of time required to a small fraction
of what it would otherwise be. The Department's civil assessment
regulations provide two ways the Department can avoid the extra,
unnecessary administrative cost of having to make early costs
of compliance estimates.
Probably the most important method is to: (1) make a
rough, good-faith estimate, and (2) if the source feels the^ rough esti-
mate is too high, leave the amount assessed unchanged but collect
only what seems reasonable to the source until such later time
as either the source comes into compliance and presents expense
vouchers or sufficient information is available to make a quick
estimate reasonably reliable. Connecticut's civil assessment
regulations specifically give the Department discretion to collect
the amounts assessed in whatever installments it thinks best.
The Connecticut regulations provide two further devices
for avoiding a premature deadline for estimating the costs of
compliance. The hearing officer can postpone any hearing regard-
ing the accuracy of the Department's initial estimates for a
reasonable period of time if he determines that information im-
portant to an accurate assessment is not available at the time
but will become available later. The risk of court interven-
tion in such cases is limited because the source is guaranteed
(1) a special correction hearing at the time it comes into com-
pliance and can present vouchers to document its actual costs and
(2) that any overassessment will be repayed with interest. Within
limits, courts are likely to defer to this available administra-
tive remedy.
In sum, economic assessments can be used relatively easily
and with very little administrative cost in most cases. There
may be a small number of cases for which cost curves or other
aids have not been developed and/or in which it may not be appro-
priate to delay making a detailed, final estimate of the costs of
compliance. However, the cost of handling even these few cases,
probably on average roughly a person-day, is manageable.
-------
11
In any case, even after taking the added administrative
costs of estimating and calculating economic remedies into account,
Connecticut will experience major net administrative savings from
the introduction of its economic enforcement system. These sav-
ings are discussed further in a few pages.
Using Economic
Remedies
Economic assessments can be used to determine (1) the remedy
requested of a court in a civil or criminal action, (2) the size
of a bond, escrow, or other surety liability or forfeiture im-
posed, and/or (3) the amount of an administratively imposed civil
penalty.
Economic remedies are much better suited to civil than
criminal cases. They charge a delinquent source what the source
has saved by not complying — but no more. That is, economic
remedies make no provision for punishment. (They might nonethe-
less still be useful in criminal cases as a means of establishing
a "floor.") On the other hand, they provide exactly what is
needed in a civil action: an exact measure of the incentive
necessary to induce the source to take remedial action.
Further, economic remedies provide a missing element that
should make widespread use of administratively-imposed civil,
financial, incentives possible^Widespread use of economic reme-
dies by regulatory agencies would be a major breakthrough in
administrative law enforcement. Such a tool would allow agencies
to assess scofflaws for whatever benefit they derive from delin-
quency with reasonable certainty and without delay. This effec-
tiveness would cause much of the delinquency now experienced to
disappear.
Now it is all too easy'for the minority who actively seeks
to avoid or delay compliance to do so. Despite a significant
number of seriously delinquent cases, especially in the Water
Compliance and Water Resources areas, since 1971 Connecticut's
Department of Environmental Protection has been unable to get the
courts to impose monetary penalties of any kind and able to get
only five injunctions in any of the key enforcement areas.* The
ease with which the recalcitrant minority are able to ignore the
law, of course, has a direct impact on how many others comply
voluntarily — and to what degree and how quickly they do so.
Because administrative agencies have been seriously and
persistently frustrated by this inability to respond surely and
quickly to recalcitrants, they have pressed steadily for change.
First they obtained a lessening of the barriers preventing their
Includes only programs for which civil assessments are or will
be effective.
-------
12
getting satisfaction in court by developing and rapidly expanding
the use of civil penalties. However hopeful this lessening of
the agencies' burden has been, their continued reliance on the
courts and the lack of a clear, workable standard for setting penal-
ties has left them still without a prompt and effective response
to delinquency. Over the last several years, several jurisdictions
have taken the logical and critical next step; they have authorized
— and their courts have upheld — administrative imposition of
civil assessments or surety requirements/forfeitures.
Administrative imposition, even though legal and promising
to be highly effective, carries with it a serious and troubling
philosophic problem: is it fair to give the regulator the power
to impose financial assessments on the regulatee? Does doing so
make the regulator judge as well as prosecutor? Does it give the
agency too much discretion?
Administratively-imposed surety requirements/forfeitures
and civil penalties become much easier to accept, both philosoph-
ically and politically, once tied to the clear, objective standard
provided by economic remedies. This standard ensures that no
regulatee can face an assessment larger than the savings it has
received as a result of noncompliance. It makes remedy-setting a
ministerial task, well within the agency's technical capacity (and
beyond that of the usual court). Without this standard, adminis-
trative imposition means the grant of extraordinary discretionary
power to an agency; with it, the agency is limited to an appro-
priately administrative role and the regulatee is fully protected.
The Connecticut Legislature authorized the Department of
Environmental Protection to impose civil penalties administratively,
but insisted that it observe careful safeguards for the citizen in
doing so. (A copy of the Enforcement Act of 1973 may be found in
Attachment A at the back of this olume.) The Department's
schedules of maximum assessments and requirements for setting
individual assessments, both based on the economic remedies stan-
dard, meet this requirement."
AN INTERMEDIATE
ENFORCEMENT RESPONSE
When a regulatee falls behind schedule or otherwise breaks
the law, enforcement staffs now typically have only two ways of
responding:
* They can cajole or attempt to bluff the regulatee.
This jawboning approach generally entails repeat-
edly excusing past delinquency. For example, if
a source has failed to comply with the terms of
-------
13
an order, enforcement staffs often "trade" an
extension of the order's deadlines in return
for a promise of future good behavior.
* Alternatively, enforcement staffs can attempt
to obtain an injunction and/or a variety of
penalties from the courts. This option entails
considerable expense, great additional delay,
and a very low probability of ultimately ob-
taining effective relief. Moreover, for the
large number of small violations (such as
failure to file periodic water pollution moni-
toring reports), resorting to such an expensive
response would clearly be unreasonable.
This is an inadequate all-or-nothing choice. It gives
regulators no means-of providing foot-draggers and recalcitrants
with a prompt, concrete incentive to comply.
What is needed is a series of in-between steps. These
remedies must be more serious than an exhortation but less so
than punitive fines or injunctions. They must be quickly and
easily applicable. Such in between steps would ensure more rapid
and much more uniform compliance — with less effort and cost to
the public — than is now the case.
The Connecticut model provides a whole series of such in-
between steps. They are of two types: (1) administratively-
imposed civil assessments and (2) administratively-imposed
sureties.
Economic Civil
Assessments
Administratively-imposed, economic civil assessments are
the first of these in between steps. Armed with this authority,
the Department can charge a delinquent regulatee for delay even
as it is being incurred.
Furthermore, even if the Department actually imposes such
assessments only rarely, the regulatees1 awareness of the avail-
ability of this tool adds greatly to the credibility of other,
less serious in between steps. As mentioned above, warning let-
ters sent to notoriously recalcitrant sources mentioning the pos-
sibility of such assessments obtained quick, respectful responses.
Previous warning letters not backed by such assessment authority
were simply ignored.
Economic civil assessments can be used to give regulatees
small warning jabs as well as to charge them for the full bene-
fit of noncompliance. If, as is commonly the case with recal-
citrant sources, the regulatee has violated a procedural require-
ment for which a civil assessment has been defined, the Department
-------
14
can impose a small procedural civil assessment on it while simul-
taneously warning that continued noncompliance will make it liable
to the much larger civil assessment for substantive noncompliance.
Alternatively, the Department could impose an assessment for the
source's past substantive violation, but mitigate it down to a
small amount while making clear that future noncompliance will lead
to a much larger assessment.
Sureties
Sureties ( e.g., performance bonds and escrows) provide a
wide range of additional in between steps. By tying them to the
same economic standard as a civil assessment, sureties can provide
a series of finely gradated and economically coherent responses
from which the Department can choose depending on the facts of
the case before it.
Connecticut's Enforcement Act of 1973 authorizes the Depart-
ment to require such "performance bonds or other security" as is
necessary. This broad authorization in effect allowed the DEP to
select whatever financial devices were best suited to administrat-
ive environmental regulation. The CEP found the escrow device to
be most promising. It imposes a relatively small cost on the
regulatee; it is available to small as well as big regulatees; and
it entails no additional burdens for the Department.
In its basic form, the escrow works as follows: a regulatee
that is required to take certain steps to come into compliance and
about whose performance the Department has become concerned is
required to post cash, government bonds, or other acceptable secur-
ity equal in value to what the estimated economic civil assessment
would be for such a source for, say, 18 months of noncompliance.
The security would be deposited with an escrow agent, typically
a bank, who, 'for a small fee, (1) will hold the security until such
time as the source comes into compliance and the agent is so noti-
fied by the State; or who(2) will deliver all or part of this
security to the State in the event that the source fails to meet
future deadlines as agreed.
Requiring a regulatee to post such an escrow is less severe
than imposing an economic civil assessment for delayed or non-
performance. Whereas our delinquent asphalt batcher would be liable
for a $1666 civil assessment every month it was behind schedule,
posting an escrow would cost it roughly $132 per month, the sum
of (1) the difference between what it could earn on the resources
tied up in the escrow account (at least its cost of capital) and
what it will earn either in interest from the bank or on the bonds
used as security, and (2) a small fee it must pay the bank. Although
the economic bite of this enforcement response is not easily entirely
ignored, its chief impact is to force the regulatee to sit up and
take notice that, unless it mends its ways and moves promptly to
come into compliance, it will be subject to an assessment large
enough to make noncompliance economically unattractive.
-------
15
There is no doubt that imposition of such surety liability
will have the sort of sharp communicative impact envisaged. Re-
quiring a source to post a surety virtually ensures extensive
high-level management review. The source's lawyers will inev-
itably be involved; its managers will have to negotiate and
approve an arrangement with an escrow agent; and a large sum
of money must change hands, even though it is not necessarily
lost forever. If the root of the problem had been an uncooper-
ative attitude by lower officials, forcing the matter to the
attention of higher-level management may well be sufficient to
bring about the desired change in the regulatee's behavior.
Moreover, even if the problem runs deeper than local or low-
level management, the risk of significant forfeitures has
already been demonstrated to have a dramatic effect on the
performance of even some of the Department's most recalcitrant
regulatees. Last year the Air Compliance Enforcement Section
required several historically troublesome cases to post sureties:
up to that point, Case A had been 66 percent behind schedule
and Case B, 133 percent; thereafter Case A experienced only
2-1/2 percent delay and Case B no delay. Suddenly the managers
in these companies treated compliance with the State's orders
as being as urgent as a commercial investment project. Company
officers went as far as to fly to suppliers to ensure on-time
delivery of necessary equipment.
Although requiring posting of an escrow is a less severe
step than imposing an economic civil assessment, it is still
quite costly for the regulatee. Since adding unnecessarily
to the cost of environmental clean-up is in the interest of
neither the public nor the Department, the CEP has developed
a simple variant of this basic escrow surety device that should
have virtually the same communicative impact but at a much re-
duced cost to the regulatee. This device, the "flexible
reserve escrow" works very simply. When the Department first
becomes concerned about a regulatee's performance, it will
require it to accept liability for posting the same amount as it
would if the Department had imposed the full escrow. However,
instead of requiring it to post this sum with the escrow agent,the
Department would require only a small proportion, e.g. 10 percent,
to be actually placed with the agent. If our asphalt batcher were
required to post only this 10 percent or $2999.00 it would have
lost only one-tenth the interest spread (the difference between
what it could earn with the money, its cost of capital, and the
interest it would receive on the securities in the escrow account)
it would have lost if it had had to post the full amount.
Despite this 90 percent cost saving, the communicative impact
of requiring the company to take this action would still be very
great. A variety of managers, including members of the source's
legal staff, would have to review and approve the document accept-
ing the full $29,992 escrow liability; arrangements would still
have to be made with an escrow agent; and a check would have to be
drawn— and justified to the regulatee's financial officers.
-------
16
If the company fell further behind, the Department could
increase the amount it required in the escrow account. If the
regulatee regained lost time, the Department could similarly
reduce the amount of the reserve it required. Once the source
had accepted full liability under the terms of the surety, it
would be bound to respond immediately to such subsequent demands
by the Department. Because this would be a contractual obliga-
tion, the source would have no right to demand administrative
hearings or to appeal the Department's actions to the courts.
Requiring a regulatee to accept a flexible reserve escrow
but to post only a small percent reserve is an extremely attract-
ive device for the Department to use initially when faced with a
regulatee that does not respond to simple warnings. The regulatee
cannot ignore this response. It applies the economic leverage of
a civil assessment without entailing any significant immediate
cost to the source. Because the response is so reasonable, and be-
cause it entails virtually no immediate economic cost, it is much
less likely to invite a litigative response from the regulatee
than requiring the posting of the full escrow amount or, especially,
imposing a full economic civil assessment.
With these devices available to the Department, it will prob-
ably be able to handle almost every case of delinquency effective-
ly with no more than a warning letter. Backed as these warning
letters would be with the Department's authority to respond immed-
iately with concrete and economically adequate incentives, they
will be taken seriously.
For the rare regulatee that does not respond to a warning
letter, the first, small bite of either a procedural civil assess-
ment or the imposition of a small flexible reserve escrow would
provide the Department with sufficient credibility to ensure
subsequent prompt compliance.
A Progression
of Steps
The several surety devices and the economic civil assess-
ments the Department can now impose administratively fit to-
gether into a coherent progression of steps the Department can
take depending on the degree of cooperation or recalcitrance
with which it is faced. The following table illustrates how the
Department might want to use these steps assuming various degrees
of delay.
-------
17
The Progression of Enforcement Options CEP Makes Available
Number of
Months Regulates
Has Overrun Com-
pliance Deadline
2
3
4 1/2
5 1/2
4 1/2
6
17
Warning letter
Warning letter
Require regulatee
to sign acceptance
of specific surety
liability
Require regulatee
to post 10% of
surety amount in
bank
Increase reserve
required in bank
to 50%
Reduce reserve
required to 25%
Partial (50%)
forfeiture
Full forfeiture
Civil assessment
Comments
Requires quick, visible
follow-up to be cred-
ible.
Forces top management,
lawyers' review of
problem area .
Forces new top mgmt.,
lawyers ', and compt-
roller's review of
area -
Economic cost limited
to (1) 10% of the dif-
ference between the
company's cost of capital
and the interest rate
paid by the escrow/
bank or earned from
government obligations
used as security plus
(2) bank fees.
State can increase
and decrease amounts
required flexibily.
Full forfeiture would
be at the economic
assessment rate that
neutralizes the ben-
efits of noncompliance.
(Forfeitures can go to
either a special fund
returnable to the reg-
ulatee or the General
Fund.)
At economic civil assess-
ment rate.
Begins as soon as surety
agreement amount exhausted.
Economic Cost
Per Month
To Regulate *
none
none
none
$132.00
(Assumes
$29,<992
escrow, i.e.
I 1/2 years
of civil
assessments)
$ 620
$ 315
$ 833
$ 1666
$ 1666
The figures used here are fitted to the economics of the asphalt
batcher analyzed above.
-------
18
In the unlikely event that the civil assessment does not work,
the agency can still go to court.
This progression of steps is a progression of options. The
Department does not have to follow any particular pattern of re-
sponses in every case. It may decide that certain recalcitrants
require the use of relatively drastic steps early in the process,
Simple or short cases allow time for only one or two responses.
However, having this full range of enforcement options available
allows the Department to select exactly the right combination of
responses for each particular enforcement problem.
The intermediate enforcement responses outlined above will
allow the Department (1) to establish its credibility by demon-
strating that its promises are backed when necessary by quick and
sure responses, (2) to force the upper-level management of non-
complying sources to focus on the implications of continuing
noncompliarice, but (3) to do so while imposing only the minimum
necessary economic costs on the regulatee.
CONFRONTING CONNECTICUT'S ENFORCEMENT PROBLEMS
The Connecticut Legislature enacted the Enforcement Act of
1973 because the first several years of the then new Department
of Environmental Protection's experience attempting to enforce
the State's environmental laws had made it clear that the Depart-
ment needed additional tools if it was to do its job effectively.
Before the Act, uncooperative polluters could delay with virtual
impunity.
A sample of the file of case summaries reviewed by the En-
vironment Committee of the Legislature as it was considering the
Enforcement Act follows. It should help explain the problem the
Act was designed to resolve.
Sample Case Histories
"Ripley Park. Mr. Park is a 74-year-old entrepeneur
as set in his ways as Plymouth Rock. One of his ways
involves the production of charcoal in an outdoor kiln.
The Department calls it burning; he calls it baking.
Whatever you call it, the smoke emitted is powerfully
odoriferous and dark. In recent years, Mr. Park's farm
has been surrounded by suburban housing tracts. Their
residents complained mightily about the smoke and sent
petitions to the Department. Mr. Park began burning at
night. The operation takes 3 days, once a month. Mr.
Park refused to accept Certified Mail delivery of
Notices of Violation, and when the Order was served
by a Sheriff, he ran from the living room and locked
himself in the bedroom. He is devoted to his operation
and to the money it makes.
-------
19
The case [went to court]...The trial lasted four hours,
even though, since neither Mr. Park nor his attorney
showed up, it was uncontested. The Court issued an
injunction. Since then, on the same schedule as before,
Mr. Park has made charcoal."
"E. J. Korvette, Inc. The company operates an inciner-
ator in which it burns packaging materials. Violations
have been reported steadily since the first one was ob-
served January 7, 1971. The incinerator emits partic-
ulates and odor in prohibited quantities, its smoke
occasionally reaching Ringlemann violations close to
five (the worst possible). The equipment itself is
of a type prohibited by Regulation.
On March 10, 1972 an Order to remedy violations of Section
§19-13-G16 was issued granting thirty days for
Korvette to come into compliance...The Order has been
ignored. ,
As clear as this violation is, as offensive as the
emissions may be to immediate neighbors, it is one of
hundreds of similar offenses, too time-consuming and
insignificant to send to the Attorney General. In
any case, the probable impact of prosecution is
minimal since the likely "penalty" would be a court
order to shape up."
"Polycast Technology, Corp. The company makes plastic
windshields for-Army helicopters...[and has been the
subject of prolonged enforcement efforts by the Depart-
ment and of repeated court battles]. As a result of
his enforcement efforts, the Director of Air Compliance
is being sued by the company President for five million
dollars. In March 1972, an injunction was issued against
the company ordering them to perform four pollution abate-
ment actions (affecting air and water) by August 1, 1972.
For no discernible reason, the work..,.[is not yet done].
Because these case histories focus on cases that were troublesome,
they may have the effect of overdramatizing the problem of environ-
mental law enforcement in Connecticut. Most sources of air and
water pollution have either complied voluntarily or have been
willing to do so once brought under direct regulation.
Although there are relatively few troublesome, uncooperative
sources, the Department must have an efficient, effective way of
handling such cases. If scofflaws are not brought to book, volun-
tary compliance by the presently law-abiding majority is threatened,
-------
20
This is especially so if, as is often the case in environmental
regulation, sources that do not comply are given a significant and
unfair economic advantage over commercial competitors that obey
the law. If people feel they can get away with delay, they have
every economic incentive to try to do so. How widespread foot-
dragging becomes will largely depend on (1) how effectively the
Department dispatches a small number of tough cases that attract
publicity and (2) whether or not regulatees perceive that others
in similar situations have been able to ignore the law successfully.
When those subject to regulation perceive that their compliance
will be policed by a tight enforcement system, voluntary compliance
increases sharply. A CEP survey of the impact of improved enforce-
ment on the rate of voluntary compliance in a variety of regulatory
settings outside Connecticut indicated that, after the introduc-
tion of improved enforcement, the percent of those who failed to
comply voluntarily decreased an average of 72 percent*
Improvements In Voluntary Compliance As a
Result of Improved Enforcement (in percent)
83
85
73
47
DOT . DOT Department University
Tire Automobile of Interior Parking
Standards* Safety Coal Mine Rules****
Standards** Standards***
72%
Source: Interviews with agency personnel, enforcement
statistics.
* Violations of manufacturers' self-professed standard
dropped 73% when standard became enforceable.
** Standards added in 1970; ratio of violations/inspections
dropped 47% between 1970 and 1974.
*** Violations/inspections ratio of new standards dropped 83%
between 1970 and 1973.
**** The number of faculty members violating parking restric-
tions dropped 85% after sanctions were developed.
The Department's own experience verifies the relationship suggested
by this chart.
A detailed discussion of the study is available in the
Connecticut State Library. Copies are also available upon
request from the Department of Environmental Protection,
State Office Building, Hartford, Connecticut and from
William Drayton, McKinsey and Company, 245 Park Avenue,
New York, New York.
-------
21
The Air Compliance Unit, the Department's newest and most
adequately staffed Unit, has pursued a vigorous enforcement policy,
has had the resources to do so effectively, and has obtained an
accordingly tough image. Of the State's known sources of air
pollution, only 3 percent have had enforcement problems serious
enough to require the issuance of orders. Of these, 13 percent were
responsible for fully 75 percent of all delay in complying with
the terms of these orders—7 percent caused 56 percent. On the
other hand, the Water Compliance Unit, which is less well staffed and
which had established a public image before it had the legal tools to
pursue a tight enforcement policy, is commonly viewed as being "more
reasonable." The average water case overruns its legal compliance
deadlines by over 100 percent. The Water Resources Unit, drastically
under-staffed and almost entirely toothless, finds over 80 percent
of the coastal structures (docks, dredging, filling, etc.) it is
supposed to regulate in a state of continuing, open violation.
(For a further evaluation of the enforcement problems faced by
these three Units, see Parts II of Volumes II through IV of this
Report.)
The Department's cost effectiveness also depends importantly
on its ability to deal effectively with the few tough uncooperative
cases. The longer cases drag on, the higher the per-case cost
of enforcement becomes for the Department. The longer the case,
the more correspondence, the more meetings, the more inspections, and
the more formal proceedings are required. Even more important,
the lower the voluntary compliance rate, the larger the number of
cases the Department must process. The probable impact of intelli-
gent and uniform application of CEP's new enforcement tools by the
Department, consequently, is dramatic:
Projected Impact of Civil Assessments on the Average per Case Costs of
Enforcement (In Dollars)
Air Compliance Orders*
Water Compliance Orders*
Water Resources Orders**
272 t 43%
Without
Civil
Assessments
With Civil
Assessments
Without
Civil
Assessments
With Civil
Assessn^nts
'5T7 "1 14%
Without With Cival
Civil Assessments
Assessments
Source: Interviews with Unit Staffs; analyses of Unit files.
Assumes all sources are informed of their financial liability for failure to abate air
pollution. (See Part VI of Volume II.)
Assumes 30 percent of all current delay is unavoidable. (See Part VI of Volume III.)
Based on a CEP study of "Orders to Remove or Get a Permit," average costs of "Orders to
Cease and Desist" should be cut by 45 percent. (See Part VI of Volume IV.)
-------
22
Being able to bring the few recalcitrant cases to book is
also important for the morale of the Department staff. These
cases bulk very large in the perceptions of the staff, much larger
even than the disproportionate amount of time they require to process.
The staff view these cases with more than conversational interest:
they serve as tests of (1) the seriousness of the Department's top
management's environmental commitment and (2) the Department's
effectiveness.
Although it is clear that the Department must be able to
deal effectively with the tough case, it must also never forget
that most citizens comply voluntarily (and that, in programs now
experiencing widespread delay and noncompliance, voluntary com-
pliance should increase markedly over a several year period after
the CEP tools are introduced). The Department must not impose
burdens on 90 percent of those it regulates in order to get a
handle on a minority.
Consequently, the Department's new economic enforcement
approach has been designed with two key objectives always in
mind:
(1) to be sufficiently tight and loophole-free to
be able to provide the hard-core recalcitrant
case with a prompt, certain, concrete, and
adequate incentive to comply, and
(2) to do so in a way that does not impose costs
on the majority.
The tools outlined in the last section provide the Department the
basic means to accomplish these objectives. The next section out-
lines how Connecticut's economic enforcement approach has been
adapted and applied to the full range of the Department's enforce-
ment problems.
APPLYING THE NEW APPROACH
The discussion so far has dealt with the new tools Connect-
icut is deploying and what they are designed to accomplish. The
following pages discuss how these tools have been applied to the
specific enforcement problems of the Department's several regulat-
ory units.
Each application has been made to fit with existing proced-
ures (and with the sharply varying styles and preferences of the
different administrative units), achieve the greatest possible
reduction in administrative costs, be equitable and legal, and
still be sufficiently simple to be practicably useable. Similarly,
the basic economic approach has had to be adapted from situation
to situation: determining the value of new land created by fill
is quite different from estimating how much a baghouse would cost
-------
23
for an asphalt batcher with emissions of 20,000 cubic feet per
minute. And, finally, what was designed has had to be tested,
drafted, explained to the public, and implemented.
The first part of this section describes how the CEP approach
has been fitted to the basic order-based regulatory process used
by the Department (and most similar regulatory agencies). The
second part summarizes very briefly how this approach has been
further tailored to the chief enforcement problems in each of
three key areas of environmental regulation: air and water
pollution and illegal filling.
FITTED TO THE
REGULATORY PROCESS
Fortunately, all three of the Department's units with major
enforcement responsibilities (along with most regulatory agencies
elsewhere) share a common regulatory process. Most of the new
economic enforcement regulations have been fitted to this common
process.
Once an environmental problem has been detected, the Depart-
ment notifies whoever is responsible and, usually, tries to reach
agreement regarding what steps must be taken to eliminate the
problem by what dates. If the problem is serious and is not
cleared up quickly, the Department will issue an order specifying
what the regulatee must do and setting a series of deadlines by
which various steps must be complete. The regulatee may contest
this order by requesting an administrative hearing within a
specified number of days. If it does not, or if its challenge is
not successful, the order becomes final, i.e. legally binding.
The Department then monitors the regulatee's progress and attempts
to hold it to the deadlines set out in the order.
This process runs into enforcement difficulties at two sep-
arate stages. First, before an order is issued, new incentives
are needed to discourage noncompliance and, when noncompliance
is found, to encourage the source to accept a reasonably rigorous
order (and not plunge the Department into lengthy and expensive
litigation). Second, once an order is final, the Department_needs
to be able to induce the source to meet the deadlines specified
in the order. Connecticut's new enforcement approach has been
designed to give the Department the tools it needs to deal with
both problems. Each of the Department's three enforcement units
has two separate but closely related civil assessment regulations:
* A pre-order assessment that recoups from the regulatee
whatever benefits it has appropriated to itself by
not meeting either the State's emission standards
(Air) or permit requirements (Water Compliance and
Water Resources).
* An order assessment that charges the regulatee the
full value of its delays beyond scheduled order
deadlines.
-------
24
These two assessments are logical extensions one of the other.
Since the value of a month's noncompliance generally is the same
in both periods, the underlying economics and the amount assessed
per month are likely to be identical. Both use roughly the same
procedures and safeguards.
Liability for a pre-order assessment ends the moment a
Department order covering the situation becomes final. This
provision provides a built in "plea bargaining" incentive to the
regulatee designed to induce him to accept the Department's order.
The moment the regulatee accepts the order, it is freed from a
large, currently accrued liability the Department could assess
at will. All it accepts in exchange is a possible future liabil-
ity that will not accrue unless it falls behind its order schedule.
In some cases the period of noncompliance used to calculate the
pre-order assessment extends back into the pre-detection period;
in all cases pre-order liability begins at the point of detection
and grows until the regulatee is under final order. The longer
the delay in getting under order, of course, the greater this
potential liability becomes. However, if the source agrees to an
order before the Department issues an assessment, the Department
will not impose the pre-order assessment. And, as long as the
regulatee remains on schedule, the Department cannot issue an
order assessment.
This disincentive for litigative delay is necessary once or-
ders have teeth. If the Department could only impose civil assess-
ments for violating the terms of an order, it would face a dra-
matic increase in the number of orders that are contested and
ultimately appealed to the courts. Until now, accepting an order
has entailed very little risk for a regulatee; with no effective
remedy generally available to it, the Department has had to respond
to delay with jawboning and extensions. Once regulatees become
aware that accepting an order is no longer relatively riskless,
the balancing incentive provided by the pre-order assessment is
necessary.
The pre-order assessment also serves other important ends,
notably that of encouraging voluntary compliance before any
Department action becomes necessary. This is especially so for
the Water Compliance Unit, which has consistently had trouble
with sources starting new discharges without first obtaining a
permit.
The following flow diagram describes in a somewhat simpli-
fied form how the Department's new tools would be used. The
flow of steps, especially in the pre-order period, vary some-
what among the Department's three chief regulatory units. The
diagram represents the most common flow applied to the typical
(cooperative) case.
-------
25
The Enforcement Process: A Typical, Cooperative Case
REGULATORY STEPS
i~-{HEARING AND APPEALS^>-
DETECT
CONFER
ORDER \-l
STEP I
STEP 2
ACTION BY REGULATEE
PROPOSES \
COMPLIANCE \
PLAN /
ACCEPTS
ORDER
MEETS\
DEADLINE \
MISSES
DEADLINE
(STRIKE)
ENFORCEMENT ACTIONS BY DEP
SENDS \
WARNING \
LETTER /
ACCEPTS \
PLAN \
DRAFTS \
ORDER \
EXTENDS N,
ALL )
DEADLINES/
SENDS N.
WARNING y
LETTER /
Once the Department detects a problem, it will normally send
a warning letter to the source advising it of the problem, and of
its potential liabilities and rights. The letter may also suggest
that the source propose a program for resolving the problem and
that it then discuss this problem with the Department. If the
source is not a repeat offender, or if it has not had prior notice
of what was required of it and of its potential liability to
civil assessments, the Department will waive the pre-order assess-
ment if the source takes "prompt and effective" action from that
time forward to resolve the problem. Even if such a source wishes
to contest an order, it will not be subject to the pre-order
assessment as long as it is moving vigorously to comply with the
law. This provision (See, e.g., §22a-6b-602 (g) (4) in Attachment B),
although somewhat of an administrative burden to the Department,
provides the regulatee with a fundamental safeguard. It ensures
that a Department inspector cannot walk up to a small outfit and
announce that it has been in violation for the last two years,
albeit perhaps unwittingly, and is therefore liable for an assess-
ment of up to $25,000.
When the Department requests a regulatee to provide a com-
pliance plan or other information, "prompt and effective" com-
pliance is defined to include providing such plans and information.
Once the source and the Department have agreed to a reasonable plan,
the Department will draft and issue an order based on this agree-
ment. The regulatee then has 30 days in which either to accept
the order or to request an administrative hearing and contest it.
As explained above, once such an order becomes final, the pre-
order assessment can no longer be imposed.
-------
26
Once under an order, the regulatee must meet a series of
deadlines, which typically include submitting engineering reports,
submitting plans and specifications, ordering necessary materials
and equipment, and having installed, tested, and begun operation
of the control facility. As long as these deadlines are met, the
Department would take no enforcement action.
If a deadline was missed for a legitimate reason, for example,
a strike, the Department would continue as it does now, to extend
that and all subsequent deadlines. (In order to prevent opening
a loophole for the recalcitrant few. the civil assessment regula-
tions bar assessments only (1) when the delay is attributable to
the Department or (2) when it has a verifiable cause. Thus
strikes, fires, and wars are grounds for mandatory exclusion,
but third party delay is not. However, the Department will con-
tinue to provide extensions for other reasons, much as it always
has, on a discretionary basis^
On the other hand, if the source misses a deadline without a
bona fide reason, the Department will typically send it a warning
letter that will note that the source is now behind schedule and
that, unless it regains the lost time, it may be subject to a
civil assessment for the delay in meeting its compliance schedule.
If the source indeed catches up and meets its final deadline,
the Department would not impose any civil assessment.
In the event that the regulatee does not move promptly and
effectively to come into compliance, or in the event that it fails
to comply with its order schedule, the Department will impose civil
assessments. The procedure for doing so is almost identical to the
procedure used in issuing a compliance order. A Notice of Viola-
tion is sent to the regulatee stating the violation for which the
assessment is being issued and the amount assessed, and notifying
the regulatee of its rights. The regulatee then has 20 days in
which to accept the Notice -, contest it, or take no action (in which
case the Notice becomes a final and effective order at the end of
the 20 days).
In the event that a civil assessment order is contested, the
contest would first be heard in a Departmental hearing conducted
by the Commissioner, a Deputy Commissioner, or a duly appointed
hearing officer. Hearings must be conducted in accordance with
the Connecticut Administrative Procedure Act and the Rules of
Practice of the Department. At such hearings, the Department
carries the burden of proving the violation and the reasonable-
ness of the proposed assessment, and the regulatee has full
opportunity to cross-examine the Department's witnesses and to
present rebutting evidence. Thereafter, the Commissioner will
issue a final decision in the matter, which could include a re-
duced assessment or no assessment. The source could, if dis-
satisfied, then appeal this decision to the Superior Court for
Hartford County. At any time during these proceedings, the
regulatee and the Department could, of course, settle the case.
-------
27
Even after a final, contested decision, a source whose costs
of compliance proved less than those assumed in calculating the
assessment imposed in the final order, can, as a matter of right,
obtain a refund of the resulting over-assessment, with interest.
In addition, the Commissioner may mitigate any assessment at any
time. (However, if a case involves a significant assessment, the
Commissioner must give notice of the amount of the reduction and
state the grounds for his action.)
In the unlikely event that a regulatee should refuse to pay
an amount assessed against him, the Enforcement Act provides a
quick and effective collection remedy. In such an event, the
Department would file a copy of its final civil assessment order
with the Clerk of the Superior Court. The Clerk is then required
to docket the final order, whereupon it obtains the same status
as a final judgment of the court and will be enforced as such
by the Sheriff.
PROGRAM
APPLICATIONS
This basic approach has been adapted to the particular needs
of each of the Department's three primary enforcement units (res-
ponsible respectively for air pollution, water pollution, and
coastal areas and wetlands). Additional work has also been done
to develop an effective enforcement approach to the environmental
movement's next enforcement problem: how to ensure that the
control facilities it has by now succeeded in getting installed
in most major sources are properly operated and maintained. The
tool has also been adapted to small, simple procedural violations
as well as to the major substantive problems discussed above.
Air Compliance
The Department's Air Compliance Unit was the first to imple-
ment CEP's new economic enforcment tools. All public hearings
on the proposed regulations were complete by November, 1974; the
regulations had been approved by the Legislative Regulations Review
Committee by December; the regulations were effective by January;
and the Department's first warning letters went out in February
of 1975.
The Unit's two major substantive economic enforcement reg-
ulations, Sections 602 and 603 reflect the basic pattern outlined above
closely. Section 602 provides pre-order assessment liability for
violation of the Department's existing particulate, hydrocarbon,
sulfur, carbon monoxide, and nitrogen oxide emission control
regulations. Section 603 authorizes the imposition of assessments
for failure to comply with the terms of a final order to abate
such emissions violations. Both assessments are based on ident-
ical economics — charging for the value of having delayed the
-------
28
costs of purchasing, installing, and operating and maintaining
necessary control equipment.* (The Section 602 and 603 regula-
tions are reproduced in Attachment B to this volume. Written
comments submitted at the time of the public hearings regarding
these regulations, including comments by a variety of leading
national experts, may be found in Attachment D.)
The Air Compliance Unit has also promulgated and begun to
use a small civil assessment designed to encourage those required
by Department orders to submit periodic progress reports to do
so on time. Even after a concerted follow-up effort in the
summer and fall of 1974, fully 17 percent of all progress re-
ports remain seriously delinquent. Cutting this high delinquency
rate would help both compliance and Department costs. Progress
reports alert both the regulatee and the Department if the reg-
ulatee begins to fall behind schedule. Moreover, imposing a
civil assessment for delinquent progress reports should cut
Department administrative costs both by saving expensive field
inspections and by reducing the amount of staff time now spent
attempting to obtain delinquent progress reports.
Volume II of the CEP Final Report discusses the Air program
in detail. This Volume provides (1) a summary description of
the Air program, (2) a detailed baseline analysis of the Air
Compliance Unit's enforcement experience before the introduction
of these new tools, (3) an explanation of the economics underlying
these regulations, (4) the regulations, (5) a detailed operating
guide (including a full set of cost curves) and (6) an analysis
of the Unit's administrative costs with and without its new
economic enforcement tools.
* The schedule in §22a- 6b-^602 (d ) defines the maximum amounts a
person with given costs could be assessed. These maximum
amounts represent the largest savings a source could be
reasonably expected to realize by postponing compliance with
air quality emission standards or an air abatement order.
This schedule is arranged according to equipment and operat-
ing costs, so that any regulatee can quickly determine its
maximum possible assessment by classifying its case according
to these two cost factors and then locating the corresponding
maximum amount in the schedule. Calculation of individual
civil assessments (§§22a-6b-602(e) and 603 (e)) would be governed
by the same calculus but would use data describing the economics
of a particular violator. By contrast, the schedule of maximum
assessment amounts was constructed using assumptions that all
tend to increase the amount of the assessment. Individual
assessments would, therefore, be much lower than the maximums
listed in the schedule.
-------
29
Water Compliance
The Water Compliance Unit is proposing three economic civil
assessment regulations: Section 503 for violations of the terms
of an order or permit, Section 502 for discharging without a per-
mit, and Section 504 for failing to submit monitoring reports as
required in the terms of an order or a permit.
Section 503 is modeled closely on the Air Compliance Unit's
Section 603 regulation authorizing civil assessments for order
violations. It has, however, been somewhat modified to fit the
different operating requirements and statutes of the Water Com-
pliance Unit.
Section 502 is, however, quite different from the Air Com-
pliance Unit's Section 602. Pre-order assessment liability for
water pollution cannot be based on effluent standards as the Air
Compliance Unit's are on emission standards:
* Connecticut in effect requires sources to reduce dis-
charges to the extent technologically feasible. Although
the Department has developed informal, de facto dis-
charge standards from this technical standard for
common types of sources, liability could not be tied
to such a standard because (1) it changes as technology
advances, (2) many cases are not covered and (3) the
exact standard applicable to a given case is not de-
termined until after a discharge is detected.
* Water Quality Standards are generally less stringent
than the technical feasibility standard; and in any
case, they do not translate readily into clear prede-
terminable effluent standards for individual dischargers
because the allowable individual discharge for a given
class of stream depends on the concentration and types
of other dischargers on the stream.
* The Federal Effluent Guideline standards cannot be
used because:
— they rely on a measure of each industry's
"product volume"-, e.g. the average number
of ducks a duck farmer maintains over a
year or the number of square inches of
metal a metal plating company plates in a
year. Much of this information is unknown
even to the company. And the Department is
certainly in no position to contest whatever
number a regulatee may assert — which is to
say that it will be virtually impossible to
enforce such a standard.
the effluent limitations required by the
Connecticut standard vary significantly from
those set by the Federal Guidelines from
-------
30
case to case. (A CEP comparison found
Connecticut requirements ranging from being
72 percent less stringent to several thousand
percent more stringent than the Federal Effluent
Guidelines for the same source.)
0If pre-assessment liability in water pollution cases cannot
be based on violations of effluent standards/ they can be based
on violations of permit requirements. Any person or municipality
planning a new (or significantly modified) discharge is required
to obtain a permit before initiating the discharge. Failure to
do so is a clear, easily proven offense — for which Section 502
authorizes the imposition of economic civil assessments. If it is
made clear that sources that already have permits may not con-
tinue discharging after their permits expire without obtaining
a new permit (and clarification of this point may require issuance
of a regulation in Connecticut) virtually a]1 dischargers will
either (1) be operating under the terms of an order or permit,
which usually specifies effluent standards for the source and
which can be enforced under the terms of Section 503, or (2) they
will be subject to assessment under Section 502. And Section 502
liability can be used, much like Section 602 liability to induce
regulatees to accept an order (or the equivalent conditions of a
permit).
Moreover, enforcing the requirement that new sources must
obtain a permit before initiating a discharge is itself an
important objective for the Water Compliance Unit. Once a
source has built its plant and hired its workforce, the Depart-
ment (and the public) are faced with a fait accompli. Closing
the source is not politically feasible: and often certain approaches
to control that would have been possible if installed earlier have
become unrealistic once the source begins operation.
Section 504 authorizes the imposition of economic civil
assessments if sources fail to submit monitoring reports regard-
ing the volume of water they are discharging and the nature and
quantity of the pollutants in that discharge periodically as
required in either an order or a permit. These monitoring re-
ports, somewhat like the progress reports required in Air Com-
pliance orders, serve several useful purposes: (1) they force
sources to think about their pollution abatement facilities from
time to time,(2) they provide important planning information
needed by both State and Federal governments, and (3) they save
the State expensive field inspections. The assessment is based
on the average cost of sampling, analyzing, and recording what-
ever water quality conditions the source was required but failed
to monitor. Thus, for example, if a source had been required to
take a composite sample; to analyze for total suspended solids,
nickel, zinc, tin, cyanide and pH; and to report the results to
the Department — and if the regulatee failed to do so, the
Department would be authorized to impose a civil assessment of
$90 on the regulatee for its failure. This assessment is the
sum of the following components: $19 for the sampling and trans-
mittal to a lab; $8, $12, $11, $14, $16, and $3 respectively for
each of the required analyses; and $7 for reporting to the Depart-
ment. (A copy of these regulations will be found in Attachment B.)
-------
31
Volume III of the CEP Final Report provides the same full
explanation of the Water Compliance CEP program that Volume II,
outlined above, does for the Air Compliance program.
Water Resources
The CEP program in the Water Resources Unit is much more
narrowly focused than in either the Air or Water Compliance pro-
grams. Economic civil assessments are provided only for illegal
commercial and institutional filling in coastal and tidal waters.
There are several reasons for this close focus:
* The Water Resources Unit is acutely understaffed and
could not now support a large new program. A careful
CEP sample survey of the Connecticut coast indicated
that between 9 and 14 illegal commercial fills account
for fully 89 percent of the cubic yards of illegal
fill placed along the coast each year. The Unit could
practically manage this number of cases.
* Illegal coastal filling does permanent, serious
environmental damage. Of the large number of
coastal enforcement problems, it deserves prior-
ity.
* Relatively clear standards exist governing when
fill will and will not be allowed, and the statute
authorizing regulation in this area (unlike that
governing inland wetlands) is well established.
* Once an economic enforcement system for coastal
filling had been perfected and tested, it can
later be easily extended to any other type of
filling, specifically including filling in inland
and/or tidal wetlands.
The coastal filling regulations are structured in a manner
roughly similar to the Water Compliance CEP regulations. Section
413 imposes liability for violating the terms of a Water Resources
order, which typically requires a source to cease and desist
filling and/or to modify or remove an illegal fill. Section 412
imposes liability for having filled without a permit. And,
Section 411 imposes a flat-rate procedural civil penalty for
failing to have submitted a complete permit application prior to
beginning filling.
However, the economics underlying the Water Resource rem-
edies are very different from those underlying the Air and Water
Compliance regulations. The benefit derived by delinquent reg-
ulatees in the Air and Water cases consisted of the value of
delaying the expenses of purchasing, installing, and operating
and maintaining control facilities. In the case of illegal
coastal fill, the delinquent regulatee benefits in three ways.
He receives (1) the value of the use of the new coastal land
created by the illegal fill, (2) the value of having delayed the
-------
32
expense of removing the illegal fill (In legal theory, illegal
fill constitutes a nuisance, and he who places it is under an
immediate and continuing, automatic obligation to remove it.),
and (3) the savings of not having prepared an application, which
must contain engineering drawings and on average costs roughly
$800, before filling. The process of accurately estimating the
value derived from the land created by the fill and the costs of
modification/removal of the fill, both necessary components for
determining economic remedies in filling cases, is naturally en-
tirely different from the process of estimating the costs of
installing and operating control facilities.
How the economics of filling cases is handled is described
in Volume IV of the CEP Report. Volume IV also provides a full
description of the Water Resources CEP program, the results of
a detailed survey of the enforcement problems the Department faces
along the Connecticut coast, copies of the Water Resources CEP
regulations (Sections 411 to 413), and an analysis of the Water
Resource Unit's administrative costs before and after the intro-
duction of these new tools.
Operating and
Maintenance
Over the last several years, environmental regulators have
been focusing on the problem of getting sources of pollution to
install often expensive control facilities. Now, especially in
a state like Connecticut that has had a vigorous environmental
program and good citizen, support, most significant sources have
control equipment in place. Consequently, in the future, envir-
onmental regulation is going to have to focus much more than it
has so far on ensuring that sources operate and maintain the
equipment they have already installed properly. If this objective
can not be achieved, much of the benefit of the last half decade's
effort to install control facilities may be lost.
It is also clear that the operating and maintenance problem
is a tough one. It is going to be difficult to get sources to
operate and maintain properly because it is much more in their
economic interest not to operate and maintain than it ever was
not to invest in the control equipment in the first place. The
following diagram, which compares on an annualized basis the
capital costs and the operating and maintenance costs of each
of the major types of air pollution control equipment, makes this
clear. In every case, the costs to the regulatee of operating
and maintaining its control equipment were much greater — usually
many times greater — than the annualized capital costs of the
equipment.
-------
33
Most Control costs are O&M Costs
TYPES OF CONTROL
EQUIPMENT
Baghouse
Electrostatic
precipitator
High tetop
afterburner (KC)
Catalytic
afterburner (HO
Low energy
•crubber (part)
Carbon
Adsorbtion
ESTIMATED PERCENT
ECONOMIC BENEFITS
OF CONTROL
ZN oxide lOP
Concrete 401
ISO
Solvent recovery
OF A
NNUALIZED CAPITAL COSTS
OPERATING AND
MAINTENANCE COSTS
220 y. 350
IS 1 1/V - -'
vt 380 _ 1 ,_500
V, 1,800. J.A. 6,000
, 700 , 2,200
90 160
[ |
80 160
| |
In the rare instances where there is any secondary material re-
covery at all, it does little or nothing to offset these costs.
Moreover, the ease with which control equipment can be turned
on and off makes detection and proof difficult, which invites
evasion.
The proposed O&M program relies on four major components:
(1) Standards of control equipment performance based
on operating parameters of the equipment — e.g.
pressure drop, air flow, water flow, temperature,
fuel consumption;
(2) Continuous monitors to measure and record emissions
and/or performance of operating parameters;
(3) Assessments based on cost savings from improper
O&M and/or monitoring;
(4) A limited permit program.
The O&M program imposes costs on regulatees only after they
have had prior contact with the Department and ample notice of
their obligation to operate properly and the enforcement conse-
quences of improper O&M. The Department will advise regulatees
of their O&M obligation once they install control equipment. For
the majority of regulatees who thereafter operate properly, the
O&M enforcement program has no application and imposes no costs.
The program only affects the relatively small number of regulatees
who, after notice and warning, are found to be operating control
equipment improperly.
Detection of visible emissions from a controlled source, or
of control equipment being operated in a manner inconsistent with
the operating parameters established at a satisfactory stack test,
will lead to an order which requires the regulatee to obtain an
-------
34
O&M permit. The permit will contain a timetable for developing
O&M standards expressed as performance levels for a combination
of operating parameters that reflect proper operation of the
control equipment. For scrubbers, for example, parameter
standards might be set for pressure drop, water flow, and gas
flow. Regulatees will be required to propose parameter standards
based on manufacturer's specifications and/or stack test results.
The O&M permit will generally also require the regulatee to in-
stall continuous monitors and recorders of either emissions or
of the performance of the operating parameters for which standards
have been set. Finally, the permit will contain a condition that
the regulatee provide assurances of future proper O&M by agree-
ing to accept the burden of proving continuous proper O&M in the
event the Department detects another O&M violation in the future.
Civil assessments, based on the costs saved as a result of im-
proper O&M or improper monitoring, apply to operating without a
permit and to operating in violation of O&M standards and/or
monitoring requirements.
Economic assessments for O&M violations, then, would be
based on savings in (1) the operating and maintenance costs and
(2) the equipment replacement costs of the source's control
facilities. Department staff can determine these costs using
the same cost curves as are used for estimating equipment and
operating costs in Sections 602-603 abatement civil assessments.
Equivalent cost curves have been developed to simplify estimating
the savings likely to accrue to a source that is violating monitor-
ing requirements. For both O&M and monitoring violations, the
staff can handle inflation, cost of capital, taxes, and the
process of calculating the resulting assessment just as it does
in Sections 602 and 603.
Similarly, economic assessments for failure to comply with
monitoring requirements are based on equipment and operating
costs. The Department can estimate these costs using cost
curves similar to those developed for emissions/order violations,
and it can determine the other variables and do the necessary
subsequent calculations using exactly the same tools developed
for the Section 602 and 603 regulations. In order to discourage
regulatees from shutting down control equipment during periods of
monitoring failure, monitoring assessments are initially calculated
to reflect savings from improper O&M. It will, however, be ad-
justed to the much lower monitoring assessment level upon a
showing by the regulatee that it made the expenditures for proper
O&M during the monitoring failure.
The Department's proposed approach to O&M enforcement should
(1) impose no burden on those who comply, (2) allow an effective
response to repeat offenders, and (3) allow maximum scope for
change in the standards used as developing engineering knowledge
and enforcement experience in this new area dictate.
Volume V provides a full description of this approach along
with an explanation of the economics used in this approach and
annotated copies of draft O&M regulations.
-------
35
CONCLUSIONS
Connecticut is introducing a new economic approach to
environmental law enforcement. A good many of the innovations
in this approach should have broad application in other regulatory
settings. The Connecticut model shows how economics can be used
to calculate remedies that are effective, unquestionably equit-
able, and practically useable. The availability of such economic
remedies in turn makes it possible to overcome the serious philos-
ophic objections that have inhibited legislatures from granting
executive departments the power to impose financial incentives on
delinquent regulatees directly.
Administrative imposition of economic civil assessments
and/or surety devices would allow regulators to provide an
immediate, concrete incentive to the scofflaw. With the regulator
no longer caught with having to choose between the two extreme and
inadequate responses of jawboning or going to court, even the
recalcitrant regulatee would find it in its economic interest to
comply. And, once the tough cases have been handled effectively,
the rate of voluntary compliance by all other regulatees would
improve sharply. Increased voluntary compliance would (1) cut
regulatory costs and (2) speed environmental clean-up significantly,
-------
36
ATTACHMENT A
THE ENFORCEMENT ACT OF 1973
The Enforcement Act of 1973, PL 73-665, gives the Department
the power to impose civil assessments and to require sureties,
and it defines how these powers may be used. The most important
portions of the Act, Sections 2 and 3(7), now Sections 22a-6(b) and
22a-6 of the General Statutes, follow. The full text of the
Act may be found in Volume VI.
The Act was initially designed by a Department task force
that had the broad outlines of the CEP enforcement approach out-
lined in this Report in mind when it was doing its work. This
task force consisted of Henry Beal, then an attorney in the Air
Compliance Unit and now Director of Air Compliance; William
Drayton, a McKinsey and Company lawyer/economist/management
consultant with a special interest in regulatory and incentive
design; and David Tundermann, then and until recently the Depart-
ment's General Counsel and now a member of the staff of the
President's Council on Environmental Quality. The New York law
firm of Davis, Polk, and Wardwell provided most valuable research
and drafting assistance.
-------
37
SECTION 2: ADMINISTRATIVELY-IMPOSED CIVIL ASSESSMENTS
Sec, 22a-6b. Imposition of civil penalties by the commissioner, (a) The
commissioner of environmental protection is authorized to adopt a schedule or
schedules establishing the amounts, or the ranges of amounts, of the civil pen-
alties which may become due under this section. Such schedule or schedules
shall be adopted by the commissioner after public hearings pursuant to section
22a-6, and may be amended from time to time in the same manner as for adop-
tion. The civil penalties established for each violation shall be of such amount
as to insure immediate and continued compliance with applicable laws, regula-
tions, orders and permits. Such civil penalties shall not exceed the following
amounts:
(1) For failure to file any registration, plan, report or record, or any applica-
tion for a permit, for failure to display any registration, permit or order, or
file any other information required pursuant to any provision of section 14-100b
or 14-lOOc, subdivision (3) of subsection (b) of section 15-121, chapter 348, sec-
tions 19-507, 19-508, 19-508a, 19-513a, 19-514, 19-517, 19-519, 19-519a, 19-524b,
19-524c, 19-524g, 19-524n, 22a-5, 22a-6, 22a-7, 22a-39, 25-2, 25-4a, 25-4d, 25-4e,
25-4f, 25-7a, 25-7b, 25-7d, 25-7e, 25-8a, 25-8c, 25-10, 25-11, 25-12, 25-15, 25-26,
25-26a, 25-27, 25-54c to 25-541, inclusive, or 25-54aa, 25-54cc, 25-54dd, 25-54ee
25-54hh, 25-54ii, 25-5411, 25-54oo, 25-54pp or 25-110 to 25-114, inclusive, or any
regulation, order or permit adopted or issued thereunder by the commissioner,
and for other violations of similar character as set forth in such schedule or
schedules, no more than one thousand dollars for said violation and in addition
no more than one hundred dollars for each day during which such violation
continues after receipt of a final order of the commissioner under subsection
(c) of this section assessing the civil penalty for such violation;
(2) For deposit, placement, removal, disposal, discharge or emission of any
material or substance in violation of any provision of section 14-100b or 14-100c,
subdivision (3) of subsection (b) of section 15-121, chapter 348, sections 19-507,
19-508, 19-508a, 19-513a, 19-514, 19-517, 19-519, 19-519a, 19-524b, 19-524c,
19-524g, 19-524n, 22a-5, 22a-6, 22a-7, 22a-39, 25-2, 25-4a, 25-4d, 25-4e, 25-4f,
25-7a, 25-7b, 25-7d, 25-7e, 25-8a, 25-8c, 25-10, 25-11, 25-12, 25-15, 25-26, 25-26a,
25-27, 25-54c to 25-541, inclusive, 25-54aa, 25-54cc, 25-54dd, 25-54ee, 25-54hh,
25-54H, 25-5411, 25-54oo, 25-54pp or 25-110 to 25-114, inclusive, or any regulation
adopted thereunder by the commissioner, and for other violations of similar
character as set forth in such schedule or schedules, no more than twenty-five
thousand dollars for said violation and in addition no more than one thousand
dollars for each day during which such violation continues after receipt of a
final order of the commissioner under subsection (c) assessing the civil penalty
for such violation;
(3) For violation of the terms of any final order, except final orders under
subsection (e) of this section and emergency orders and cease and desist orders
as set forth in subdivision (4) of this subsection, of the commissioner, for viola-
tion of the terms of any permit issued by the commissioner, and for other viola-
tions of similar character as set forth in such schedule or schedules, no more
than twenty-five thousand dollars for said violation and in addition no more than
one thousand dollars for each day during which such violation continues after
receipt of a final order of the commissioner under subsection (c) of this section
assessing the civil penalty for such violation;
(4) For violation of any emergency order or cease and desist order of the
commissioner, and for other violations of similar character as set forth in such
schedule or schedules, no more than twenty-five thousand dollars for said viola-
tion and in addition no more than five thousand dollars for each day during
which such violation continues after receipt of a final order of the commissioner
under subsection (c) assessing the civil penalty for such violation.
-------
38
(b) In adopting the schedule or schedules prescribed by this section, the
commissioner shall consider the amounts, or ranges of amounts, of assessment
necessary to insure immediate and continued compliance, and the character and
degree of injury or impairment to, or interference with, (1) public health, safety
or welfare, (2) the public trust in the air, water, land and other natural resources
of the state, and (3) reasonable use of property which is caused or is likely
to be caused by the type of activity described in such schedule or schedules.
(c) In addition, in setting a civil penalty in a particular case, the commis-
sioner shall consider all factors which he deems relevant, including, but not
limited to, the following:
(1) The amount of assessment necessary to insure immediate and continued
compliance;
(2) The character and degree of impact of the violation on the natural
resources of the state, especially any rare or unique natural phenomena;
(3) The conduct of the person incurring the civil penalty in taking all feasible
steps or procedures necessary or appropriate to comply or to correct the viola-
tion;
(4) Any prior violations by such person of statutes, regulations, orders or
permits administered, adopted or issued by the commissioner;
(5) The economic and financial conditions of such person;
(6) The character and degree of injury to, or interference with, public health,
safety or welfare which is caused or threatened to be caused by such violation;
(7) The character and degree 'of injury to, or interference with reasonable
use of property which is caused or threatened to be caused by such violation.
(d) If the commissioner has reason to believe that a violation has occurred
for which a civil penalty is authorized by this section, he may send to the vio-
lator, by certified mail, return receipt requested, or personal service, a notice
which shall include:
(1) A reference to the sections of the statute, regulation, order or permit
involved;
(2) A short and plain statement of the matters asserted or charged;
(3) A statement of the amount of the civil penalty or penalties to be imposed
upon finding after hearing that a violation has occurred or upon a default; and
(4) A statement of the party's right to a hearing.
(e) The person to whom the notice is addressed shall have twenty days from
the date of receipt of the notice in which to deliver to the commissioner written
application for a hearing. If a hearing is requested then, after a hearing and
upon a finding that a violation has occurred, the commissioner may issue a final
order assessing a civil penalty under this section which is not greater than the
penalty stated in the notice. If such a hearing is not so requested, or if such
a request is later withdrawn, then the notice shall, on the first day after the
expiration of such twenty day period or on the first day after the withdrawal
of such request for hearing, whichever is later, become a final order of the
commissioner and the matters asserted or charged in the notice shall be deemed
admitted unless modified by consent order, which shall be a final order. Any
-------
39
civil penalty may be mitigated by the commissioner upon such terms and condi-
tions as he in his discretion deems proper or necessary upon consideration of
the factors set forth in subsection (b) hereof.
(f) All hearings under this section shall be conducted pursuant to sections
4-177, to 4-184, inclusive. The final order of the commissioner assessing a civil
penalty shall be subject to appeal as set forth in section 4-183 except that any
such appeal shall be taken to the superior court for Hartford county and shall
have precedence in the order of trial as provided in section 52-191. Such final
order shall not be subject to appeal under any other provision of the general
statutes. No challenge to any final order of the commissioner assessing a civil
penalty shall be allowed as to any issue which could have been raised by an
appeal of an earlier order, notice, permit, denial or other final decision by the
commissioner. Any civil penalty authorized by this section shall become due
and payable (i) at the time of receipt of a final order in the case of a civil penalty
assessed in such order after a hearing, (ii) on the first day after the expiration
of the period in which a hearing may be requested if no hearing is requested,
or (iii) on the first day after any withdrawal of a request for hearing.
(g) Any person acting within the terms and conditions of a final order or
permit issued to him by the commissioner shall not be subject to a civil penalty,
under this section, for such actions.
(h) A civil penalty assessed in a final order of the commissioner under this
section may be enforced in the same manner as a judgment of the superior
court. Such final order shall be served in person or by certified mail, return
receipt requested. Any notice of violation or final order against a private cor-
poration shall be served upon at least one of the individuals enumerated in
section 52-57. After entry, a transcript of such final order may be filed by the
commissioner, without requiring the payment of costs as a condition precedent
to such filing, in the office of the clerk of the superior court in any one or more
of the following counties: Any county in which the respondent resides, any
county in which the respondent has a place of business, any county in which
the respondent owns real property and any county in which any real property
which is a subject of the proceedings is located; or, if the respondent is not
a resident of the state of Connecticut, in Hartford county. Upon such filing,
such clerk or clerks shall docket such order in the same manner and with the
same effect as a judgment entered in the superior court within the county. Upon
such docketing, such order may be enforced as a judgment of such court.
(i) The provisions of this section, subsection (a) of section 19-518, sections
22a-2, 22a-6, 22a-6a, 22a-7, 25-17, 25-54g, 25-54h, subsection (d) of section
25-54i, 25-54J, 25-54k, 25-541, 25-54p, subsections (b) and (c) of section 25-54mm
and 25-54qq are in addition to and in no way derogate from any other enforce-
ment provisions contained in any statute administered by the commissioner. The
powers, duties and remedies provided in such other statutes, and the existence
of or exercise of any powers, duties or remedies hereunder or thereunder shall
not prevent the commissioner from exercising any other powers, duties or reme-
dies provided herein, therein, at law or in equity.
(P.A. 73-665, S. 2. 17.)
-------
40
SECTION 3(7); SURETIES
Sec. 22a-6. Commissioner to establish environmental standards, criteria and
regulations, make contracts, studies, issue permits. Complaints. Hearings. Bonds.
The commissioner may (1) adopt, amend or repeal such environmental stan-
dards, criteria and regulations, and such procedural regulations as are necessary
and proper to carry out his functions, powers and duties. No adoption, amend-
ment or repeal of any standard, criterion or regulation shall take effect except
after a public hearing, thirty days prior notice of the date, time, place and
subject matter of which shall be published in the Connecticut Law Journal, or
earlier than thirty days after the publication thereof in said law journal; (2) enter
into contracts with any person, firm, corporation or association to do all things
necessary or convenient to carry out the functions, powers and duties of the
department; (3) initiate and receive complaints as to any actual or suspected
violation of any statute, regulation, permit or order administered, adopted or
issued by him. The commissioner shall have the power to hold hearings, admin-
ister oaths, take testimony and subpoena witnesses and evidence, enter orders
and institute legal proceedings including, but not limited to, suits for injunctions,
for the enforcement of any statute, regulation, order or permit administered,
adopted or issued by him; (4) in accordance with regulations adopted by him,
require, issue, renew, revoke, modify or deny permits, under such conditions
as he may prescribe, governing all sources of pollution in Connecticut within
his jurisdiction; (5) in accordance with constitutional limitations, enter at all
reasonable times upon any public or private property, except a private resi-
dence, for the purpose of inspection and investigation to ascertain possible
violations of any statute, regulation, order or permit administered, adopted or
issued by him and the owner, managing agent or occupant of any such property
shall permit such entry, or he may-apply to any court having criminal jurisdic-
tion for a warrant to inspect such premises to determine compliance with any
statute, regulation, order or permit administered, adopted or enforced by him,
provided any information relating to secret processes or methods of manufac-
ture or production ascertained by the commissioner during, or as a result of
any inspection, investigation, hearing or otherwisefshalj.be kept confidential and
shall not be disclosed; (6) undertake any studies, inquiries, surveys or analyses
he may deem relevant, through the personnel of the department or in cooper-
ation with any public or private agency, to accomplish the functions, powers
and duties of the commissioner; (7) require the posting of sufficient performance
bond or other security to assure compliance with any permit or order. (8) pro-
vide by notice printed on any form that any false statement made thereon or
pursuant thereto is punishable as a criminal offense under section 53a-157; (9)
notwithstanding the provisions of section 4-131, make or contract for the making
of any alteration, repair or addition to any real asset under his control and
management, including rented or leased premises, involving an expenditure of
fifty thousand dollars or less, provided any expenditure in excess of twenty-
five thousand dollars shall be subject to the bidding procedures in section 4-132.
(1971, P.A. 872, S. 7; P.A. 73-665, S. 3,17; P.A. 74-188.)
See chapter 54.
-------
41
ATTACHMENT B
REPRESENTATIVE ECONOMIC ENFORCEMENT REGULATIONS
This Attachment contains four sets of CEP regulations., The
first three, between them, exemplify the three major components
of the CEP regulatory structure. The fourth spells out the pro-
cedures to be used in all civil assessment cases.
Type of Regulation
Pre-Order Assessments
Order Violation Assessments
Small, flat rate Assessments
Basic CEP Procedures
Subject Covered
Air Emissions
Air Orders
Water Monitoring
Requirements
Procedures
Section
Number
§602
§603
§504
§§100-102
-------
42
VIOLATING EMISSIONS STANDARDS
ADMINISTRATIVE REGULATIONS
Regulations and notices published herein are
printed exactly as submitted by the forwarding
agencies. These, being official documents
submitted by the responsible agencies, are
consequently not subject to editing by the
Commission on Official Legal Publications.
DEPARTMENT OF ENVIRONMENTAL PROTECTION
Assessment of Civil Penalties for Violation of Air
Emissions Standards and Orders of the
Commissioner
Section 1. The Regulations of Connecticut State
Agencies are amended by adding sections 22a-6b-602 and
22a-6b-603, inclusive, as follows:
Sec. 22a-6b-G02(a). Title
This section shall be known and may be cited as "Civil
Penalty Regulations: Emission Violations."
Sec. 22a-6b-602(b). Definitions
(1) "Assessment period" means the period of time,
expressed in months or portions thereof, during which
a regulatce has failed to incur all the expenses-necessary
to insure immediate and continued compliance with ap-
plicable emission standards except that it does not in-
elude the time that a person is under a final order of the
Commissioner, or the "order assessment period" defined
in Section 22a-6b-603(b), or any period before the date on
which Sections 22a-6b-602 and 22a-6b-603 of the Civil
Penalty regulations become effective.
(2) "Civil penalties final order" means an order of
the Commissioner issued pursuant to Sections 22a-6b-101,
2;!a-fib-G02, and 22a-6b-603 of the Civil Penalty Regula-
tions which has become final by the passage of time or
by the consent of the regulatce or after hearing.
(3) "Commissioner" means the Commissioner of the
Department of Environmental Protection or his lawfully
designated agent.
(4) "Compliance timetable" means the schedule of
dates by which a person under a final order is to come
into compliance with Department regulations.
(5) "Cost of capital" means cither: (i) the weighted
average of the marginal rates the Commissioner finds a
person or class of persons typically must pay per year
for debt and owner's equity or (ii) the annual rate of
return or of savings that the Commissioner finds a per-
son or class of persons could achieve with a sum of
money equal to the cost of compliance; as determined
by the Commissioner for a person or class of persons.
'0) "Cost of compliance" means the net, after tax,
estimated present value of the sum of equipment costs,
operating costs, and all other costs and savings the reg-
ulatec will experience in order to come into compliance
including, hut not limited to inflation, depreciation, such
replacement costs as will later be necessary to replace
capital equipment that has either worn out or become
obsolete, and a discount rate equal to the cost of capital.
(7) "Department" means the Department of Environ-
mental Protection.
(8) "Depreciable life" means the time period of useful
life expectancy for capital plant and equipment. This
period shall be defined as 10 years until and unless the
Commissioner finds otherwise pursuant to Section 22a-6b-
G02(g) (2) in which case he may consider the depreciation
periods allowed for tax purposes by the U. S. Internal
Revenue Service and such other guides as he determines
arc similarly reliable.
(9) "Depreciation" means the amortization of equip-
ment costs over their depreciable life.
(10) "Emit" means the act of releasing or discharg-
ing or causing to be released or discharged any air pol-
lutant in violation of the terms of Sections 19-508-9 and
19-508-18 to 19-508-22, inclusive, of the Regulations for
the Abatement of Air Pollution. An "emissions standard"
is any requirement sot forth in Sections 19-508-9 and
19-508-18 to 19-508-22, inclusive, and an "emissions viola-
tion" is a violation of an emissions standard.
(11) "Equipment costs" means the installed capital
costs of such equipment as is or may be required to bring
an unabated activity into compliance with applicable
emission standards. Such costs shall include, but not be
limited to, the cost of equipment required to control
emissions effectively, auxilliary equipment, technical and
engineering services, and all development and start-up
costs including labor, materials and necessary testing.
For the purpose of estimating the cost of compliance
prior to the date that the unabated activity has been
brought into compliance with applicable emissions stand-
ards, the Commissioner may assume that what he finds
to be the most environmentally effective and reliable
equipment available will be used. The Commissioner
shall, upon petition by the regulatee once the regulatce
has come into compliance, correct the penalty due using
actual equipment costs pursuant to Section 22a-6b-602(g)
(2).
(12) "Final order" means an order of the Commis-
sioner issued pursuant to Title 19, Chapter 360, Sections
19-508, 19-5JO, 19-514, 19-515 and/or 19-517 of the Con-
necticut General Statutes which has become final by the
passage of time or by the consent of the regulatee or
after hearing.
(13) "Inflation" means the average annual rate of in-
flation as measured by the changes in the Wholesale Price
Index prepared by the United States Department of
Labor or such other index of inflation as the Commis-
sioner may determine is most appropriate over the 3 years
prior to the year in which the civil penalty is to be
assessed.
(14) "Operating costs" means the non-depreciable
annual costs for the operation and maintenance of equip-
ment and processes required for the abatement of air
pollution which will protect installed control equipment
and insure continuous compliance with applicable emis-
sion standards.
(15) "Person" includes every individual, firm, part-
nership, association, syndicate, company, trust, corpora-
tion, municipality, and any other legal entity.
(16) "Regulatce" means a person who owns or operates
a process or piece of property that has been, is, or may
become an unabated activity.
(17) "Unabated activity" means the ownership or
operation of any process or piece of property, real or
personal, which (i) emits or causes to be emitted, any
air pollutant in excess of the emission standards pre-
scribed in Section 19-508-9 and 19-508-18 to 19-508-22,
inclusive, of the Regulations for the Abatement of Air
Pollution or (ii) is not equipped or operated with the
emission controls required by Sections 19-508-18 to 19-
508-22. Ownership or operation of each such process or
piece of property is a separate "unabated activity" re-
gardless of the number of identical or closely similar
processes or pieces of property owned by the same per-
son or located on the same premises.
-------
43
Sec. 22a-6b-602(c). Civil penalties for violating emis-
sion standards
Any person carrying on an unabated activity shall be
linhlr for a civil penalty assessed by the Commissioner
pursuant to Public Act 73-GG.r>, Section 2(a)(2), and in
accordance with the procedures prescribed in Section
22a-fib-100 to 22a-6b-102, inclusive, of the Civil Penalty
Regulations.
Sec. 22a-6b-G02(d). Schedule of maximum assessments
(3) Persons maintaining unabated activities may be
assessed monthly amounts for each such activity no
greater than the amount listed in the following schedule
for the combination of equipment costs and operating
costs which will be or has been required to bring the
unabated activity into compliance with applicable emis-
sions standards.
(2) The maximum monthly amounts set forth in this
schedule represent the economic advantages a person
responsible for an unabated activity could gain from one
month's delay in bringing that activity into compliance
assuming economic and tax conditions all tending to in-
crease the value to the regulatee of such delay. These
maximum amounts have been calculated in three broad
steps: a gross cash flow for eaeli set of compliance ex-
penditures, chiefly equipment costs and operating costs,
is defined; tliis gross cash flow is discounted to present
value, and the maximum monthly civil penalty is cal-
culated as that amount which would, if paid monthly,
amortize the gross present value of the project. The
Commissioner shall provide a written explanation of
these calculations upon request.
(3) The Commissioner shall impose lesser penalties
pursuant to Section 22a-Gb-602(e)(l-2) if he finds the
probable advantages of delay are smaller than indicated
in this schedule, and he may further lower these penal-
ties pursuant to Sections 22a-6b-602(c)(5) and/or 22a-
6b-G02(g).
(4) In no ease shall the assessment exceed $25,000 plus
•tKlOO for encli day that the unabated activity continues
after the regulatec has received a civil penalties final
order.
(5) The Commissioner has determined that the reme-
dies provided by this schedule will insure immediate and
continued compliance and will protect (i) the public
health, safety, and welfare; (ii) the public trust in the
air, water, land and other natural resources of, the state;
and (iii) the reasonable use of property.
Sec. 22a-Gb-G02(e). Determination of amount in individ-
ual cases
(1) The Commissioner shall determine the amount of
the monthly civil penalty he may assess for any individ-
ual unabated activity based on the actual or probable
cost of compliance required of that particular activity.
Individual assessments arc calculated in four broad
steps: the gross cash flow of the required compliance
expenditures, chiefly equipment costs and operating
costs, is determined; the net cash flow is established by
taking tax and other savings into account; this net cash
flow is discounted to present, value; and the individual
monthly civil penalty is calculated as that amount which
would, if paid monthly, amortize the net present value
of the project.
(2) The Commissioner shall calculate the total civil
penalty by multiplying the monthly civil penalty by the
number of months or fractions thereof in the assessment
period.
(3) The Commissioner shall provide a written explana-
tion of this methodology upon request. He shall also
provide a written summary of the calculations used ,to
determine a particular assessment, except to the extent
he is required to maintain the confidentiality of certain
information pursuant to Section 22a-6b-602(i), upon
written request by an interested party or the affected
regulatec.
(4) In no case shall an individual assessment exceed
either (i) the maximum civil penalty Section 22a-Gb-
B02(d) would allow per month for an unabated activity
with the same equipment costs and operating costs or
(ii) for the total civil penalty due during the entire
assessment period, $25,000 plus $1000 for each day that
the unabated activity continues after the regulatec has
received a civil penalties final order.
Operating
Costa
$0 1000
$1001-2.->00
JL'-iOl TiOOO
,«.i "(11 7.VIO
$rr)0i. 10,000
$10,001 15,000
$15,00! 20,000
$211,001 25,000
»2.-,,ooi-.-tr,,r>oo
$35,001-50,000
$r>n,ooi-75,ooo
$75,001.100,000
$ioo,oni 200,000
.$200,OOI-.'I50,000
Equipment Costs
A!
188.
357.
638.
919.
1200.
1762.
2324.
2886.
4011.
5097.
8508.
11318.
22561.
39425.
SS
88
263.
432.
713.
994.
1275.
1837.
2400.
2962.
4086.
5772.
8583.
11394.
22637.
39501.
II
415.
583.
864.
1145.
1426.
1989.
2551.
3113.
4237.
5924.
8734.
11545.
22788.
39652.
i-H
O O
II
717.
885.
1168.
1448.
1729.
2299.
2853.
3415.
4539.
6226.
9036.
11847.
23090.
39954.
Is
cr1-!
N 10
1170.
1339.
1B20.
1901.
2182.
2744.
3306.
3808.
4993.
6679.
9490.
12300.
29^43.
40407.
Is
£§•
WHO
1623.
1792.
2073.
2354.
2C35.
3197.
3759.
4321.
5446.
7132.
9943.
12754.
23996.
40861.
in o"
2227.
2396.
2677.
2958.
3239.
3801.
4364.
4926.
6050.
7736.
10547.
13358.
24501.
41463.
si
If
3134.
3303.
3584.
3865.
4146.
4708.
5270.
5832.
6957.
8643.
11454.
14264.
25507.
42371.
$100,001-
150,000
4045.
4813.
5094.
5375.
5057.
62)9.
6781.
7343.
8467.
10154.
12964.
15775.
27018.
43882.
$150,001-
200,000
6155.
6324.
6605.
6886.
7167.
7729.
8292.
8854.
9978.
11664.
14475.
17286.
28528.
45393.
$200,001-
300,000
9177.
9346.
9627.
9908.
10189.
10751.
11313.
11875.
13000.
14686.
17497.
20307.
31550.
48415.
So
o^o
ocT
»8
15220.
15389.
15670.
15951.
16232.
16794.
17356.
17918.
19043.
20729.
23540.
26350.
37593.
54458.
$500,001-
1,000,000
30328.
30496.
30777.
31038.
31340.
31902.
32464.
33026.
34150.
35837.
38647.
41458.
52701.
*
° s
ll
*
*
*
*
*
*
*
*
*
*
*
*
*
*
$350,001-1111(1 above ............. .
No more than $25,000 plus $1000 for each day that tho unabated activity continues after the regulates has received
i civil penalties final order. ,,
-------
44
(5) In sotting a civil penalty in n particular cnsi1, the
Commissioner shall consider all factors which lie deems
relevant, including, but not limited to those listed In-low;
and he may, as a result of considering and balancing
these factors, lower the civil penalty. The factors he
shall consider include:
(i) The amount of the assessment necessary to insure
immediate and continued compliance;
(ii) The character and degree of impact the. unabated
activity has on the public trust in the air, water, and
land and on the natural resources of the state, especially
any rare or unique natural phenomena;
(iii) The character and degree of injury to, or inter-
ference with, public health, safety or welfare which is
caused or threatened to be caused by the unabated
activity;
(iv) The conduct of the person incurring the civil
penalty in taking all feasible steps or procedures neces-
sary or appropriate to comply or to correct the unabated
activity;
(v) Any prior violations by such person of statutes,
regulations, orders or permits administered, adopted or
issued by the Commissioner;
(vi) The economic and financial conditions of such
person;
(vii) The character and degree of injury to, or inter-
ference with reasonable use of property which is caused
or threatened to be caused by such unabated activity.
Sec. 22a-Gb-G02(f). Enforcement proceedings
(1) Warning letter. If the Commissioner finds that
an emissions violation has probably occurred, he shall
send the responsible regulatee :i civil penalties warning
letter by certified mail or by personal delivery or service.
This letter shall notify the regulatee that the Commis-
sioner has reason to believe a violation has occurred. For
those cases to which Sections 22a-6b-G02(g) (4)(i) and
22a-Gb-602(g)(4)(ii) apply, this warning letter shall also
notify the regulatee that it may be able to avoid the
imposition of civil penalties tinder Section 22a-fib-602 if
it takes prompt and effective action pursuant to the
terms of Section 22a-6b-602(g) (4).
(2) Hearings, (i) Any person in receipt of a notice
of violation issued pursuant to Section 22a-6b-10l(a) of
the Civil Penalty Regulations may apply to the Commis-
sioner for a hearing pursuant to Section 22a-6o-101(b).
(ii) Such hearing shall be conducted by the Commis-
sioner, a Deputy Commissioner, or a hearing officer from
the Office of Adjudication of the Department. Such hear-
ing shall be conducted pursuant to Sections 4-177 to
4-18r>, inclusive, of the General Statutes and to the Rules
of Practice of the Department.
(iii) The Department shall have the burden of pro-
ducing evidence to prove the emissions violation that
provides the basis for imposing the penalty and the rea-
sonableness of the proposed assessment, and the risk of
non-persuasion by a preponderance of the evidence shall
fall upon the Department.
(iv) If the Commissioner, Deputy Commissioner, or
hearing officer presiding at the hearing determines that
information important to an accurate determination of
all or part of the civil penalty amount is not available
at the time of the hearing but will become available
Inter, he may defer determining the amount of the civil
penalty due until he establishes that the previously miss-
ing information is available, at which time he shall
promptly hold a hearing pursuant to Section 22a-6b-G02 •
(1,0(2) regarding the amount of the civil penalty due.
Hi- nniy not collect any portion of the civil penalty until
ttiis hearing is held and a civil penalties final order issued.
(3) Appeals. Any person may appeal 11 civil penalty
final order of the Commissioner issued after a hearing
pursuant to Section 2(f) of Public Act 73-GG5.
Sec. 22a-6b-602(g). Mitigation
(1) General. The Commissioner may mitigate any civil
penalty upon such terms as he in his discretion deems
proper or necessary upon consideration of the factors
set forth in Sections 2(b) and 2(c) of Public Act 73-GG5.
(2) Correction of penalties, (i) A regulatee in receipt
of a notice of violation issued pursuant to Section 22a-
6b-101(a) of the Civil Penalty Regulations may petition
the Commissioner for correction of the civil penalty as-
sessed against him at any time up to two years after
the Commissioner finds that the regulatee has come into
compliance. Such petition shall set forth in writing any
evidence that the cost of compliance has been or will be
less than the Commissioner had initially determined in
assessing the civil penalty, and it shall lie sent by cer-
tified mail or personal service to the Commissioner or
the Director of Air Compliance.
(ii) The Commissioner may, in response to such a
petition or at his own initiative, lower an assessment he
determines was excessive. If the Commissioner takes no
action in response to such a petition, or if his response
is not satisfactory to the regulatee, the regulatee may
obtain a hearing of right once it has come into compli-
ance or at any other time specified in a final order or a
civil penalties final order. Following such a hearing the
Commissioner shall mitigate the civil penalty if and to
the extent that the actual cost of compliance has been
less than he had initially determined.
(iii) Refunds shall be made with interest calculated
from the time of payment and at the cost of capital rate
used to assess the civil penalty.
(3) Reduction of the assessment period for delays
beyond the regulatee's control. The Commissioner shall
exclude from the assessment period such periods of non-
compliance as the regulatee proves have been caused by
strikes or lockouts; riots, wars, or other acts of violence;
floods, hurricanes, or other Acts of God; or other equally
severe, unforeseeable and uncorrectiblc accidents; where
such acts or events were occasioned directly upon the
regulatee or a person under contract to the regulatee.
In addition, the Commissioner shall exclude from the
assessment period such periods of non-compliance as
were occasioned by delays attributable to the Air Com-
pliance Unit of the Department in excess of routine proc-
essing times. Nothing in this section shall prohibit a
regulatee from proposing, or the Department from ac-
cepting, a compliance timetable which excludes from the
assessment period periods of non-compliance caused by
other acts cr events beyond the control of the regulatee,
such as contractors' or suppliers' delays.
(4) Nonimposition during prompt compliance, (i) If,
upon receipt of a warning letter defined in Section 22a-
6b-602(f)(l) and continuously thereafter until (a) the
end of ninety days or such longer period as the Com-
missioner may allow or (b) at the end of the assessment
period, whichever occurs first, the regulatee takes all
steps necessary to bring the unabated activity promptly
and effectively into continuing compliance with appli-
cable emissions standards, the Commissioner shall not im-
pose the civil penalty assessable under section 22a-6b-
602 before (a) the end of the ninety day period or such
longer period as the Commissioner may allow or (b) the
end of the assessment period, whichever occurs first.
(ii) If the warning letter requests preparation of a
compliance plan, the regulatee shall be deemed to have
taken prompt and effective action during the period
between receipt of such a request and submission of the
requested plan if (a) the plan is a detailed written plan
of action including a timetable which, once implemented,
will achieve compliance as promptly and effectively as
possible and if (b) it is submitted no later than forty
days after receipt of such a request. The regulatee shall
also be deemed to have taken prompt and effective action,
-------
45
even though it takes no further steps, during the sub-
sequent period between its submission of such a satis-
factory plan of action and five days after it has been
notified that the Department has completed its review
of the plan and/or has issued a compliance order!
Thereafter — and, if the warning letter does not request
the preparation of a compliance plan, from the time the
regulatee receives the warning letter — the regulatce
must take all steps necessary to achieve continuing com-
pliance as promptly and effectively as possible if it is to
meet the standard of performance required in Section
22a-6b-602(g)(4)(i).
(iii) Sections 22a-6b-602(g)(4)(i) and 22a-6b-602(g)
(4) (ii) shall not apply to persons to whom the Depart-
ment has, within the preceding 5 years, issued a written
order under Section 19-508-12(b)(2) of the Regulations
for the Abatement of Air Pollution; or a warning letter
under Section 22a-6b-602(f)(l) of this regulation; or
actual written notice that that person has been found
in violation of one or more emissions standards; or
actual written notice both of the duty to comply with
the relevant requirements of Sections 19-508-9 and 19-
508-18 to 19-508-22, inclusive, and of the. potential lia-
bility to civil penalties for failure to do so; provided
that such prior order, warning letter, or actual notice
(1) refers to the same scetion(s) of the Department's
Regulations for the Abatement of Air Pollution that are
the subject of the current action and (2) was given by
certified mail or by personal delivery or service.
(5) Notice, (i) The Commissioner shall report every
case in which he lowers a civil penalty pursuant to Sec-
tion 22a-6b-602(e) or in which he mitigates a civil pen-
alty pursuant to Sections 22a-6b-602(g)(l-3), if the
monthly civil penalty without such lowering or mitiga-
tion would be greater than three hundred dollars, in the
Monthly Report of Activities of the Air Compliance Unit.
This report shall state the name and address of the
regulatee, the amount of the reduction, the amount of
the civil penalty still to be assessed, and the grounds for
such lowering or mitigation.
(ii) The Commissioner shall also send written notice
to all persons who have, within the preceedinpf twelve
months, requested copies of this Monthly Report, either
thiough the Monthly Report or otherwise, of any hear-
ings to be held regarding such cases where the amount
of the civil penalty may be an issue at least ten days prior
to the hearing.
Sec. 22a-6b-602(h). Limited inclusion of past failure to
abate in the assessment period
If the Commissioner finds that it is reasonable to infer
that the emissions violation (s) for which a civil penalty
is being assessed are the result of a regulatee's past
failure to make the control expenditures necessary to
bring the similar activities into compliance with appli-
cable emissions standards, and if the regulatee is not
protected from the imposition of civil penalties pursuant
to Section 22a-6b-602(g) (4), the Commissioner may in-
clude the period of such pro-violation failure in the as-
sessment period used to calculate the civil penalty as
prescribed in Section 22a-6b-602(e) subject to the fol-
lowing limitations:
(1) No assessment period shall begin before the date
on which this regulation becomes effective;
(2) No assessment period shall include a pre-detection
period greater than two years.
See. 22a-6b-602(i). Bequest for information by the
commissioner
(1) The Commissioner may require the regulatee to
provide such additional information, including informa-
tion regarding costs, as he deems necessary to effectuate
the purposes of Section 22a-6b-602.
(2) Any person who files any statement, record or
report with the Commissioner containing false or mis-
leading information or other claims will be liable to
criminal prosecution for a Class A misdemeanor punish-
able by imprisonment for a period of up to one year and
a fine of up to one thousand dollars ($1000) for each
violation pursuant to Section 53a-157 of the Connecticut
General Statutes.
(3) Any information disclosing trade secrets and com-
mercial or financial information provided by a regulatee
pursuant to this section will remain confidential if the
regulatee so requests in a letter sent by certified mail or
personal service to the Commissioner or the Director of
Air Compliance, except that such information may be
disclosed to other officers, employees, or authorized rep-
resentatives of the stute concerned with carrying out
these regulations or when relevant in any hearing con-
ducted under the authority of these regulations by the
Department of Environmental Protection or in any judi-
cial proceeding, subject to such safeguards as the hear-
ing officer or presiding judge may impose.
Sec. 22a-6b-602(j). Collection
(1) Payment of the civil penalties assessed under this
section may be required monthly, or at such time or time
intervals as the Commissioner determines will most effec-
tively limit the Department's administrative costs and
further the objectives defined in Section 22a-6b-602(d).
(2) The present value of the total civil penalty as-
sessed, calculated at the time the notice of violation is
issued, shall be held constant regardless of the timing
of its collection.
-------
46
VIOLATING THE TERMS OF AN ORDER
ADMINISTRATIVE REGULATIONS
liegula/ioni and nolicei published herein art
printed exactly us submit led by Ike forwarding
agenciei. These, being official documenti
tubinitted by the retpontiblt agencies, art
consequently not subject to editing by tke
Commijit'ox on Official Legal Publicationi.
DEPAKTMENT OF ENVIBONMKNTAL PEOTBCnOK
Sec. 22a-6b-603(a). Title
This section shall be known and may be cited as "Civil
Penalty Regulations: Violation of the Terms of an Order
to Abate an Emissions Violation."
Sec. 22a-6b-603(b). Definitions
Except for the following terms, the definitions of Sec-
tion 22a-6b-602(b) will apply to these regulations;
(1) "Order assessment period" means the period of
time, expressed in months or portions thereof, that a
person under a final order is behind in conforming to
that order's compliance timetable as measured by the
time that has elapsed between the date of a scheduled
deadline and the date that the abatement, control or com-
pliance measures called for in the scheduled deadline arc
actually completed.
(2) "Scheduled deadline" means the date in a compli-
ance timetable by which an abatement, control, or com-
pliance measure is scheduled to be completed; such dead-
line may be for any of the intermediate steps in the
compliance timetable or for the final step at which com-
pliance is to be completed.
Sec. 22a-6b-603(c). Civil penalties for violating the
terms of an order
Any person subject to a fmnl order of the Commissioner
to abate an emissions violation who is not in compliance
with the terms of that order shall be liable to a civil
penalty assessed by the Commissioner pursuant to Public
Act 73-665, Section 2(a)(3), in accordance with the pro-
cedures prescribed in Section 22a-6b-101 to 22a-6b-102 of
the Civil Penalty Eegulations, inclusive.
Sec. 22a-6b-603(d). Schedule of maximum assessments
(1) Persons responsible for an unabated activity that
is under but not in compliance with the terms of a final
order may be assessed a civil penalty no larger than the
product of (a) the maximum monthly civil penalty the
Commissioner may assess under the schedule of maximum
assessments of Section 22a-6b-602(d) against a person
-------
47
for an unabated activity with the same equipment costs
and operating costs and (h) the number of months and/
or fractions thereof the Commissioner determines arc in
the order assessment period.
(2) The Commissioner shall provide a written explana-
tion of how these maximum assessments are calculated
to any regulatee upon request.
(3) The Commissioner shall impose lesser penalties
pursuant to Section 22a-6b-603(e)(l-2) if he finds the
probable advantages of delay arc smaller than indicated
in this schedule, and he may further lower these penal-
tins pursuant to Sections 22a-6b-603(e)(5) and/or 22a-
6b-G03(g).
(4) In no case shall the assessment exceed $25,000 plus
$1000 for each day that the unabated activity continues
after the regulatee has received a civil penalties final
order.
(5) The Commissioner has determined that the maxi-
mum remedies provided in this schedule will insure im-
mediate and continued compliance and will protect (i)
the public health, safety, and welfare; (ii) the public
trust in the air, water, land and other natural resources
of the state; and (iii) the reasonable use of property.
Sec. 22a-6b-6C3(e). Determination of amount in individ-
ual cases
(1) The Commissioner shall determine the amount of
the monthly civil penalty he may assess for each individ-
ual case of nn unabated activity not conforming to or
complying with the terms of a final order based on the
actual or probable cost of compliance required of that
particular activity. Individual assessments arc calcu-
lated in four broad steps: the gross cash flow of the re-
quired compliance expenditures, chiefly equipment costs
and operating costs, is determined; the net cash flow is
established by taking tax and other savings into account;
this net cash flow is discounted to present value; and the
individual monthly civil penalty is calculated as that
amount which would, if paid monthly, amortize the net
present value of the project.
(2) The Commissioner shall calculate the total civil
penalty by multiplying the monthly civil penalty by the
number of months or fractions thereof in the order
assessment period.
(3) The Commissioner shall provide a written explana-
tion of tliis methodology upon request. He shall also
provide a written summary of the calculations used to
determine a particular assessment, except to the extent
he is required to maintain the confidentiality of certain
information pursuant to Section 22a-6b-603(h), upon
written request by an interested party or the affected
regulatee.
(4) In no ease shall an individual assessment exceed
cither (i) the maximum civil penalty Section 22a-6b-
602(d) would allow per month for an unabated activity
with the same equipment costs and operating costs, or
(ii) for the total civil penalty due during the entire order
assessment period, $25,000 plus $1000 for each day that
the unabated activity continues after the regulatec has
received a civil penalties final order.
(5) In setting a civil penalty in a particular case, the
Commissioner shall consider all factors which he deems
relevant, including but not limited to those listed below;
and he may, as a result of considering and balancing
these factors, lower the civil penalty. The factors he
shall consider include:
(i) The amount of the assessment necessary to insure
immediate and continued compliance;
(ii) The character and degree of impact the unabated
activity has on the public trust in the air, water, and
land and on the natural resources of the state, especially
any rare or unique natural phenomena;
(iii) The character and degree of injury to, or inter-
ference with, public health, safety or welfare which is
caused or threatened to be caused by the unabated ac-
tivity ;
(iv) The conduct of the person, incurring the civil pen-
alty in taking all feasible steps or procedures necessary
or appropriate to comply or to correct the unabated ac-
tivity ;
(v) Any prior violations by such person of statutes,
regulations, orders or permits administered, adopted or
issued by the Commissioner;
(vi) The economic and financial conditions of such
person;
(vii) The character and degree of injury to, or inter-
ference with reasonable use of property which is caused
or threatened to be caused by such unabated activity.
Sec. 22a-6b-603(f). Enforcement proceedings
(1) Hearings, (i) Any person in receipt of a notice of
violation issued pursuant to Section 22a-6b-101(a) of
the Civil Penalty Regulations may apply to the Com-
missioner for a hearing pursuant to Section 22a-6b-
101 (b).
(ii) Such hearing shall be conducted by the Commis-
sioner, a Deputy Commissioner, or a hearing officer from
the Office of Adjudication of the Department Such hear-
ing shall be conducted pursuant to Sections 4-177 to 4-185
of the General Statutes and to the Rules of Practice of
the Department.
(iii) The Department shall have the burden of pro-
ducing evidence to prove the basis for imposing the pen-
alty and the reasonableness of the proposed assessment,
and the risk of non-persuasion by a preponderance of the
evidence shall fall upon the Department.
(iv) If the Commissioner, Deputy Commissioner, or
hearing officer presiding at the hearing determines that
information important to an accurate determination of
all or part of the civil penalty amount is not available
at the time of the hearing but will become available
later, he may defer determining the amount of the civil
penalty due until he establishes that the previously miss-
ing information is available, at which time he shall
promptly hold a hearing pursuant to Section 22a-6b-
603(g)(2) regarding the amount of the civil penalty due.
He may not collect any portion of the civil penalty until
this hearing is held and a civil penalties final order issued.
(2) Appeals. Any person may appeal a civil penalties
final order of the Commissioner issued after a hearing
pursuant to Section 2(f) of Public Act 73-665.
Sec. 22a-6b-603(g). Mitigation
(1) General. The Commissioner may mitigate any
civil penalty upon such terms as he in his discretion
deems proper or necessary upon consideration of the
factors set forth in Sections 2(b) and 2(e) of Public Act
73-665.
(2) Correction of penalties, (i) A regulatee in receipt
of a notice of violation issued pursuant to Section 22a-
6b-101(a) of the Civil Penalty Regulations may petition
the Commissioner for correction of the civil penalty as-
sessed against him at any time up to two years after the
Commissioner finds that the regulatee has come into
compliance. Such petition shall set forth in writing any
evidence that the cost of compliance has been or will be
less than the Commissioner had initially determined in
assessing the civil penalty, and it shall be sent by certi-
fied mail or personal service to the Commissioner or the
Director of Air Compliance.
(ii) The Commissioner may, in response to such a
petition or at his own initiative, lower an assessment he
-------
48
determines was excessive. If the Commissioner takes
no action in response to such a petition, or if his response
is not satisfactory to the rcgulatee, the regulatec may
obtain a hearing of right once it has come into compli-
ance or at any other time specified in a final order or a
civil penalties final order. Following such a hearing the
Commissioner shall mitigate the civil penalty if and to
the extent that the actual cost of compliance has been
less than he had initially determined.
(iii) The Commissioner shall also mitigate the civil
penalty if and to the extent that the regulatee comes
into actual final compliance with less delay than the total
number of days of delay for which assessments have
previously been made while the regulatee was under a
final order.
(iv) Refunds shall be made with interest calculated
from the time of payment and at the cost of capital rate
used to assess the civil penalty.
(3) Reduction of the order assessment period for de-
lays beyond the regulatee's control. The Commissioner
shall exclude from the order assessment period such
periods of non-compliance as the regulatee proves (i)
have been caused by strikes or lockouts; riots, wars, or
other acts of violence; floods, hurricanes, or other Acts
of God; or other equally severe, unforeseeable and un-
correctible accidents; where such acts or events were
occasioned directly upon the regulatec or a person under
contract to the regulatee. In addition, the Commissioner
shall exclude from the order assessment period such
periods of non-compliance as were occasioned by delays
attributable to the Air Compliance Unit of the Depart-
ment in excess of routine processing times. Nothing in
this section shall prohibit a regulatee from proposing, or
the Department from accepting, a compliance timetable
which excludes from the order assessment period periods
of non-compliance caused by other acts or events beyond
the control of the regulatee, such as contractors' or sup-
pliers' delays.
(4) Notice, (i) The Commissioner shall report every
case in which he lowers a civil penalty pursuant to Sec-
tion 22a-6b-603(e) or in which he mitigates a civil pen-
alty pursuant to Section 22a-6b-603(g) (1-3), if the
monthly civil penalty without such lowering or mitiga-
tion would be greater than three hundred dollars, "in the
Monthly Report of Activities of the Air Compliance Unit.
This report shall state the name and address of the reg-
ulatec, the amount of the reduction, the amount of the
civil penalty still to be assessed, and the grounds for
such lowering or mitigation.
(ii) The Commissioner shall also send written notice
to all persons who have, within the preceding twelve
months requested copies of this Monthly Report, cither
through the Monthly Report or otherwise, of any hear-
ings to be held regarding such cases where the amount
of the civil penalty may be an issue at least ten days
prior to the hearing.
Sec. 22a-6b-603(h). Request for information by the
commissioner
(1) The Commissioner may require the rcgulatec to
provide, such additional information, including informa-
tion regarding costs, as he deems necessary Jo effectuate
the purposes of Section 22ii-6b-603.
(2) Any person who files any statement, record or
report with the Commissioner containing false or mis-
leading information or other claims, will be liable to
criminal prosecution for a Class A misdemeanor punish-
able by imprisonment for a period up to one year and
a fine of up to one thousand dollars ($1000) for each
violation pursuant to Section 53a-157 of the General
Statutes.
(3) Any information disclosing trade secrets and com-
mercial or financial information provided by a regulatee
pursuant to this section will remain confidential if the
regulatee so requests in a letter sent by certified mail
or personal service to the Commissioner or the Director
of Air Compliance, except that such information may be
disclosed to other officers, employees, or authorized rep-
resentatives of the state concerned with carrying out
these regulations or when relevant in any hearing con-
ducted under the authority of these regulations by the
Department of Environmental Protection or in any judi-
cial proceeding, subject to such safeguards as the hear-
ing officer or presiding judge may impose.
Sec. 22a-6b-603(i). Collection
(1) Payment of the civil penalties assessed under this
section may be required monthly, or at such time or time
intervals as the Commissioner determines will most effec-
tively limit the Department's administrative costs and
further the objectives defined in Section 22a-Gb-G03(d).
(2) The present value of the total civil penalty as-
sessed, calculated at the time the notice of violation is
issued, shall be held constant regardless of the timing of
its collection.
Be it known that the foregoing regulations are made, adopted
and promulgated by the undersigned pursuant to Sections 22a-6 and
19-508 of the General Statutes and Section 2 of Public Act No.
665 of the 1973 Public Acts, after the publication in the Connecticut
Law Journal on September 24, 1974, of the notice of the proposal
to adopt them, the holding of advertised public hearings on Novem-
ber 12, 13, and 14, 1974, and after consideration of all relevant mat-
ter presented, pertaining to Assessment of Civil Penalties for Viola-
tion of Air Emissions Standards and Orders of the Commissioner.
In Witness Whereof, I ha\e hereunto set my hand and seal this
27th day of November, 1974.
DOUGLAS M. COSTLE
Commissioner
Approved: Attorney General, December 20, 1974; Standing Legis-
lative Regulations Review Committee, December 16, 1974. Beceivcd
and filed: Secretary of the State, January 2, 1975. Effective Jan-
uary 2, 1975.
-------
49
VIOLATING MONITORING REQUIREMENTS
STATE OF CONNECTICUT
RULES AND REGULATIONS
OF
THE DEPARTMENT OF ENVIRONMENTAL PROTECTION
CONCERNING: ASSESSMENT OF CIVIL PENALTIES FOR VIOLATION OF
MONITORING REPORT REQUIREMENTS OF ORDERS AND
PERMITS ISSUED BY THE COMMISSIONER
Section 22a-6b-504(a). Title. This section shall be known and
may be cited as "Civil Penalty Regulations: Violation of Moni-
toring Report Requirements."
Section 22a-6b-504(b). Definitions. The following definitions
apply to this section:
(1) "Commissioner" means the Commissioner of the Depart-
ment of Environmental Protection or his lawfully
designated agent.
(2) "Composite sample" means any sample not identified
as a grab sample and required in a permit or order
that requires monitoring of a discharge.
(3) "Department" means the Department of Environmental
Protection.
(4) "Grab sample" means any sample identified as a grab
sample and required in any permit or order that re-
quires monitoring of a discharge.
(5) "Monitoring report" means any report concerning dis-
charges to the waters of the state by any person or
municipality that a permit or order requires the
person or municipality to file with the Department.
(6) "Municipality" means any metropolitan district, town,
consolidated town and city, consolidated town and
borough, city, borough, village, fire and sewer
district, sewer district and each municipal organ-
ization having authority to levy and collect taxes
or make charges for its authorized function,
(7) "Person" means any individual, partnership, associa-
tion, firm, corporation or other entity, except a
municipality.
(8) "State-approved, fee-basis wastewater laboratory"
means any laboratory licensed or approved for the
-------
50
analysis of wastewaters on a fee basis by the Conn-
ecticut state agency charged with the responsibility
of licensing or approving such laboratories.
Section 22a-6b-504(c). Imposition of Civil Penalties.
(1) When the Commissioner determines that a person or
municipality has failed to submit a monitoring re-
port required by a permit or order issued pursuant
to §§ 25-27, 25-54g, 25-54h, 25-541, 25-54J, 25-54k,
25-541, or 25-54aa of the General Statutes, as
amended, on or before the due date or the end of
the reporting interval specified in the permit or
order or has submitted a monitoring report that
does not include information required by such permit
or order, the Commissioner may assess a civil pen-
alty against such person or municipality pursuant
to §22a-6b(a)(1) and (b) through (i), inclusive, of
the General Statutes, as amended, and §22a-6b-101
of the Civil Penalty Regulations. If the permit
or order calls for the inclusion of flow data in a
monitoring report and the report is submitted with-
out the required flow data, the Commissioner may
treat the case as one in which no report has been
submitted.
(2) Any person or municipality required by such permit
or order to submit monitoring reports shall be liable
for failure to meet any of the monitoring report re-
quirements of such permit or order, notwithstanding
any delegation of responsibility to another person
to monitor or to complete and submit monitoring
reports.
(3) (i) When the Commissioner determines that a
person or municipality is liable for the
imposition of a civil assessment under
§22a-6b-504(c)(1), he shall cause to be
delivered to the person or municipality
by certified mail or personal service a
letter stating that the person or munic-
ipality failed to satisfy the requirement
for the monitoring report due on a spec-
ified date and indicating the nature of
the failure.
(ii) Such a letter shall be sent no later than
90 days after the due date of the report
in question.
(iii) The Commissioner may not impose a civil
assessment under this section on any
person or municipality in regard to any
monitoring report unless (A) the require-
ments of §22a-6b-504(c)(3)(i) have been
fulfilled, or (B) the 90 day period dis-
cussed in §22a-6b-504(c)(3)(ii) has not
-------
51
elapsed, or (C) the Commissioner had sent
the regulatee a §22a-6b-504(c)(3)(i)
warning letter concerning an earlier re-
port with closely similar inadequacies
to those that give rise to the current
liability. For the purpose of this sub-
section, two reports shall involve
"closely similar inadequacies" if neither
is submitted at all or if both fail to
include required data on flow or if both
fail to include required data on one or
more required analyses even if the anal-
yses are different.
(4) The Commissioner may not impose a civil assessment
under this section in regard to any monitoring re-
port if one year or more has elapsed since the due
date of that report.
Section 22a-6b-504(d). Assessment List.
(1) The Commissioner shall prepare a list of civil assess-
ment amounts to be known as the Monitoring Report
Assessment List. This list shall include assessment
amounts based on the costs to persons and/or municipal-
ities required to submit monitoring reports of grab
and composite sampling, delivery for analysis, re-
porting, and analysis for each discharge character-
istic covered- by monitoring programs administered
by the Commissioner. The amounts in the Monitoring
Report Assessment List shall (A) for composite and
grab sampling, delivery for analysis, and reporting,
be based on representative costs to a sample of
persons and/or municipalities required to submit monit-
oring reports, and (B) for each ot the listed anal-
yses, be equal to the typical charge of state-approved
fee-basis water laboratories. The Commissioner shall
revise the relevant parts of the List if he deter-
mines that any or all of the representative costs
or charges on which it is based have changed so much
that such changes cause the amounts in the Monitoring
Report Assessment List to be too low to counter-
balance the economic benefits of non-compliance or
so high in relation to those benefits as to be un-
reasonable.
(2) No item in the Monitoring Report Assessment List may
be included in a civil assessment calculation unless
the list containing the amount has been previously
published in the Connecticut Law Journal.
Section 22a-6b-504(e). Calculation of Assessments. Any civil
assessment levied under this section shall be equal to the sum
of the amounts from the Monitoring Report Assessment List (A) for
-------
52
composite sampling for each required composite sample for which
no analysis is reported and for grab sampling for each required
grab sample for which no analysis is reported, (B) for delivery
for each report not submitted, (C) for analysis for each re-
quired analysis for which no results are reported, and (D) for
reporting for each report not submitted. The Commissioner shall
also consider the factors listed in §22a-6b(c) of the General
Statutes, as amended, and he may, based on this consideration,
lower the assessment to be levied.
Section 22a-6b-504(f). Schedule of Maximum Assessment Amounts.
(1) No amount in a Monitoring Report Assessment List
shall exceed the amount in the corresponding part
of the following schedule of maximum amounts.
MAXIMUM AMOUNT (In dollar!)
MAXIMUM AMOUNT (in dollar*)
(A) Sampling
1. grab aample*
2. composite aample**
(B) Delivery***
tcl Reporting**"
(D) Analyaie***"*
General
2, Biological oxygen demand
4. Total aollda
5. Total dlaaolvad eollda
6. Total auapended aolida
7. Total volatile aolidi
8. Aaewnla (a> X)
9. Xjeldahl nitrogen (aa K)
10. Nitrate (aa N)
11. Total pnoephorue (aa P)
12. Acidity
13. Total organic carbon
14 . Hardneaa
IS. Nitrite (aa H)
16. pa
Trace Metala
17. Aluminuii
IB . Antimony
19. Araenio
30. Barium
21. Beryllium
23. Cedmium
24. Calcium
25. Chromium VI
26. Chromium total
27. Cobalt
28. copper
29. Gold
30, Iron
31. Lead
10
X
X
X
20
X
X
X
X
X
X
X
30
X
x
X
X
X
X
X
X
X
X
X
it
X
X
X
X
X
X
40
X
X
X
X
50
60
X
.
other
160
70
•
32. Magneeium
33. Manganeae
34. Mercury
35. Molybdenum
36. Nickel
3B. Selenium
39. silver
40. Sodium
41 Thallium
42. Tin
43. Titanium
44. Vanadium
45. line
Hut^ente Anion. and Oraanic.
46. Oraanic nitrogen (aa Ml
47. Ortho-phoaphate (ai P)
41. Sulfate (ae-fpi),
• . 4». SuUiae !« »)*
50. Sulflte . -
51. Bromide
B. Chloride
H. Fluoride
. Chlorine-total reaidual
56. Oil and greaae
57. Phenole
SB. Surfactanta
59. Algicidea
60. Benildina
61. Chlorinated organic coapounaa
(except ueatlcldee)
62.' Peaticidea
Phyaical and Biological Parametera
63.. Color
64. Specific conductance
65. Turbidity
66. Fecal Itrectococcl bacteria
67. Colifom bacteria (fecal)
6B. Coliform bacteria
69. Other analyaea
'
10
X
X
20
X
X
X
X
X
X
X
X
30
X
X
X
X
X
X
X
X
X
X
X
X
X
X
40
X
X
X
X
X
X
X
X
X
50
X
X
60
1
other
70
70
•For every grab aample required by the penult or order for «hioh no analyaei are reported on or before the due date or the end of the reporting interval
epacif led in the permit or order.
" For every ocajoeita ample required by the permit or order for nhich no analyeea are reported on or baton the due data or the end of the reporting
Interval apaclfiad in tha permit cr order.
••• For every report rot aubnitted on or before tha due date or tha and of the reporting interval apaciflad In the permit or order.
**** For every report not aubnitted on or before tha due date or tha end of tha reporting interval epacifiad in tha permit or order.
***** For evexy analyaia required by the permit or order for leiich no reaulta are reported.
(2) The Commissioner has determined that the maximum
civil penalties provided in this schedule will in-
sure immediate and continued compliance and will
-------
53
protect (i) the public health, safety, and
welfare; (ii) the public trust in the water,
land and other natural resources of the state;
and (iii) the reasonable use of property.
These maximum amounts are just large enough
to ensure that the economic incentive for non-
compliance with monitoring report requirements
will be eliminated in every case, thereby
ensuring immediate and continued compliance
and as much protection of the three other
listed factors as would higher assessments.
Because the schedule sets maximum amounts,
it allows these three factors to be considered
in setting lower assessments.
Section 22a-6b-504(g). Maximum Assessment. No assessment shall
exceed $1000 per monitoring report not submitted in completed
form on or before the due date or the end of the reporting inter-
val specified in the permit or order.
Section 22a-6b-504(h). Limited Grounds for Non-Imposition of
Assessments.
(1) The Commissioner shall not levy an assessment
under §22a-6b-504 if the person or municipality
assessed proves that the violation of monitoring
report requirements was caused by strikes or
lockouts; riots, wars, or other acts of viol-
ence; floods, hurricanes, or other Acts of God;
or other equally severe, unforeseeable and un-
correctable accidents; where such acts or events
were occasioned directly upon the person or
municipality assessed or another under contract
to that person or municipality.
(2) Nothing in this section shall prohibit a person
or municipality from proposing, or the Department
from accepting, an agreement which protects from
civil assessment liability monitoring report re-
quirement violations caused by other acts or
events not covered by subsection (1) of this
Section such as contractors' or suppliers' delays.
-------
54
BASIC CEP PROCEDURES
ADMINISTRATIVE REGULATIONS
Kegulatiant and notices published herein art
printed exactly in submitted by (At forwarding
agencies. These, being official document!
rubinilltd by Ike retponsibli agencies, art
consequently not subject to editing by the
Commission on Official Legal Publications.
DEPARTMENT OF ENVTBONMEWTAX PROTBCTIOH
AjMument of Civil PenmltlM
Boo. 22a-6b-100. Title
Section 22a-pb-100 to 22»-6b-900, inclusive, (ball be
known and may be cited as "Civil Penalty Regulation*."
See. 22a-6b-101. Enforcement proceeding!
(a) If the commissioner has reason to believe that a
violation has occurred for which a civil penalty has been
eHtablished, he may send to the violator by certified mail,
return receipt requested, or by personal service, a notice
which shall include:
(1) A reference to the section of the statute, regulation
or order involved;
(2) A short and plain statement of the matters asserted
or charged;
(3) A statement of the amount of the civil penalties to
be imposed upon finding after hearing that a violation
Baa occurred or upon a default;
(4) A statement of the party's right to a hearing.
(b) The person to whom the notice is addressed shall
have twenty days from the date of receipt of the notice
in which to deliver to the commissioner written applica-
tion for a hearing. If a hearing is requested then, after
a hearing and upon a finding that a violation has occurred,
the commissioner may issue a final order assessing a
civil penalty under this section which is not greater than
the penalty stated in the notice. If such a hearing is not
so requested, or if such a request is later withdrawn, then
the notice shall, on the first day after the expiration of
such twenty day period or on the'first day after the with-
drawal of such request for hearing, whichever is later,
become a final order of the commissioner and the matters
asserted or charged in the notice shall be deemed admitted
unless modified by consent order, which shall be a final
order. Any civil penalty may be mitigated by the com-
missioner upon such terms as he in his descretion deems
proper or necessary upon consideration of the factors
set forth in section 2 (b) of Public Act 73-665.
(e) Final orders assessing civil penalties not appealed
pursuant to section 2 (f) of Public Act 73-665, as
amended, shall be filed for execution pursuant to section
2 (h) of Public Act 73-665, as amended. Such final orders
do not waive or forsake any other remedies or powers the
department may have with regard to the matter in ques-
tion.
Sec. 22a-6b-102. Conflict and severance
(a) The provisions of this section are in addition to
and in no way derogate from any other enforcement pro-
visions contained in any statute administered by the com-
missioner. The powers, duties and remedies provided in
such other statutes, and the existence of or exercise of any
powers, duties remedies hereunder or thereunder shall
not prevent the commissioner from exercising any other
powers, duties ot remedies provided herein, therein, at
law or in equity.
(b) The invalidity of any word, clause, sentence, sec-
tion, part or provision of these regulations shall not affect
the validity of any other part which can be given effect
without such invalid part or parts.
-------
55
ATTACHMENT C
THE ECONOMICS OF ECONOMIC REMEDIES
-------
56
ATTACHMENT C
THE ECONOMICS OF ECONOMIC REMEDIES
Economic remedies must be just large enough to make compliance
economically attractive: they must take away the entire benefit
of noncompliance — including whatever return the noncomplying
regulatee may be able to earn on the use of the money it has not
spent on pollution control for however long the delay continues.
Such economic assessments will ensure voluntary compliance because
they simultaneously remove the incentive to delay and guarantee
those who do comply a commercially attractive "return" on their
abatement investment — not having to pay the assessment. This
"return" will be sufficiently attractive to make citizens feel
that compliance "pays" because it is calculated at the cost of
capital rate appropriate for each source, i.e. because it is as
large as the returns the source is obtaining on investments it
has recently chosen to make.
An economic assessment is defined to be that payment which
would, if made at the end of each month throughout a specified
assessment period, have the same net economic impact on a company
as the expenditures necessary for compliance with Department
requirements throughout that assessment period. In other words,
the present value of the stream of assessment payments made over
the assessment period would equal the present value of the net
flow of compliance costs over the same period.
Economic assessments are based on a simple economic calculus
that is commonly used by businessmen in evaluating investment
alternatives. This calculus requires four main steps.
(1) Identify the gross cash flow of all expenditures
necessary for the source to comply with the law
during each year of the assessment period and ad-
just for anticipated inflation (deflation). Both
initial and replacement installed capital costs and
operating and maintenance expenses must be considered.
(2) Obtain net cash flow by adjusting the figures in
(1) for the effect of tax deductions and credits,
chiefly for depreciation of capital equipment and
for operating and maintenance expenses.
(3) Discount this net cash flow to a present value
(using a cost of capital rate if the source is
a business).
(4) Calculate the final civil assessment as that amount
which would, if paid monthly over the assessment
period, create a stream of payments whose present
value (using the same discount rate as in (3)) would
equal the present value of the cost of compliance.
-------
57
The rest of this Attachment outlines this methodology in greater
detail. It explains what information is needed, how this infor-
mation must be adjusted to take the impact of taxes into account,
how the calculations are handled by the assessment formula, and
how this formula is derived. It then explains how this formula
was used to establish the schedules of maximum civil assessments
found in the regulations; and, finally, it briefly explains how
the formula is used to calculate individual assessments.
DETERMINING THE COSTS
OP COMPLIANCE
CASH FLOW
The first step in determining how large an economic assess-
ment should be is to identify what costs will be incurred in
each year of the period during which control activities can be
presumed to continue. (How these costs are determined, the most
difficult step in making individual assessments, is explained in
Parts III and V of Volume II.) These costs, and how they will
be handled in the assessment formula, are outlined below briefly:
(1) Initial capital costs for pollution control
equipment/facilities, considered as an ex-
penditure in year zero.
(2) Replacement costs for this abatement equipment.
It is assumed that the equipment will be re-
placed at the end of each depreciation period
within the assessment period and that the cash
outlay is increased (decreased) assuming an
inflation (deflation) rate that is the average
of the rates experienced over the three years
prior to the date of the assessment. (The
assessment period is 20 years for reasons dis-
cussed below; in individual assessment cases
the depreciation period is presumed to be 10
years unless the Commissioner finds otherwise.
The 10 year figure is based on a CEP survey
of the typical life expectancy of commonly
used air pollution control equipment.)
(3) The salvage value of any equipment to the extent
that it is not fully depreciated at the end of the
assessment period. This factor is, of course, a
credit that reduces the net cost. Salvage value
is also adjusted for inflation (deflation).
(4) Annual operating and maintenance costs, i.e. such
costs as are required to ensure the continuous
effective operation of the pollution abatement
equipment over its full depreciable life. These
costs are increased (decreased) each year to
account for inflation (deflation).
-------
58
All of these expenses are affected importantly by the impact
of various tax provisions. The assessment formula must consider
the effects on a source's U. S. income tax of:
(1) An investment tax credit for the purchase of
new abatement equipment.
(2) The ability to deduct from taxable income
each year:
(a) depreciation of the capital cost
of equipment over its useful life
(usually at accelerated rates approved
for such equipment), and
(b) annual operating costs.
In developing assessments from the net cash flow of the costs
of compliance created from these cost estimates and tax considera-
tions, the following assumptions apply:
* Tax savings are calculated as if the violator is in
a tax bracket with a known effective rate (the vari-
able T in the assessment formula) in all years.
* Regulatees either have or will have sufficient taxable
income to take full advantage of any tax credits or
deductions to which they are entitled by virtue of
required control expenditures, or their effective
U. S. income tax- rate (T) will be 0.
* An investment tax credit is in effect, and is obtained
at the time equipment is purchased.
* For purposes of discounting, operating costs are con-
sidered to be paid and corresponding tax savings real-
ized at the beginning of each year. Tax savings from
depreciation are realized at the end of each year.
* If equipment is not fully depreciated at the end of
the assessment period, it can be sold at a salvage
value equal to its economic worth. In that case a
portion of the tax credit must be refunded, pro-rated
according to the proportion of useful life remaining.
(The formula for salvage value is given in the deri-
vations section below.)
* For all purposes other than calculating the deprecia-
tion tax deduction, where realistically accelerated
depreciation in case by case assessments is used,
straight-line depreciation is used.
-------
59
THE ASSESSMENT
FORMULA
Department staff do not have to push their way through the
host of calculations required to set out the costs of compliance
cash flow, adjust it for tax and inflation, discount to present
value, etc. All these calculations are handled automatically by
the assessment formula. All the staff need do is put a tape cas-
sette with the formula into a desk calculator and type in a few
variables — and all this work will be done in seconds.
This section explains the formula and its derivation.
Notation
Input variables:
AP = Assessment period, in years.
CC = Annual cost of capital or discount rate, as a
decimal fraction.
EL = Expected life of equipment, in years.
DL = Depreciable life of equipment, in years.
CCE = Capital cost of equipment for initial equipment,
in dollars.
OP = Operating costs in first year, in dollars.
RI = Annual rate of inflation, as a decimal fraction.
T = Effective marginal U.S. income tax rate, as a deci-
mal fraction. (If there is a state corporate income
tax, T would be the total effective tax rate.
It would be given by the formula: T = TS +
(1-TS)TF, where Ts is the state corporate income
tax rate and Tp the federal one.)
TC = Investment tax credit rate, as a decimal fraction.
Output variable:
CA = Civil assessment per month, in dollars.
Other variables:
PVO = Net present value of operating costs over the
assessment period, net of any tax savings arising
from operating costs, in dollars.
PVIE = Net present value of initial equipment, net of any
tax credits and savings arising from the purchase
and depreciation of this equipment, in dollars.
-------
60
PVE = Net present value of equipment cost over the entire
assessment period (includes the discounted value of
initial and replacement equipment, less the value
of tax credits and deductions and of any salvage
value at the end of the assessment period), in dollars,
A = Amortization factor, giving the amount of the monthly
payment required per dollar of present value to be
amortized, as a decimal.
Formula
The civil assessment is given by formula (1) below, with
the additional variables defined by equations (2) through (5).
(These formulae are derived in the following section.)
CA = (PVO + PVE) A
CC
PVO =
PVIE =
t1 +
\CC -
(1-TC) -
"l (l +
1 -u +
1 -/I +
v1 +
T
(DL) (CC
RI\AP"
CC/
RI \
CC)
:)
CC)°L
CCE
PVE =
(1/12)
A = (1 + CC) - 1
PVIE
(1)
(2)
(3)
(4)
1 -
(5)
(1 + CC)
AP
Derivations
CA:
The total present value of compliance costs is the sum of
PVO and PVE. The economic assessment is the monthly payment
which amortizes this sum over AP years. Hence, the sum is mul-
tiplied by the amortization factor, A.
PVO:
We assume that operating costs are paid in the beginning
of the year. Each year operating costs increase by an infla-
tion factor of (1 + RI), regardless of the age of equipment
then in use. We convert operating costs for year I to a present
value by discounting by the factor I/ (I 4- CC) . Assuming
T is the current maximum rate of .48, there is a tax savings
of 48 percent of operating costs each year, so net operating
costs are .52 of gross operating costs each year.
-------
In general,
AP
PVO =
1 = 1
61
(1 - T) (OP) (1 + RI)
1-1
(1 + CC)1"1
Formula (2) above is an equivalent but explicit formula,
derived from the sum of a geometric series.
PVIE:
The cost of initial equipment is CCE. Deducted from this is
the tax credit (the variable TC) obtained immediately, and tax
savings of the fraction T of allowable depreciation for each year
of depreciable life of the equipment. Using straight-line
depreciation, annual depreciation is CCE/DL- Depreciation in
year I is discounted by the factor I/ (1 + CC)1. Thus
DL
PVIE = CCE - (TC) (CCE)
Formula (3) above is equivalent.
¥±! frn? \ i
£ T (=±£ -
1 = 1 * EL / (1 +
(1 + CC)
PVE:
th
The equipment cost of the K set of replacement equipment
(where K = 0 for initial equipment) is equal to the purchase
price of the initial equipment times a cumulative inflation fac-
tor of
K x EL
(1 + RI)
The savings due to the tax credit on replacement equipment
and to deductions for depreciation are proportional to equip-
ment cost, and are thus also inflated by the same cumulative in-
flation factor. Note that all expenditures and savings on this
piece of replacement equipment occur (EL) x (K) years further
in the future than the corresponding cash flows for the initial
equipment purchase. Provided that the entire useful life of the
K replacement equipment lies within the assessment period, its
contribution to net pr-esent value is
k(EL) (K)
PVIE
If the assessment period AP is an integral multiple of the
equipment life EL, then the useful life of all replacement equip-
ment will be within the assessment period. In that case,
PVE =
(AP/EL) -1
K?0
(EL) (K)
l + CC
(PVIE 1
-------
62
Formula (4) is equivalent but simpler.
If AP is not an integral multiple of EL, then the last piece
of replacement equipment still has a salvage value at the end of
the assessment period. We assume that the salvage value is equal
to the economic value of the equipment, which is the present value
of remaining "services" of this equipment plus the tax savings
from any remaining allowable depreciation. If the equipment was
purchased in year J and has a remaining lifetime of I years (where
I is less than EL) its salvage value is
CCE (1 + RI)
J
(1 - TC) + -4=- (TC)
This salvage value is such that the net present value of
equipment costs over any period does not depend on what combina-
tion of new and used equipment is owned during that period. As
a result, equation (4) for PVE holds regardless of whether AP is
an integral multiple of EL.
A:
The amortization factor is based on the standard formula for a
monthly annuity of unit amount for AP years at an annual interest
rate of CC. Since the formula is for monthly payments, the
numerator is the monthly cost of capital.
DETERMINING
MAXIMUM ASSESSMENTS
For purposes of calculating maximum assessments, we assume
the following values: (Note that CA increases with increases in
CCE, OP, RI, CC, and AP, and decreases with increases in EL, DL,
T and TC.)
* RI = .15 (i.e., 15%). The typical rate of inflation
has increased markedly over the last several decades
and reached levels not far from 15 percent in 1974.
* CC = .20 (i.e., 20%). Over the long run, the cost
of capital has generally exceeded the inflation rate
by about 5 percent to provide an adequate return and
to compensate investors for inflation.
* AP = 20 years. Twenty years is a common time frame
for evaluating many capital projects. Since abate-
ment equipment is auxiliary to production facilities,
-------
63
it or replacements will have to be used for the lifetime
of the underlying plant requiring control if the source
is to remain in compliance with the law. Consequently,
it is reasonable to assume that sources evaluating a
commitment to abatement will think in terms of the
common 20-year period. Moreover, a common assessment
period helps ensure that assessments are comparable
and therefore fair.
* EL = 5 years. Very few significant types of air pollu-
tion control equipment have useful lives less than five
years long.
* PL = 5 years. Federal tax law allows pollution
abatement equipment to be depreciated over a five year
period, or over the expected lifetime of the equip-
ment, whichever is shorter.
* T = .48 (i.e., 48%). Although a zero tax rate is pos-
sible,and assuming a rate lower than the maximum cor-
porate rate could be defended easily and would increase
the assessment maximum significantly, the schedule of
maxima used in Sections 602 and 603 assume the 48 percent
rate because it is the rate likely to apply in all but a
small minority of the cases in which assessments are
likely.
* TC = .07 (i.e., 7%). This is the likely rate of the
U. S. investment tax credit.
* CCE, OP = maximum figure in range. To obtain the maxi-
mum assessment when CCE and OP may assume any value over
a specified range, CCE and OP are set at the upper limits
of their respective ranges.
An Example: Derivation
of a Maximum Assessment
The following computations illustrate the calculation of the
civil assessment for the upper left cell in Schedule A of §602(d)
of the Air Compliance Civil Assessment Regulations. (This cell
is for cases with cost of equipment, CCE = $2500 and annual operat-
ing cost, OP = $1000. Other input variables are set at the values
specified above.
-------
64
20
PVO = .52
PVIE =
PVE
.20
1 + '15
.48
[ f1H
1-llH
1 f1H
L1 - v<
5(.20
IS1
- .20,
^ .15^
h .20^
/ t it
20
5
+ .20)5j
(1607.25)
1000 = 7152.23
2500 = 1607.25
4806.26
A =
CA =
(1 + .20)(1/12)-1 = .015719
" (1+20)20
(7152.23 + 4806.26) .015719 = 187.98
[by (2)]
[by (3)]
[by (4)J
[by (5)]
[by (1)]
In other words, a regulatee required to purchase equipment
worth less than $2500 that will cost less than $1000 a year to
operate cannot be assessed more than $187.98 a month for failing
to control its emissions as required.
SETTING
INDIVIDUAL ASSESSMENTS .
Individual assessments are determined using the same
economics and assessment formula as were used to fix the maximum
assessment schedules. However, the Department will utilize cur-
rent, real values for CCE, OP, EL, DL, RI, T, TC and CC.
* Equipment Costs (CCE) will be based on Department
estimates of the installed equipment costs re-
quired to bring an uncontrolled source into com-
pliance or on evidence of the actual cost.
* Operating and Maintenance Expenses (OP) will be
based on Department estimates of the annual cost
of operating and maintaining this equipment prop-
erly.
* Equipment Life (EL) is 10 years unless the
Commissioner determines otherwise in a correc-
tion hearing. He will use reliable tables from,
e.g., the U. S. EPA and/or IRS in doing so.
* Depreciable Life (DL) is 5 years unless Federal
tax law changes or unless the Commissioner de-
termines that the lifetime of a particular piece
of equipment (and therefore its depreciable life)
is less than five years.
-------
65
* The Rate of Inflation (Deflation) (RI) will be
valued as an average of recent annual rates based
on an appropriate price index.
* The U. S. Income Tax Rate (T) applicable to the
source will be assumed to be 48 percent if the
source is a corporation (with very limited ex-
ceptions) and zero percent if it is a public
body or a nonprofit institution. The rate will
vary if the source is an individual or partner-
ship.
* The Investment Tax Credit (TC) will be the rate
set in the current tax law. (It is now 7 per-
cent. )
* The Cost of Capital (CC) will be set in most
cases as the marginal rate obtaining in the
industry at the time.
Chapters II - V of Volume II, Part III, explain how to
estimate installed capital and annual O&ll costs, to adjust for
inflation, to take different individual tax rates into account,
and to obtain the cost of capital so critical to the formula
for Air Compliance cases. Parallel portions of Volumes III and
IV explain how to take these steps in Water Compliance and
Water Resources cases.
-------
66
ATTACHMENT D
PUBLIC COMMENT ON
ECONOMIC LAW ENFORCEMENT
IN CONNECTICUT
This attachment contains representative excerpts from the
well over 100 pages of written testimony submitted when the
first major set of CEP regulations went to public hearings. A
sampling of the associated press coverage follows. (A complete
set of these comments and press stories is available in the
Department.)
-------
67
EXCERPTS FROM PUBLIC TESTIMONY
ON PROPOSED REGULATIONS
-------
68
Statements
William J. Baumol, Professor of Economics, Princeton and New York
Universities
It is a sensible and economically sound regulatory approach. Its
innovative use of objective economic criteria to determine the size of
the disincentive necessary to induce compliance in each case ensures that
each violator is given an effective incentive while minimizing agency
discretion....
I feel that these proposed regulations are designed with a conserva-
tive professionalism, balance, and economic rationality....
This formula approximates reasonably the economics of the violator's
situation and the assessment level that will be just sufficient (1) to
make compliance become economically attractive, and (2) to remove the
competitive advantage non-compliance often gives violators vis-a-vis law-
abiding companies. It does so in a relatively simple and straightforward
way that will be understood by businessmen and that is administratively
workable....
It will calculate effective but not excessive assessments —
In every case the potential assessment calculated by the formula
would make investing in abatement as attractive as other investments
firms in the same business as the company being regulated have recently
found commercially attractive.
The regulations would not allow the Department to impose assessments
any larger than this economic incentive: in no case can the State charge
a business more than is necessary to make compliance with the law as
attractive as non-compliance....
It is practical —
It is understandable....
It is predictable —
To my knowledge it represents the first program of its kind to
attempt to structure civil assessments on the basis of cost of compliance
with environmental standards
Marvin Chirelstein, Professor of Law, Yale Law School
These regulations...guarantee.../the businessman/ a commercially
attractive return on his abatement investment—in the form of saved
civil assessments....
This financial "return" removes the chief factor that now dis-
courages prompt compliance.
These regulations also ensure that both the law-abiding majority
and the few law-breakers are protected from any possible abuse of dis-
cretion by the Department
The enforcement system these regulations would create would have
one more important if less formal safeguard built in. The Department's
staff would be forced to think of the cost of compliance whenever it
considered taking enforcement action. The staff would, in other words,
-------
69
be required de facto to make an informal "economic impact statement" some-
what analogous in reverse to an environmental impact statement,
I am impressed with the success with which the Department's regula-
tions achieve the dual objectives of effectiveness and fairness. Such
success is unfortunately quite rare. And it is, I believe, increasingly
important in the regulatory area....
The Department of Environmental Protection's proposed civil penalty
regulations breaks important new ground in developing such safeguards.
The objective economic basis for assessing penalties they propose is an
especially important innovation. It could be used in the very large num-
ber of regulatory contexts in which the person subject to regulation must
shoulder some cost in order to comply with the law. It is obviously well
suited to environmental regulation....
Victor F. Tomasso, Vice President, Tomasso Construction Company
It is to the credit of the Department and the State of Connecticut
that the proposed regulations represent a novel and creative alternative
to protracted and costly judicial litigation leading to the eventual
compliance with the State's environmental protection laws. In large
measure, the regulations are directed at the small minority of Connecticut
businesses that have, for one reason or another, failed in their responsi-
bility in maintaining a healthy and clean environment....
It is my belief that the administrative assessment of civil penalties
being developed in these regulations should and will be applied in other
environmental control areas....
Brian Sullivan, Staff Attorney, Connecticut Citizen Action Group
Existing enforcement procedures have required the DEP to rely
initially on the Attorney General or local prosecutors plus the courts
to impose sanctions on these companies. DEP proceedings have dragged on
often for two and one-half years. The new system should decrease
enforcement delay and increase its efficiency by permitting penalties to
be imposed directly by the DEP subject only to a reviewing function of
the courts
The general experience of the administrative process has been to
create the unrealistic threat of large sanctions, but in fact to impose
them so infrequently as to negate the deterrent effect.
The new DEP regulations, on the other hand, should permit sure,
predictable imposition of penalties....
-------
70
Richard B. Stewart, Professor of Law, Harvard Law School
...the proposed Connecticut regulations bring an innovative standard
to environmental law enforcement by removing the economic incentives to
forego the installation of environmental controls....
...I believe that the proposed regulations will have broad remedial
effect in encouraging compliance with air quality standards.
The Department's proposals seem to combine maximum enforcement flexi-
bility with limited administrative discretion....
For the Department, environmental law enforcement is made more prompt
and efficient by avoiding recourse to costly, time-consuming judicial
litigation. For the regulatees, the proposals promise simplicity, certainty,
and equity....
Moreover, these regulations protect those regulatees which have com-
plied with air quality standards from unfair competition; the implementa-
tion of these regulations will assure a "negative return" to any regulatee
who attempts to avoid compliance costs....
D. Daryl Wyckoff, Lecturer in Business Administration, Harvard Business
School
The general approach of identifying the level stream of payments
which are equivalent to the anti-pollution project cash outflows in net
present value terms is both technically justifiable and administratively
feasible. Furthermore, it has the effect of applying constant pressure
on the manager to comply rather than continue to pollute. This avoids
the pitfall of the fine in fact becoming a "license to pollute." If we
assume that the enlightened manager makes investment decisions through
the accepted "capital budgeting" procedure, then he will consistently
select the pollution control alternative....
Andrew J. Gold, Professor of Economics, Director of Urban and Environ-
mental Studies, Trinity College
If you ask an economist what administrative technique to use to get
the law enforced the answer would so closely approximate this bill that
you could hardly distinguish it from what his own works must be. Put
simply, the firm must be placed in a situation where the benefits of
compliance exceed the benefits of noncompliance and there is no certain
way to do that except by appropriate charges....
There is no other way to guarantee compliance. Anyone familiar
with the enforcement of standards in other areas could quickly testify
to the impotence of administrative agencies faced with either inadequate
penalties or remedies or the necessity of overkill
The current DEP bill moves then between impotence and overkill in
a way that maintains legislative control by specifying in advance the
criteria for penalty charges
-------
71
In summary, the method of civil penalties calculated as they are in
this bill seems like the only rational way to secure enforcement of
legislatively defined purposes at a reasonable cost and with due regard
for legislative direction....
Thomas Nelson., Professor of Law, University of Connecticut Law School
The current cumbersome, all-or-nothing enforcement procedures
available to the Department of Environmental Protection now provide an
economic incentive to a firm to attempt to avoid or delay compliance....
Ralph S. Brown, Jr., Professor of Law, Yale Law School
It may be reasonably surmised that the nonconformist is chiefly
influenced by the economic advantages that he gains from his failure
to comply, when his competitors are in fact complying.
This regulation seeks to remove that improper advantage. It uses
the very elements of operating costs and equipment costs that would be
taken into account by a calculating wrongdoer, and turns them against
him....
In a time when the use of administrative penalties is rapidly
expanding, this ingenious proposal which is precisely and measurably
related to the shortcomings that it seeks to remedy may have and
should have wide influence.
To be sure, your Department is concerned with carrying out its
own mission for Connecticut. But it is certainly no discredit that
it has produced a way of doing so that seems far superior to existing
techniques.
-------
72
REPRESENTATIVE PRESS COVERAGE
OF THE
PUBLIC INTRODUCTION OF
CONNECTICUT'S ECONOMIC ENFORCEMENT APPROACH
-------
73
NEW HAVEN REGISTER, FRIDAY, NOVEMBER 15, 1974
Innovative Plan To Fine Air Polluters
air
m,
Some good features are boasted by
the first-in-the-nation method proposed
by State officials for penalizing compa-
nies that^ neglect to stop polluting the
by the Connecticut Depart-
ivironmental Protection
es incentive to both the
e companies to get on with
meeting clean-air standards.
companies now are getting
away with pollution neglect because the
State hesitates to crack down on them.
If present tough penalties-were invoked,
many firms would be forced out of busi-
ness. Right now there are 10,000 pollu-
tion sources registered with the DEP.
With the State reluctant to do itself eco-
nomic damage by losing business and
industry, the harsh penalties are not
aggressively enforced.
The proposed new regulations for
imposing civil penalties might yield re-
sults without crushing companies. In-
stead of the stringent approach, which
too 01 ten is 'unusable, the DEP would
take the financial advantage out of
pollution.
Under the innovative system, the
size of a penalty, to be imposed on a
monthly basis, would be determined by
estimating the cost of acquiring anti-
pollution equipment needed by the firm
and the cost of maintaining it. Then the
State would figure the amount of return
the compnay could count on if it invested
that amount of money instead of putting
it toward anti-pollution devices. That's
what the firm would be charged.
There is an element of fairness to the
plan that makes it worth considering. It
would eliminate the competitive edge
that some firms gain by refusing to in-
vest in anti-pollution equipment. Right
now, many companies that have spent
money to fight air pollution have done so
at a disadvantage if competing firms
fail to comply with standards.
The formula proposed seems to be a
realistic approach that would allow the
State td~take an aggressive anti-pollu-
tion stance without undermining the
State's economy.
-------
74
NORWICH BULLETIN, WEDNESDAY, NOVEMBER 13, 1974
DEP Considers Plan
To Fine Polluters
ByKELLYANTHONY
NORWICH - The State Department
of Environmental Protection (DEP)
will begin to tighten its reign on air
polluters refusing to obey clean air
laws, by reviewing a proposed set of
regulations to fine violators who are
escaping through loopholes and
delaying tactics.
The public hearing for Eastern
Connecticut is slated for tonight in i
Norwich City Hall at 7:30, and is one of
four regional hearings being held
throughout the state this week by DEP.:
Industrial polluters which formerly
gained an economical advantage over
their competitors by failing to comply
with the law will now be sulject to
fines. Under The Enforcement Act of
1973, the General Assemb-y has
authorized DEP to assess fines !»i offset
the savings some industries rer.'ized by
not installing pollution control devices.
When the new regulations are
adopted in their final form, it will speed
up the enforcement process to make the
cost of complying with the law less
expensive than not complying, a
spokesman said.
Under the new regulations, once DEP
had issued a notice of violation, dtlng
both the violation and a proposed
assessment which is 'derived from a
complex formula, the polluter would
have 20 days to comply or appeal.
Any hearing must then be conducted
by the commissioner or deputy com-
missioner personally, or by a hearing
officer from the Office of Adjudication,
a separate DEP board. Upon final
consideration, a decision could include
a reduced assessment or no
assessment. The violator would also
have the right of appeal to Hartford
Superior Court.
Existing state and federal air .
pollution control laws, even entirely
disregarding the Enforcement Act,
subject violators to injunctions, money
penalties up to $180,000 a week, and, in
some cases, imprisonment.
In (contrast, the Enforcement Act
only authorizes assessments which '
would match the savings of non-
compliance, and no proposed total
assessment could exceed $25,000, phis
$1,000 a day once a violator was placed
under a final order. DEP,: however,
would int.erit the initial enforcement
1 responsibility Instead of the Attorney
(General's office. '-
Richard B. Stewart, • assistant
professor of 'law at Harvard, called
Connecticut's regulations "an In-
novative standard to environemntal •
law enforcement by removing the
economic incentives to forego the in-
stallation of environmental controls."
Former DEP head Dan Lufldn also
testified that "these regulations go •
long way to protect environmentally
responsible businesses from
irresponsible competitors and, at the
same time, bring flagrant polluters into
compliance."
Marvin Chirelstein, a law professor
at Yale and an expert in areas of cor-
porate and tax law, referred to the
regulations as a "realistic set of
economic criteria," but noted the
difficulty- of determining.the exact cost
of capital would invite litigation and
suggested other "tightening"
procedures, all of a minor nature.
NEW HAVEN JOURNAL COURIER, WEDNESDAY, NOVEMBER 13, 1974
DEP Wants Polluters fined
Amount Saved By Ignoring Rules
HARTFORD (AP) - The
Connecticut Department of En-
vironmental Protection wants U
fine polluters the same ammnt
of money they are saving by ig-
noring air-emission standards.
The DEP is proptsing regu-
lations that would allow it to
assess civil penalties on com-
panies that avoid complying
with state pollution standards.
The penalty charged each pol-
luter wsuld be the amount the
firm would get if it invested the
m»ney needed to meet the
standards.
Andrew Weissman. an attor-
ney who helped draft the pro- the courts and fashion the pun-
posed regulations, said Tuesday
that Connecticut is the first
state to try to eliminate the
economic advantage of ignoring
pollution standards.
Weissman said at a press
briefing that present penalties
i are ineffective because they
1 are so harsh they are unusable.
He said state and federal fines
now total HM.MO a week and
court orders U halt pollution
simply would force a company
'Out of business. -,
-ishment to fit the circumstance
of each firm found in violation.
Here is how the new regu-
lations would work:
1 A company found in violation
Vould be sent a warning letter
it M days to submit a
table plan for ending the
pollution. If that condition were
not met, the firm would be as-
sessed the penalty for each
. The 1973- General Assembly
- ally would be determined by
•"» «taWnh| it,
figuring the amount of return
the company would get if it in-
vested that money instead of
putting it toward anti-pollution
devices and charging the com-
pany a penalty equal to the in-
terest it could have earned.
Weissman Hid that fornula
would eliminate any advantage
to the firm to-avoid investing in
emmission controls. He said
some firms have had an wfair
advantage by ignoring the law
while their competitors have
voluntarily complied
> He said^ 10,000 pollution
sources are registered with the
^department*
This A.P. story was carried in most state papers.
-------
75
NEW LONDON DAY, TUESDAY, OCTOBER 22, 1974
Pollution penalty proposed
NEW HAVEN - Pro-
posed civil penalties, de-
signed to make it unecono-
mical for businesses and
industry to pollute the air,
were outlined for members
of the Connecticut Bar As-
sociation Monday by offi-
cials from the state Depart-
ment of Environmental
Protection.
The explanation came
during one of several semi-
nars conducted at the bar
association's 99th annual
meeting here.
The proposed penalties,
which include lines of up to
$25,000 per day for failure to
comply with state pollution
control orders, were creat-
ed by the DEP to carry out
• the mantera? of t
vironmental Enforcem
Act passed by the state le-
gislature in 1973.
A public hearing on the
proposed penalties has
been scheduled for No-
vember in Hartford.
The purpose of the act,
Atty. William Drayton, Jr.,
a DEP consultant from
New York said, is to give all
the environmental statutes
on the books now a uniform
procedure for enforcement.
In the past, Drayton said,
the department has been
hampered by the inability
to distinguish between
major and minor infrac-
tions of the law there was
no such uniform procedure.
The procedure tffl also
help the DEP act more
quickly against violations,
Drayton said. • Violators
who delay in installing polu-
tion-control equipment will
be fined severely, he said,
while violators who act
promptly will face no penal-
ties.
In the past, he said, the
situation has been such that
at times it made more
sense for a businessman to
delay in the installation of
equipment than to take ac-
tion right away.
Because there was no uni*.
form procedure, Drayton
said, a violator previously
could put off correction of
the problem without facing
any severe penalty
MANCHESTER HERALD,
WEDNESDAY, NOVEMBER 13, 1974
Citizen Group Backs
Fines for Polluters
HARTFORD (UPI) - The
Connecticut Citizen Action
Group is backing new fines
against polluters by the state
Department of Environmental
Protection. j£&^\
In testimonyjfjrepar* for
delivery before fie DEBfnday,
CCAG attorney «Rwlff5ullivan
backed regulations to al'ow for
better enforcement of existing
laws by the DEP.
Sullivan said the new
regulations would permit the
DEP to impose penalties
directly, instead of going
through the attorney general or
local authorities as it must now
do.
The fines are calculated on
the basis of the cost a business
would have incurred in com-
plying with the air standards in
the first place, Sullivan said.
Thus, the fine for a polluting
factory would be what the
business would have spent if it
had installed antipollution
equipment.
Story carried in many other state papers,
-------
76
HARTFORD TIMES, SATURDAY, NOVEMBER 16, 1974
State Industries Snub
Hearing on Pollution
By DICK ANtHOMY
Staff Reporter
The one group with the most
direct stake in the state's
proposed system of air pollution
fines — Connecticut's industrial
community — was virtually un-
represented at the Hartford
hearing on the proposal.
• The only company that sent a
spokesman to» the Hearing
this week was Northeast
titilil'es.
Meanwhile, environmental
groups, along with some
professors from colleges and un-
iversities in tne state,
dominated the hearing.
Although a few of these
speakers had minor questions
about the proposals, most felt
they are generally sound.
One environmentalist who had
serious reservation about the
proposed rules was Barbara
Bass. She represented the Air
Conservaiion Committee, part
of the Connecticut Lung
Association.
She said that while the propos-
ed rules focus on getting com-
panies to obey air pollution
laws, they don't deal with the
problem of ensuring that poten-
tial polluters register with the
Department of Environmental
Protection (DEP).
"There are many sources
(companies) who are un-
registered, there are many
sources which are not in com-
pliance." she asserted.
Deputy DEP Commissioner
Eckhard't C. Beck responded
that the proposed regulations on
fines aren't meant to cover the
problem of registrations.
mat would require a ditterent
set of regulations, he told her.
The spokesmartfor Northeast
Utilities, Atty. Robert Knicker-
bocker, told the hearing panel
the rules don't deal with the fact
that companies may have vary-
ing reasons for not obeying anti-
-pollution laws.
The rules, however, are
written with the assumption
that polluters violating the law
simply want to have an economic
advantage over competing
firms.
Another speaker, however,
said the focus on the issue of
competitive advantages is cor-
rect
Prof. Ralph S. Brown Jr. of
Yale University Law School
argued that companies who op-
pose " the rules because of
"sincere differences" with the
DEP about air pollution stan-
dards should make their
feelings known before the rules
are adopted.
If they dwi't. he went on, it's
reasonable to assume they are
chiefly influenced by the
economic advantages" to be
gained from failure to comply.
The proposed rules, called
civil penalises, have been
designed'so that polluters will
be fined exactly the amount
they save by not installing anti-
poliution equipment.
The rules also provide for
periods of negotiation, and for
appeals, however Thus firms
would be given ample opportuni-
ty to comply before would have
start paying fines.
HARTFORD TIMES,
SATURDAY,
NOVEMBER 16, 1974
New Britain Builder Backs
Pollution Penalty Proposals
By GERALD J. DEMEUSY
A New'Britain construc-
.tton official said Saturday
civil penalty regulations
propoied by the Department
'of Environmental Protection
(DEP) effectively will
check the pollution of air by
a minority of Connecticut In-
dustry.- • v ;
Victor F. Tomasjo, vice
prMMenfof Angelo Tornas-
ao Inc., cautioned, however,
that the regulations must be
^carefully drafted to avoid
confuiing language that
might leave loopholes for
deliberate polluters.
Deputy DEP Commission-
er Eckardt C. Beck said the
regulations will be sent to
the office of the attorney
general for review after "a
few minor technical revi-
sions' are made." He said
the regulations were en-
dorsed by economists, edu-
cators and environmental-
ist! during a series of public
hearings last week.
Called 'Creative'
Tomasso said his firm fa-
vors the proposed regula-
tions as "a novel and crea-
tive" method of dealing with
industries which are drag-
ging their feet in complying
with requirements of the
Clean Air Act.
The regulations, which
would implement the Con-
necticut Enforcement Act
passed, by the 1873 General
Assembly, empower DEP to
assess fines against firms
which ignore compliance or-
ders. The amount of the fine
would not exceed the cost of
installing pollution abate-
ment devices.
Tomasso predicted the
civil penalty regulations to
deal with air polluters will
establish, a precedent for
controlling other environ-
mental problems in the
same way. That's why, he
said, it's important to make
the regulations as clear and
simple as possible.
He said it would be "iron-
ic" if the language of the
regulations-aimed at ending
th« time consuming and ex-
pensive procedure of hailing
polluters into court-was so
ambiguous and unclear that
businessmen would have to
hire a lawyer to Interpret
the terms.
Beck 'Convinced'
"Testimony presented at
last week's public hearings
has convinced Tne that the
regulations fulfill the
legislature's intent in closing
the iOOphoMWtifonr ctrcm ««•
laws, and at the same time
safeguarding responsible
firms from undue govern-
ment regulation," said Beck.
The regulations provide
for appeal to the courts in
cases where those who art
fined disagree with findings
of the DEP.
Architect of the 1973 legis-
lative act, former state
DEP Commissioner Dan W.
Lufkin, went on record in fa-
vor of the regulations. He
said they establish a system
of fines "that exactly equals
the illegal profits which fla-
grant polluters make by not
complying with the law."
-------
BRIDGEPORT TELEGRAM, WEDNESDAY, NOVEMBER 13, 1974
DEP Plan to Stiffen Air Rules
Praised at City Hall Hearing
A state Department of Environ-i
mental Protection proposal aimed
Lufkin Praises Plan
The proposed regulations were
at eliminating the economic «d- also praised by former EnwMjfe. with the state, 3;750 have been in-
vantages of violating air pollution mental Protection <>»•
control standards drew praise and missioner Dan W. Lufkin, who
only minor criticism at a sparsely was in charge of the DEP in
He said that of the 10,000 poten-
tial pollution sources registered
spected and 1,350 of these were
found to be in violation. All but
287 companies corrected their
attended public hearing in City, 1973, when the regulations were i problems without a DEP order,
Hall last^ight. first conceived. Mr. Lukin, who. he said.
The proposal, in the form of ad-1 resigned to return to his WaH/j Half of the 287 cleared cor-
ministrative regulations, would Street investment f i r m,,, rected their violations according
give the DEP the right to levy -*~1i J - -*•*——* fl—"-u -~ —~ " • •• • •
fines of up to $25,000 initially
plus $1,000 per day for continuing
violators of air standards.
The exact amount of the fines responsible business from ir-
would be equal to the money responsible competitors k and
saved by the recalcitrant com- bring flagrant polluters into
pany by not installing and main- compliance."
taining pollution control equip- The one other dissenting note
ment. at the hearing came from Peter
Under present regulations, vio- Alagna, who heads the Stamford
lators face money penalties of up Air Pollution Control bureau and
delivered a statement through. a,|to DEP timetables, he said, but
spokesman saying the regula-ith<, rest delayed. A total of 21 vio-
tions would "go a long way to lators were responsible for three-
protect e n v ironmentallyjfluarters of the delayed com-
, ^ ... , pjjance yme accumulated since
June of 1972, he said.
Mr. Tundermann, who along
with Deputy Environmental Pro-
tection Commissioner Eckardt C.
Beck conducted the hearing, said
the regulations could go into ef-
fect by January. They first must
* EH, vi .a AUVVJ **««.« V^ j^w.-ip....— m, — •» — r ---- — --- — --- -- -- — --- - — — — — — — „-_ j^V.1 UV tl ttl&Ual/Y i. HOY 111 OV UlUSL
to $180,000 a week or in some I formerly wbrked in Bridgeport's! be approved by the legislature's
cases imprisonment. But in order Air Compliance unit. (Regulation Review committee,
to have the penalties assessed, Mr. Alagna claimed that the however.
the department must go to court, proposed regulations would
According to DEP spokesmen, "short circuit" due-process con-
judges were unwilling to enforce trols by giving the DEP the
the harsh standards and violators right to levy fines without going
were able to avoid complying with to court. He recommended that
the law. :;;the regulations be restricted in
Muriel Lightfoot of the state application to areas where air
n,.»iin
-------
78
THE HARTFORD COURANT, WEDNESDAY, NOVEMBER 13, 1974
Hearing Today
Pollution Fines Supported
By GERALD J. DEMEUSY
Deputy Commissioner
Eckardt C. Beck of the state
Department of Environmen-
tal Protection (DEP) said
Tuesday his office has been
deluged with letters support-
ing fines for polluters who
refuse to obey clean air
laws.
The proposed fining regu-
lations will be aired at a
public hearing at the State
Capitol today at 10 a.m.
Beck said he expects the
regulations to encounter
"some oppositjon" at this
morning's hearing, although
the written statements sub-
mitted so far are over-
whelmingly in favor of
them.
The Connecticut Citizen
Action Group (CCAG) backs
the regulations, but at the
same time called for "more
vigorous enforcement" of
existing laws by the DEP.
"They (the regulations)
become important environ-
mental tools only if strictly
enforced," said CCAG attor-
ney Brian Sullivan.
The proposed regulations
would implement the Envi-
ronmental Enforcement Act
passed by the 1973 legisla-
ture. Under its provisions,
the DEP is authorized to im-
pose penalties against those
who balk at complying with
pollution abatement orders.
In a letter to Beck, Prof.
Marvin Chirelstein of Yale
Law School noted that the
DEP penalties in no inst-
ance will exceed the cost of
complying with abatement
orders. He also noted that
no one would be subject to
penalty unless he was on no-
tice he was in violation. He
said the proposed regula-
tions "achieve the dual
objectives of effectiveness
and fairness."
"The department's pro-
posals seem to combine
maximum enforcement flex-
ibility with limited adminis-
trative discretion," said
Asst. Prof. Richard B. Stew-
art of Harvard Law School.
"I believe it is a sensible
•and economically sound reg-
ulatory approach," com-
mented William J. Baumol,
professor of economics at
Princeton and New York
universities.
NEW HAVEN JOURNAL COURIER, THURSDAY, NOVEMBER 14, 1974
Making Polluters Pay Supported
Staff Reporter
HARTFORD - The state's
first proposed system of fines
for polluters got a generally
favorable response as a hearing
on it began here Wednesday.
The system is embodied in a
set of rules prepared by the De-
partment of Environmental
Protection (DEP)^
The rules are intended to help
the state control industrial air
pollution.
The lone speaker with serious
questions about the proposed
rules was the attorney repre-
senting Northeast Utilities.
The attorney, Robert
Knickerbocker, asserted that
the rules focus too heavily on
the economic benefits polluters
reap by not installing anti-pollu-
tion equipment.
One problem with spotlight-
ing the competitive advantage I
polluter, may have, he went on,
is that the rule* may not apply
to a company like the one he
was representing. "My client
doesn't operate in a competitive
framework."
He also said the law on which
the rules are based puts its
emphasis on the social and
health impacts of pollution.
The proposed rules won
praise from most other speak-
•s. Professor* (ran the Yale
University and University of
Connecticut law schools, and
from Trinity College were
among those supporting the
regulations.
Also supporting the DEP
proposals were representatives
from- the Connecticut Forest
and Park Association and the
Farmington River Water Shed
Association.
-------
79
WATERBURY AMERICAN, THURSDAY, NOVEMBER 14, 1974
Stiff Air Pollution
Fine Plan Favored
The Department of Environ-
mental Protection held a public
hearing in Waterbury Wednes-
day night on proposed regula-
tions for air polluters that
would make it as expensive to
violate the law as it would be to
install anti-pollution equipment.
Proposed DEP^*Jplations
would allow th^agency to as-
sess civil penalties on compa-
nies that avoid compliance with
state pollution standards.
The proposals were favored
by four people and opposed by
one at a public hearing in Ald-
ermanic Chambers.
Two additional speakers,
making a total of s^ven, did not
register for or Against but
merely asked questions about
the proposal.
The hearing, conducted by '
David Tundermann, assistant
commissioner and DEP consult-
ant, William Drayton, was at-
tended by only one Waterbury
firm, Sherwood Medical Indus-
tries.
Uniroyal representatives were
present, but did not speak.
The penalty charged each pol-
luter would be the amount the
firm would get if it invested the
money needed to meet the
standards.
DEP considers present penal-
ities ineffective because they
are so harsh they are unusable.
DEP said state and federal
fines now total $180,000 a week
and court orders to halt pollu-
tion simply would force a com-
pany out of business, something
the DEP and the courts have
been unwilling to do.
The new regulations, author-
ized by the 1973 General Assem-
bly, are designed to eliminate
economic incentive to violate
and to protect those who have
complied from unfair economic
advantage.
The only opponent at Wednes-
day njgbt's hearing was Atty.
Robert H. Hall of Newtown, a
lawyer who represents alleged
violators but who said he was
speaking only for himself.
Hall contended the proposed
regulations enable DEP to im-
pose penalises on a mere claim
of violation without resorting to
a court to determine the validi-
ty of the claim.
Hall also contended that if the
violation is mild or intermittent
and the cost of abating it is
"astronomical," .a penalty
based on the cost of the equip-
ment would not be in proportion
to the violation.
Michael Michalak of Sher-
wood Medical Industries had no
comment for or against the reg-
ulations, but said his company
is having trouble meeting the
standards. He said Sherwood
has contacted 11 different anti-
pbllution equipment firms and
has spent $17,000 on a system
"that wasn't worth a penny."
Michalak wanted to know how
much flexibility the new regula-
tions have for dealing with a
situation similiar to Sherwood's,
adding that DEP inspectors he
has dealt with so far have been
inflexible. He said they have
demanded compliance without
concern for the nature of Sher-
wood's operation or for the
problems the company has en-
countered in trying to achieve
compliance.
Tundermann said as long as a
company is making "a reasona-
ble effort" to comply, it is im-
mune from penalty.
Wilfred Swan of Beacon Falls
also had no comment for or
against the proposed regula-
tions, but wanted to know
whether they provide for publi-
cation of the identity of viola-
tors. He was referred to a DEP
publication which he was told
would be sent to him if he
called DEP offices in Hartford.
Two of the four people in fa-
vor addressed the hearing by.
proxy. Tundermann read a
statement from former DEP
commissioner, Dan W. Lufkin
and James Vickery read a
statement from Prof. William
Baumol of Princeton Universi-
ty.
After reviewing the provisions
of the regulations, Lufkin's
statement concluded, "I think
these regulations go a long way
to protect environmentally re-
sponsible business from irre-
sponsible competitors and, at
the same time, bring flagrant
polluters into compliance. I
urge the adoption of these regu-
lations."
Prof. B a u m o 1's statement
said, in part, the proposed regu-
lations provide "an effective in-
centive while minimizing agen-
cy discretion., .(they) make com-
pliance attractive and remove
the competitive advantage. . .
This is the first program of its
kind. I urge its adoption and
am looking for ward to its im-
plementation."
Also speaking in favor were
William F. MorriD, executive
director of the B^rkshire-Litch-
field Environmental Council,
and Dennis Arnold of the Yale
Legislative Services.
The hearings will resume to-
night at 7:30 in Norwich.
A hearing on the proposed
regulations in Bridgeport Tues-
day night was attended by six
persons. Lufkin's statement
there said the regulations would
eliminate a situation in which
"flagrant violators were able to
drag their feet and the depart-
ment through the courts know-
ing that in the end they would
receive token penalties."
Muriel Lightfoot of Westport,
representing the League of
Women Voters, testified that
the time had come for private
companies to realize that "pol-
lution control should be consid-
ered a cost of doing business."
The Connecticut Citizen Ac-
tion Group called the regula-
tions in a release a "new step
for environmental protection in
Connecticut."
-------
80
THE HARTFORD COURANT, WEDNESDAY, JULY 30, 1975
Hearings Set on Fines
For Wetlands Violators
Public hearings will be
held in September on pro-
posed regulations to let the
state Department of Envi-
ronmental Protection
(DEP) fine persons who
tamper with coastal wet-
lands without first getting a
permit.
Authority to impose fines
would be conferred on DEP
Commissioner Joseph N.
Gill, although violators
would have the right of court
appeal.
Two years ago, the legisla-
ture enacted the so-called
civil penalties act which ena-
bles the DEP to adopt regu-
lations to deal swiftly with
polluters. The proposed reg-
ulations would broaden this
authority to levy fines
against wetlands law viola-
tors.
Gill said he fears contin-
ued encroachment of wet-
lands. Those who fill in low-
lying areas cause "irreversi-
ble" damage to the ecosys-
tem, he said. He estimated
that as many as 14 illegal
fills are made each year.,
The hearings will be Sept.
9 at 7 p.m. at New London
City Hall; Sept. 10 at 7 p.m.
at the New Haven Hall of
Records, and Sept. 11 at 7
p.m. at Cloonan Middle
School in Stamford.
NEW LONDON DAY,
WEDNESDAY,
SEPTEMBER 10, 1975
Filling penalties plan
draws no criticism
NEW LONDON — No ob-
jections were voiced at a
public hearing in City Hall
Tuesday night on proposed
new state regulations pro-
viding for heavy fines
against institutions that fill
in coastal areas without
permits.
The hearing was conduct-
ed by the state Department
of Environmental Protec-
tion (DEPJjjirhich will en-
force the/few regulations.
The omy substantial testi-
mony came from Merritt
Cosgrove, a New London at-
torney and a former DEP
employe who helped draw
up the regulations. Cos-
grove praised the propos-
al.
The new regulations
would add teeth to a 12-
year-old State law that
hibits the filling of any area
seaward of mean high tide
without a state permit.
The procedures now in ef-
fect require the DEP to
take all accused violators to
court before a fine is le-
vied.
DEP spokesmen argue
that court delays of up to
two and a half years are
cumbersome and encour-
age potential violators to
think they can get away
with unpermitted filling.
The new regulations
allow the DEP to levy a fine
when it determines an ille-
gal fill has taken place. The
institution would then have
to take the case to court in
order to appeal the fine.
The fines would range up
to $885 for not seeking a per-
mi» Kttfnro fillfno and UD to
$1,000 a day for refusing to
remove illegal fill.
The fines would apply
only to institutions and not
to individuals. DEP figures
show nearly 90 per cent of
all the illegal filling has tra-
ditionally been done by in-
stitutions.
------- |