United States
Environmental Protection
Agency
Office of Air Quality
Planning and Standards
Washington DC 20460
EPA-340/1-83-018a
August 1982
Stationary Source Compliance Series
Initial Design
Considerations for
A Model State
and Local
Administrative
Fines Program
Volume I
Final Report
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EPA-340/1 -83-018a
Initial Design Considerations
for A Model State and Local
Administrative Fines Program
Volume I
Final Report
by
Lisa A. Baci, J. O'Neill Collins,
Andrew Bagley, Robert J. Kindya
GCA CORPORATION
GCA/TECHNOLOGY DIVISION
Bedford, Massachusetts
Contract No. 68-01-6316
Technical Service Area 3
Task Order No. 25
Prepared for
U S. ENVIRONMENTAL PROTECTION AGENCY
Office of Stationary Source Compliance
Washington, D C 20460
Augus, ,982 - r: , ., _.on Agency
0604
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DISCLAIMER
This Draft Final Report was furnished to the Environmental Protection
Agency by the GCA Corporation, GCA/Technology Division, Bedford, Massachusetts
01730, in fulfillment of Contract No. 68-01-6316, Technical Service Area No.
3, Task Order 25. The opinions, findings, and conclusions expressed are those
of the authors and not necessarily those of the Environmental Protection
Agency or the cooperating agencies. Mention of company or product names is
not to be considered as an endorsement by the Environmental Protection Agency.
U,S. Environmental Protection Agency
11
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CONTENTS
Table* iv
Volume 1
1. Introduction 1
Technical Approach 1
Findings 2
Conclusions and Recommendations 4
2. Model Program Issues 6
Effectiveness 6
Fairness . o 13
Responsiveness to Agency Needs, Goals, and Characteristics . 17
Ease of Implementation and Administration . 23
Summary of Nine Administrative Fines Programs Surveyed. ... 24
3. Model Program Design 27
Penalty Assessment 27
Contested Assessments 32
Penalty Collection/Disposition 35
Summary 36
References 38
Appendices
A. Review of States' Enforcement Laws and Regulations Pertaining
to Administrative Fines 40
B. Telephone Interview Guide 44
C. List of State and Regional Control Agency Officials Contacted . . 47
ill
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TABLES
Number Page
1 Summary of Nine Agencies' Programs and Procedures 25
2 Recommended Components for a Model Administrative Fines
Program 37
iv
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SECTION 1
INTRODUCTION
Until recently, most air pollution control programs concentrated on bringing
sources into initial compliance with Federal and state regulations. In the
case of stationary sources, this effort focused on the development and installation
of pollution control equipment. Now that much of this equipment is either in
place or scheduled to be installed, agencies are turning their attention to the
problems of continuing compliance. This effort is aimed at ensuring that the
design, operation, and maintenance of pollution control equipment are sufficient
to keep sources in compliance with state and local air pollution regulations.
The U.S. Environmental Protection Agency's Stationary Source Compliance
Division (SSCD) has formed a Continuing Compliance Task Group to develop programs
that state and local agencies can use to encourage continuing compliance. An
effective enforcement strategy for ensuring continuing compliance should include
provision for quickly imposed sanctions, appropriate remedies, and a means of
building a record in cases involving recalcitrant sources. EPA believes that
an enforcement strategy which incorporates an administrative fines component
may be well suited to meeting these goals and has decided to pursue development
of a model administrative fines program.
The objective of this study is to develop a list of issues that roust be
addressed by a model administrative fines program, and then to formulate an
initial set of design criteria for such a program. To accomplish these
objectives, the study analyzed the operating experience of nine state and local
agencies that currently employ administrative fines programs as part of their
overall air pollution enforcement effort. The discussion below briefly outlines
the study's technical approach, summarizes its major findings, and provides a
number of specific conclusions and recommendations.
TECHNICAL APPROACH
In order to select specific agencies for detailed study, the enforcement
provisions of the air pollution laws and regulations of all 50 states were
reviewed; this effort was supplemented by contacts with state, federal, and
regional officials to identify agencies with ongoing administrative fines
programs. This initial survey revealed that 12 states and 4 local agencies
posses most of the powers needed to establish an administrative fines program
for air pollution enforcement. An additional six states possess these same
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powers but tailor their programs to recovering the cost savings that violators
achieved by not complying with the law, i.e., they assess "noncompliance"
penalties similar to those specified by Section 120 of the Clean Air Act. Two
states administer both types of programs. Since EPA in this study is primarily
interested in studying agencies that assess small fines (<$1000) as a continuing
compliance incentive, only agencies in the first category were selected for
further study. Appendix A of this volume summarizes the results of this initial
survey.
Nine agencies that have actively relied on administrative fines to enforce
air pollution regulations for several years were selected for further study.
The nine programs examined in this report include those operated by the Puget Sound
Air Pollution Control Agency and the states of Georgia, Indiana, Louisiana,
Mississippi, Nevada, New Jersey, Oregon and Pennsylvania. An informal interview
guide (reproduced in Appendix B) was developed to be used as the basis for a
telephone survey of responsible enforcement officials in those nine agenices.
The telephone interview, which were conducted in December 1981 and January
1982, each lasted approximately 45 minutes to 1 hour. Appendix C lists the
officials contacted for this study. A separate volume contains brief summaries
of each agency's administrative fines program including copies of the enabling
legislation authorizing the agency to impose administrative fines.
FINDINGS
The following findings have been established based on discussions with
agency officials and review of laws, regulations, and literature pertaining to
administrative fines;
1. Eighteen states and at least four local agencies possess most of the
powers needed to establish an administrative fines program. In six
of these states, however, programs are restricted to the assessment
of "noncompliance" penalties.
2. Several of the states that have enabling legislation authorizing
administrative fines do not currently operate an active fines
program. Several other states rely on administrative fines
infrequently but consider them an important part of their overall
enforcement strategies. States in this latter group were analyzed
in this study.
3. Officials from the nine agencies surveyed felt that their programs
were, for the most part, an effective and fair way to enforce air
pollution regulations.
4. Agencies disagreed about the best way to design an effective
administrative fines program. Three agencies tend to use civil
penalties only as a last resort when other enforcement techniques
fail; this approach is characterized by fewer, but larger fines,
little reliance on formal penalty assessment schedules and/or
policies, and highly centralized penalty assessment authority.
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Three other agencies prefer a second approach: they assess
penalties more frequently, rely on formal penalty schedules and/or
policies, and typically exhibit fairly decentralized penalty
assessment authority. The remaining three programs rely on some
combination of these two approaches.
5. Several agencies indicated that a lack of resources to detect
violations and collect penalties impaired the effectiveness of their
programs. A. few agencies also cited political or institutional
constraints to strengthening and extending their programs.
6. Most agencies rely on a common set of procedures to ensure fairness
in their administrative fines programs. In every case, the enabling
legislation authorizing civil penalties indicates—at least in broad
terms—what offenses make a source liable for an administrative
fine. Most agencies provide the source with written notice of the
violation and will schedule an informal conference to discuss the
violation, either routinely or at the source's request. All of the
agencies provide violators with the opportunity for court review of
the penalty decision and most also conduct formal administrative
hearings at some stage of the penalty imposition process. A few
agencies have also adopted formal penalty schedules or policies to
limit administrative discretion in assessing civil penalties.
7. In spite of procedural safeguards, several agencies expressed
concern about the fairness of their administrative fines programs.
Some officials were worried that poor penalty collection procedures
permitted the most recalcitrant sources to escape paying their
fines. Others indicated that the burden of the program may fall
unequally on large and small sources. A few officials were
concerned about inconsistencies between the penalties imposed for
air pollution violations and those assessed for violation of other
environmental regulations.
8. There are at least three important differences among agencies that
should be analyzed and understood before developing a model
administrative fines program: (1) differences in legal and
institutional mechanisms for air pollution enforcement; (2)
differences in enforcement philosophy; and (3) differences in
enforcement case load.
9. Several agencies pointed out that most of the personnel and
capabilities needed to run an administrative fines program—
inspectors, legal and administrative staff, and a tribunal to
resolve disputed assessments—were already in place to implement
other aspects of their air pollution control program. Although no
official could estimate the cost of running the administrative fines
component of their enforcement program, most felt it was small
relative to the costs of the agency's other air pollution control
activities.
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10. Officials pointed out relatively few financial or institutional
constraints to the implementation of their administrative fines
programs. Some officials indicated that financial constraints were
partly responsible for difficulties in detecting and documenting
violations and/or collecting penalties. Two officials indicated
that it might improve program operations in their agencies if agency
officials had greater authority to assess penalties.
CONCLUSIONS AND RECOMMENDATIONS
After talking with agency officials and reviewing the literature on
administrative fines, we have reached the following conclusions about the
design of a model administrative fines program:
1. A model program must contain three major structural components:
(1) procedures for assessing penalties; (2) procedures for handling
contested assessments; and (3) procedures for penalty collection and
disposition.
2. The nine agencies rely on two different basic approaches to penalty
assessment. Each of these approaches is tailored to achieve
different enforcement goals: one is used primarily for deterring
serious violations or recalcitrant sources, while the other is used
to assess fines for routine or minor violations. Although many
continuing compliance violations probably fall in this second
category, the development of a model program that integrates both
approaches, similar to the ones used by Nevada, Pennsylvania, and
Oregon, should be seriously considered. This "two-tiered" program
would offer an alternative to agencies that currently rely on only
one approach, and would assist agencies in developing procedures for
handling both serious and more routine continuing compliance
problems.
3. Many federal agencies that impose fines through an administrative
procedure rely on the courts to provide the only formal hearing if
the violator wishes to dispute the penalty. Agency officials and
legal commentators alike, however, seem to agree that the
opportunity for an administrative, rather than judicial, hearing is
an essential component of an effective administrative fines
program. Of the nine agencies surveyed in this study, only New
Jersey does not provide sources with the opportunity to dispute
fines in an administrative hearing.
4. Most agencies ultimately rely on civil action in district courts to
recover uncollected penalties. Since a number of agencies reported
difficulties in collecting penalties, EPA should explore the
usefulness of other penalty collection techniques (e.g., liens on
violators' property) before recommending any approach for a model
administrative fines program.
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5. A model program should point out the drawbacks of channeling penalty
revenue back into the agency budget. Most officials felt that the
credibility of their fines programs could be jeopardized by such an
arrangements.
The findings and conclusions of this study have a number of inportant
implications for the development of a model administrative fines program. Many
agencies already have well established procedures and preferences for enforcing
their air pollution regulations. A model program will have to take into account
what state and local agencies already have inplace; any recommended improvements
on existing practice should draw on more detailed analysis of agency experience
and performance. The findings from the nine agency survey, while useful, are
largely descriptive. They reflect what an interviewer can learn over the
telephone in 45 minutes to an hour by talking to one knowledgeable official in
each state after reviewing that agency's existing laws and regulations. This
anlaysis of agency experience can highlight key issues and important problems,
but was not intended, and is not sufficient, to provide the basis for final
recommendations for the detailed design of a model fines program.
In order to develop a model administrative fines program, there is, a need
for further analysis of the effectiveness of existing state and local programs,
based on more detailed study of how these programs actually function. It is
recommended that the Continuing Compliance Task Group undertake a limited number
of more detailed case studies of selected agency programs, perhaps four or five
at most, to study some of the key design problems raised in this report.
Criteria that should be considered when selecting programs for further study
include:
0 Basic enabling legislative requirements;
0 Enforcement caseload (number and type of violations handled);
0 Agency organization (centralized, decentralized);
0 Number and dollar amount of fines collected;
0 Agency interest in the study.
The agencies selected should represent each of the different approaches to
organizing an administrative fines program. At least one agency without such a
program should also be included in the study.
The remainder of this volume presents the results of the study. Section 2
focuses on four key issues that should be considered in a model program;
effectiveness, fairness, responsiveness to agency needs and goals, and ease of
implementation and administration. Section 3 outlines the key design features
of a model program and discusses how the nine agencies surveyed handled important
program components. Appendices A, B, and C, described above, are contained in
this volume; a separate volume summarizes the key characteristics of each of
the nine agency programs.
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SECTION 2
MODEL PROGRAM ISSUES
To be considered successful, a model administrative fines program should
be effective, fair, responsive to individual states' needs and goals, and
relatively easy to implement. This section discusses each of these issues,
drawing both on information supplied by state and local officials, and
published material dealing with administrative fines.
EFFECTIVENESS
Proponents claim that an administrative fines program can help regulatory
agencies achieve two important enforcement goals: (1) deter violations, and
(2) build a record against recalcitrant violators. The discussion below
attempts to provide a framework for thinking about this issue, while
summarizing the insights available from state and local experience with
administrative fines programs.
Effectiveness, as formally defined, implies producing a "decided,
decisive, or desired effect." Most agencies agreed that their administrative
fines programs produced the effect they desired: deterrence of air pollution
violations. Several agencies also indicated that the program was an effective
means of building a record against recalcitrant sources. Agencies disagreed,
however, on how to best design an administrative fines program to maximize its
effectiveness. They also cited several obstacles to effectiveness including
lack of resources to detect and document violations and political or
institutional constraints to strengthening and extending the program.
Use of Administrative Fines to Deter Violations
Although the threat of having to pay a penalty may be sufficient to deter
some violators, commentators frequently point to the certainty that the fine
will be imposed as its major advantage over harsher sanctions such as permit
revocations or court injunctions. Violators realize that agencies are often
unwilling to impose these harsh, time-consuming, and expensive sanctions for
relatively minor violations. Administrative fines, on the other hand, can be
tailored to the seriousness of the violation and do not involve the delays or
difficulties inherent in scheduling a court hearing. Agencies thus can react
swiftly and in a manner appropriate to the nature of the violation.
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An article by the Administrative Conference of the United States (pp« 928-929)
summarized some of the major advantages of administratively imposed fines over
those imposed by the courts. While the excerpt cited below focuses on federal
regulatory enforcement, its key points apply to state and local administrative
fines programs as well.
1. Cases which now languish on judicial dockets could be adjudicated
quickly, efficiently and at relatively low cost.
2. Unwise settlements (from the standpoint of the public's interest in
deterring or remedying violations of regulatory laws) would be
avoided by eliminating the inhibitions on agencies created by the
unavailability of (or inappropriateness of taking a case to)
overburdened courts. Concomitantly, the availability of a forum
should temper administrative inclinations towards arbitrariness.
3. Dual and overlapping efforts by an agency and the Department of
Justice would be eliminated.
4. There would no longer be an opportunity for recalcitrant defendants
(who will not settle and cannot easily be brought to trial) to
escape the consequences of their improper acts.
5. An alleged offender would, at his or her option, be provided with
procedural protections and an impartial forum in which to present a
defense. No such forum or protection is available as a practical
(as opposed to theoretical) matter now.
6. Fair settlements should be facilitated since neither the agency nor
the alleged offender would be able to premise obstinancy on the
inability or unwillingness of the other to go to court.
7. Cases which are simply inappropriate (e.g., because of their dollar
magnitude and the expertise involved) would be removed from federal
district courts at a time when there is general agreement that we
have poured more into the courts than they can digest.
8. Substantial evidence review would be available in the courts of
appeals as an ultimate (though presumably seldom used) protection
against abuse.
All of the agencies GCA surveyed indicated that the primary purpose of
their administrative fines program was deterring sources from committing
violations that jeopardize attainment of NAAQS, as well as encouraging
violators to regain compliance as quickly as possible. A few agencies also
indicated that their programs accomplished secondary goals such as
case-building and making sources aware that the agency had regulations that it
intended to enforce. Most agencies feel their programs accomplish these goals
adequately, even admirably. Pennsylvania, for example, indicated that it
would be in "a tough enforcement situation" if it lacked the authority to
impose civil penalties. Louisiana thought its program was effective because
"companies know that the agency will not hesitate to use civil penalties if
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forced to." A Mississippi official described that state's program as "an ace
up our sleeve....that reduces turnaround time on violations from 6 months to
within 15 days."
Several agencies indicated that sources were anxious to avoid the negative
publicity associated with being fined. Two states, Indiana and New Jersey,
mentioned that major sources were particularly concerned because they would
have to report the fine to the Securities and Exchange Commission and were
eager to avoid this type of blemish on the company's reputation. Indiana
provided further evidence that companies fear notoriety more than they fear the
financial pinch of a fine. In that state, large companies have hired outside
attorneys to avoid fines smaller than $1000. A recent report on Puget Sound's
enforcement activities also documents this tendency:2
"The desire to avoid a reputation as a poor corporate citizen seems
to be the most important deterrent effect of the penalty. Fines do not
look well on corporate financial records, and are poor public relations
for the company. Although a few companies appeared to absorb the fines,
most took them more seriously than their economic value might warrant."
New Jersey noted, however, that small sources may be more motivated by the
financial aspects of the penalty since the owner of a small firm "pays the
penalty directly out of his wallet."
Agencies also cited speed, flexibility, and certainty as important advantages
of administrative fines over other enforcement techniques. In a written
response,^ a Mississippi official stated: "We believe our capabilities are far
superior to those capabilities of state and federal agencies who must get before
a court with a matter. The long procedural delays we believe often lead to
settlements which are not in the best interest of the public welfare." Similar
sentiments were echoed by other agencies.
Two states indicated that these advantages are not necessarily confined to
penalties that are assessed automatically. Both Pennsylvania and Louisiana
felt that sources were much more cooperative in negotiating consent agreements
knowing that the state had the authority and willingness to assess civil
penalties if the source refused to cooperate.
Many agencies indicated that flexibility to set penalties appropriate to
the nature of the violation was a key feature of their program. Most of these
agencies were reluctant to adopt formal penalty schedules or policies for fear
they would compromise this flexibility. Many of these advantages were summarized
by an Oregon official who indicated why he felt administrative fines were
superior to judicially-imposed sanctions. He noted that administrative penalties:
1. are easier to assess;
2. require a less stringent burden of proof;
3. are not reviewed by a jury of civilians but rather by knowledgeable
people in the profession;
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4. arc better than criminal sanctions for maintaining control of
continual compliance violations. (Criminal sanctions are costly and
difficult to use because the agency would have to prove the harmful
effects on the environment.);
5. are more flexible, especially for smaller problems; and
6. enable the agency to handle more cases than if they had to pay for
attorney general time.
Use of Administrative Fines for Case-Building
Administrative fines are one way to build a record against sources with a
long history of continuing compliance violations. A record of small fines
issued to a source for minor violations may provide a more convincing and
better documented case that the source is recalcitrant than would a record of
letters and informal conferences designed to bring the source back into
compliance. Several agencies indicated that they use administrative fines for
this purpose as discussed below.
Nevada has perhaps the most formal program for using administrative fines
to build a record against recalcitrant sources. The State Environmental
Commission has promulgated a penalty schedule for "minor" violations of air
pollution regulations. If a source has more than four minor violations within
a 12 month period, any subsequent violations are classified as major and
subject the violator to the possibility of a much stiffer penalty. The State
Environmental Commission also keeps a record of major violations, and calls
sources in for a formal quasi-judicial hearing if they commit more than one
major violation for the same offense within 12 months. Nevada officials feel
this systematic record keeping has improved both the effectiveness and the
fairness of its administrative fines program.
New Jersey also has formal procedures for handling repeat violations. It
has developed a penalty schedule, reproduced in Appendix D, that includes
progressively higher fines for second and subsequent violations. After a
•pecitied number of violations, cases are automatically referred to the
attorney general's office. A spokesman for the New Jersey Department of
Environmental Protection indicated that administrative officials can deviate
from the penalty schedule when "good and sufficient cause exists."
Other agencies that issue many small fines rely on less formal approaches
to case-building. Pennsylvania, which issues small fines for "summary
offenses" and civil penalties only for recalcitrant sources or serious
violations, indicated that a history of small fines bolsters the agency's case
when officials go before the Environmental Hearing Board seeking civil
penalties against a violator. Indiana also indicated that one of the first
steps enforcement officials take when an inspector discovers a violation is
refer to agency records to see if they have fined the source before. Usually,
the agency will be stricter with a source if this is its second or third
violation.
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Agencies such as those in Louisiana, Mississippi, and Georgia, that issue
civil penalties primarily as a last resort when other enforcement techniques
fail, do not issue enough penalties to make their program a useful way of
building a record against recalcitrant sources. These agencies indicate they
rely on other means, such as notices of violation, to keep track of
recalcitrant sources. A Georgia official indicated that his agency keeps a
compliance file containing correspondence and other information for this
purpose.
Approaches to Designing Effective Administrative Fines Programs
Although there is general agreement among the agencies surveyed on the
goals of an administrative fines program as well as some consensus that the
programs actually accomplish these goals, agencies exhibit great diversity in
the way they structure their programs to accomplish these goals. Although it
is impossible to divide the nine agencies into categories, most tend to rely
on one of two fundamental approaches to organizing their administrative fines
programs. These approaches are summarized briefly below and outlined in more
detail in Section 3 which focuses on program organization and structure.
Several agencies, including Georgia, Mississippi, and Louisiana, tend to
use civil penalties only as a last resort when other enforcement techniques
fail. As Section 3 indicates, this approach is characterized by larger fines,
fewer penalties, little reliance on formal penalty assessment schedules and/or
policies, and highly centralized penalty assessment authority. In
Mississippi, for example, the Bureau of Pollution Control issues a letter of
complaint and prepares for an adjudicatory hearing only if the agency is
unable to bring the source into voluntary compliance. The Mississippi
Commission on Natural Resources then holds a hearing and makes findings of
fact and conclusions of law; it sets whatever penalty it feels is appropriate
within the limits established by the state's enabling legislation. The
Department of Natural Resources is not authorized to assess penalties.
Mississippi typically issues two or three penalties a year for air pollution
violations. Unlike Georgia and Louisiana, which often assess fines of more
than $1000, the typical fine in Mississippi ranges from $500 to $1000.
The second approach, which is favored by three agencies, Indiana, New
Jersey, and Puget Sound, has very different characteristics. These agencies
do not view fines as a last resort and thus assess penalties more frequently.
Most have developed formal penalty schedules or policies to improve efficiency
and consistency and reduce administrative discretion. These penalty policies
are particularly crucial because assessment authority tends to be fairly
decentralized. In Puget Sound, for example, the inspectors make initial
decisions about when to assess penalties, although this decision must
ultimately be approved by upper level management.
The remaining three agencies rely on some combination of these two
approaches to organize their administrative fines programs. Two states,
Pennsylvania and Oregon, have multifaceted penalty programs that utilize both
of these approaches. The third state, Nevada, has a hybrid program that
blends the characteristics of the two approaches. Each of these three
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programs is described briefly below. Appendix D of this report summarizes the
key features of all nine agencies' programs.
Pennsylvania has three distinct "administrative" fines programs:
Magistrate-issued penalties for "summary offenses," penalties contained in
consent agreements, and civil penalties issued by the Environmental Hearings
Board. The magistrate-issued penalties are not, strictly-speaking,
"administrative" fines since they are issued by a lower-level judicial
official, a magistrate. These penalties are described here, however, because
they serve much the same functions as the small fines programs of Indiana, New
Jersey, and Puget Sound, and many of their features could be duplicated using
administrative, rather than judicial, imposition. Magistrate citations
involve a nominal fine, between $100 and $1000, and are typically used for
minor violations (open burning, opacity, odor) that are easily corrected.
When an inspector detects a violation, he files immediately with a magistrate
who then issues the fine. Records provided by Pennsylvania officials indicate
that the state issued 28 magistrate citations in 1981 collecting $5500 in
penalties. Only two fines exceeded $500, while most ranged from $100 to $200.
Pennsylvania prefers to use consent orders to handle most violations that
cannot be resolved immediately, including such continuing compliance
violations as poor operating and maintenance procedures. The Bureau of
Pollution Control relies on four different types of penalties: lump-sum
settlements, ongoing penalties, end-date penalties, and performance bonds.
The use of each of these penalties is described in Appendix D. In the first
quarter of 1981, Pennsylvania collected over $200,000 from approximately 30
consent orders or agreements. While most of these penalties were less than
$1000, a few were over $50,000. Pennsylvania also uses "Letter Agreements"
which are similar to consent orders except that they apply to "summary
offenses" (i.e., those that would usually be handled with a magistrate
citation). In the first quarter of 1981 the agency collected over $80,000
from 13 letter agreements, including one for over $67,000.
Finally, Pennsylvania does assess civil penalties. These are usually
reserved for recalcitrant sources or situations when a company refuses to
negotiate a consent agreement. This portion of Pennsylvania's program closely
resembles that of Louisiana, Georgia, and Misssissippi. Penalties are issued
only as a last resort, there are no schedules or policies to limit
administrative discretion in establishing the penalty amount, and assessment
authority is centralized in the State's Environmental Hearings Board. The
Bureau of Air Quality Control can only recommend civil penalties, it cannot
assess them. In 1981, the Environmental Hearings Board assessed three civil
penalties for air pollution violations totaling $265,000. A spokesman for
Pennsylvania's Bureau of Air Quality Control stated that this multifaceted
approach to fining sources for air pollution violations "affords the agency
the kind of coverage they need to handle any type of violation."
Oregon also has two distinct penalty programs: one for "fixed" sources
such as industrial plants and a second for agricultural or "field-burn ng"
violations. According to both state officials and a recent EPA report,^
Oregon prefers to deal with industrial sources by issuing civil penalties only
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when voluntary compliance fails. This portion of its administrative fines
programs thus resembles that of Georgia, Louisiana, and Mississippi. The
agency does issue NOVs, or NOIs (Notices of Intent to Issue Civil Penalties)
for major, chronic, or operating and maintenance problems but allows the
source 5 days to establish contact with the agency and attempt to resolve the
problem. In 1978, 13 major and 6 minor sources received NOIs, but no civil
penalties were issued to industrial sources.^
The second portion of Oregon's program was established to handle
violations of agricultural burning regulations by commercial grass-seed
growers. Although this problem is somewhat unique to Oregon, the program the
state developed exhibits many of the same characteristics as the small fines
programs operated by Indiana, New Jersey, and Puget Sound:
(1) most fines are nominal,
(2) the agency has developed a penalty schedule (which is reproduced in
Appendix D), and
(3) assessment authority is highly decentralized—in many cases, the
penalty is assessed immediately, similar to the way a parking ticket
might be issued.
As indicated above, Oregon officials are fairly pleased with the effectiveness
of their civil penalties programs and cited many advantages of administrative
rather than judicial imposition of fines.
Nevada has a hybrid program that blends the characteristics of the two
approaches outlined above. The state issues smaller fines for minor
violations and has adopted a penalty schedule to limit administrative
discretion in assessing these fines. Fines for major violations are largely
left to the discretion of the Environmental Commission. At some point, a
source with a history of minor violations is treated as if it had committed a
major violation. It appears that penalty assessment authority is highly
centralized for both major and minor violations, and a representative of the
State Environmental Commission indicated that in all cases the agency prefers
to try voluntary or negotiated compliance before resorting to administrative
f i ne s.
Obstacles to Effective Administrative Fines Programs
The officials surveyed cited three problems that do or could undermine
the effectiveness of their administrative fines programs:
(1) inadequate inspection and detection capability,
(2) poor penalty collection procedures, and
(3) lack of the necessary statutory authority or political backing to
strengthen or extend the program.
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To put this information in perspective, however, it should be noted again that
most agencies were enthusiastic about the effectiveness of their
administrative fines programs. Officials were able to point to few drawbacks
or disadvantages and most were unable to suggest aspects of the program that
needed improvement.
The most frequently cited obstacle to effectiveness was difficulty in
adequately documenting air pollution violations. Although most agencies
stressed that Administrative tribunals require far less evidence than a court
before assessing a penalty, several officials still indicated that providing
adequate documentation that a violation exists is one of the few major
problems in assessing administrative fines. Mississippi, for example, noted
that it assessed more penalties for water violations, in part because air
pollution violations are more difficult to prove. Before the Mississippi
Commission on Natural Resources will assess a fine, the Bureau of Pollution
Control must demonstrate "beyond a reasonable doubt" that a violation
occurred. Several other agencies, typically those that routinely assess many
small fines, were more concerned about the problems of insufficient resources
to detect violations and inadequately trained inspection staff. These
officials noted that once a violation was properly documented, the procedures
they had established to assess penalties worked smoothly.
Several agencies also indicated that poor penalty collection procedures
sometimes jeopardize the credibility of their fines programs. This problem,
which is discussed in more detail in the subsection on fairness, is only an
issue for agencies that assess a large number of fines. Agencies that issue
relatively few fines—5 to 10 annually—did not report any difficulties in
collecting the penalties assessed.
Finally, a few officials suggested that the people responsible for
establishing enforcement policy are sometimes willing to sacrifice a stronger
administrative fines program in favor of other state goals such as maintaining
a reputation as a good place to do business. One official felt that the
environmental hearing board discouraged the agency from pursuing penalty cases
against large, politically sensitive companies until all other avenues had
been exhausted; this same treatment was not offered to smaller sources,
however. Two other officials felt that the same types of considerations would
make it difficult, if not impossible, to strengthen and extend their programs.
FAIRNESS
In the past, legal scholars have expressed concern about whether
administrative fines programs adequately protect accused violators from
arbitrary and capricious administrative decisions. This concern prompted the
American Bar Association to outline the following set of "fair procedural
safeguards" for federal imposition of civil money penalties:* (pp. 929-930}
14
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1. a clear statutory specification of the offense subject to the money
penalty sanction;
2. provision for adequate and fair procedures, including notice to the
accused and opportunity to answer prior to the imposition of the
penalty; and
3. other safeguards to avoid an agency prejudgment of guilt and the
imposition of double penalties for the same offense and to afford
opportunity for a hearing.
The discussion below examines the procedural safeguards developed by the nine
state and local agencies reviewed in this study.
Moat of the nine agencies reviewed in this study rely on a common set of
procedures to ensure fairness in their administrative fines programs. In
every case, the enabling legislation authorizing civil penalties indicates—at
least in broad terms—what offenses make a source liable for an administrative
fine. Most agencies provide the source with written notice of the violation
and will schedule an informal conference to discuss the violation either
routinely or at the source's request. All of the agencies provide sources
with the opportunity for court review of the penalty decision and most also
conduct formal administrative hearings at some stage of the penalty imposition
process. A few agencies have also developed formal penalty schedules or
policies to limit administrative discretion in assessing civil penalties.
In spite of these safeguards, several agencies expressed some concern
about the fairness of their administrative fines program. Some officials were
worried that poor penalty collection procedures permitted the most
recalcitrant sources to escape paying their fines. Others indicated that the
burden of the program may fall unequally on large and small sources. A few
officials were concerned about inconsistencies between the penalties imposed
for air pollution violations and those assessed for violations of other
environmental regulations. These problems are also discussed below.
Techniques Agencies Rely on to Ensure Fairness
As indicated, all nine agencies rely on similar procedures to ensure that
their administrative fines programs are fair. The most basic of these
procedures—and one recommended by the American Bar Association—is clear
statutory language indicating what offenses are subject to administrative
Lines. All nine agencies have such language in the enabling legislation that
authorizes their administrative fines programs. The following example taken
from Georgia's legislation5 is typical of the relatively simple language
most of the nine statutes contain:
"1. Civil Penalties: Any person violating any provision of the Act or
rules or regulations hereunder or any permit condition or limitation
pursuant to this Act, or failing or refusing to comply with any
final order of the Director issued as provided herein, shall be
liable for civil penalty of not more than $25,000 per day."
15
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Two states, Oregon and Nevada, have slightly more detailed legislation
that describes varying penalties or penalty assessment procedures for
different types of offenses. In addition, New Jersey, Nevada, and Oregon have
adopted rules or regulations indicating the penalty amount to be assessed for
specific types of violations.
Most of the nine agencies prefer to negotiate with the alleged violator
prior to imposing an administrative fine. These conferences help the source
understand the agency's decision and provide an opportunity for both parties
to suggest reasonable solutions to the problem. Louisiana and Mississippi
(and to some extent Oregon) will usually forego civil penalties if the source
voluntarily eliminates the violation or agrees to a compliance order. Several
other states, including Georgia and Indiana (and, except for "summary
offenses," Pennsylvania) also prefer to rely on compliance agreements but
often negotiate a penalty into the agreement. Nevada will hold an informal
conference prior to assessing a penalty for a first violation, but
automatically schedules a hearing before the Environmental Commission after
the second violation for the same offense within 12 months.
A few agencies, typically those that issue a large number of fines for
relatively minor offenses, usually do not hold informal conferences prior to
assessing a fine. New Jersey, for example, issues administrative orders
explaining the nature of the violation. If the violation is not corrected
during the time period specified in the order, the agency issues a Notice of
Prosecution (NOP) which contains a penalty and offer of penalty settlement.
Although the source may request a hearing on the administrative order, it has
no recourse but to accept the state's offer of penalty settlement or go to
court. Oregon, which routinely issues small penalties for field-burning
allows sources to respond to penalty assessments with a written statement
contesting the penalty which is then presented to a hearing officer. If the
source disagrees with the hearing officer's findings it can appeal to the
Environmental Quality Commission.
Most agencies do provide the alleged violator with the opportunity for a
tormal administrative hearing at some stage of the penalty imposition
process. These hearings, which are usually quasi-judicial in nature, allow
both parties to present evidence and call and cross-examine witnesses. The
hearing officer, commission, or board then makes findings of fact and
conclusions of law based on this evidence. In some cases, a state
administrative procedures act governs the conduct of these hearings; in
others, the air pollution control law specifies how the agency will conduct
hearings on civil penalties and/or other enforcement actions.
The agencies that prefer to negotiate with sources prior to imposing a
fine (Georgia, Indiana, Louisiana, Mississippi, and to some extent, Oregon and
Pennsylvania) usually hold formal quasi-judicial hearings only if these
negotiations fail. In some of these states the agency requests a hearing when
negotiations fail, and the hearing board usually imposes the fine, if any. In
others, the agency or commission assesses a fine and the source may then
request a hearing to appeal the assessment.
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The remaining three agencies, in Nev.ida, Mew Jersey, and Puget Sound,
each rely on different procedures for scheduling formal administrative
hearings. Nevada automatically holds an adjudlcatory hearing before the State
Environmental Commission if the source has two violations for the same offense
within 12 months; when this is not the case the Commission may choose to
schedule a hearing, but does not have to unless the source requests one. As
indicated above, New Jersey does not allow sources the opportunity for a
formal administrative hearing after the state sends out a Notice of
Prosecution containing an offer of penalty settlement. However, sources may
request a hearing on the original administrative order that specifies the
violation. Puget Sound rarely holds informal negotiations on penalty
assessments, but state law allows the source to request either a formal or
informal hearing on the penalty before the State Pollution Control Hearing
Board. According to a recent study^ about 20 percent of the penalties that
Puget Sound levies are appealed to this Board.
All nine administrative fines programs rely on court review of penalty
assessments as an ultimate safeguard against abuse of administrative
discretion. Most agencies indicated that sources very rarely avail themselves
of che opportunity to appeal the hearing officer's final decision to the
courts. Even in New Jersey, where sources do not have the opportunity to
contest the penalty assessment in an administrative hearing, only about
'j percent of the penalty cases ultimately go to trial. ^
Recent articles on civil penalties*-1" also stress the need for penalty
assessment schedules or policies to guide agency officials in deciding when to
assess a fine and how large the fine should be. Over half of the agencies
reviewed rely primarily on the penalty ceilings specified in the enabling
legislation, and then follow informal policies to limit administrative
discretion in assessing fines. In a few cases, the enabling legislation also
specifies factors that the agency or hearing board should consider in setting
the fine, such as the seriousness of the violation and the good faith of the
source in eliminating the violation. Only New Jersey, Nevada, and Oregon have
formally adopted rules or regulations to guide officials in establishing the
appropriate fine for specific offenses, while Indiana has developed internal
policy guidance to assist officials in assessing penalties for three of the
most common violations: open burning, construction without a permit, and
operating without a permit. One state, Pennsylvania, is considering
establishing a more formal policy to guide officials in assessing penalties.
Section 3 describes penalty assessment procedures in more detail.
Problems in Achieving Fairness
Most of the agencies surveyed felt that their administrative fines
programs were both effective and fair. A few agency officials, when asked to
(inscribe drawbacks or disadvantages of their programs, mentioned the problems
discussed below. Most of these officials felt these problems were either
minor, or had plagued the program in the past but were now under control.
17
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One official, representing an agency that assesses many small fines,
noted that difficulties in collecting penalties may create the impression
among some violators that fines can be safely ignored. Although he felt that
this problem was not as serious as some critics claimed, he was concerned
about the unfairness that results: companies that violate the law with
impunity may escape paying penalties while more conscientious companies pay
their fines promptly. Nevada indicated that it had experienced similar
problems in assessing and collecting penalties for recalcitrant sources until
it improved its recordkeeping and established a policy of holding automatic
hearings whenever a source is charged with two violations for the same offense
within 12 months. According to Nevada officials, the uneven penalty
assessment and collection procedures had "created problems with the
credibility of the enforcement program and resulted in lots of bad feelings."
Two agency officials felt that their programs sometimes resulted in large
and small sources being treated unequally. One official felt that small
sources could escape paying their fines more easily because the agency, which
lacked the resources to follow up on all penalty assessments, concentrated its
efforts on the larger sources. An official from another agency, however, felt
that small sources often end up paying more than their fair share of fines
because they are less likely to hire an attorney and contest the penalty.
Both these officials represent agencies that tend to assess many small
( $1000) fines.
Finally, a few officials were concerned about inconsistencies in the way
fines are assessed for air, water, and hazardous waste violations. Agencies
that have separate enforcement programs for each type of pollutant worry about
the inequities that sometimes result from this arrangement. According to a
Pennsylvania official, for example, one advantage of adopting formal penalty
assessment policies is to promote more uniformity in the way the state
assesses penalties for air and water violations. Agencies that rely on a
single administrative fines program to enforce all types of environmental
regulations are also concerned about inconsistencies, however; Mississippi,
for example, must prove that a violation existed "beyond a reasonable doubt"
before assessing a penalty. According to one official, one reason the state
assesses more penalties for water pollution violations is that water
violations are easier to prove than air pollution violations.
RESPONSIVENESS TO AGENCY NEEDS, GOALS, AND CHARACTERISTICS
As Section 1 indicated, the nine agencies reviewed in this report were
selected for detailed study because they possess a common set of
characteristics. Upon further examination, however, the most striking
characteristic of these nine administrative fines programs is their
diversity. This diversity must be analyzed and understood before it is
possible to design a model program that agencies will find attractive.
There are at least three types of important differences among agencies
that should be considered in the development of a model administrative fines
program:
18
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(1) differences in legal and institutional mechanisms for air pollution
enforcement,
(2) differences in enforcement philosophy, and
(3) differences in enforcement caseload.
Ait-hough the discussion below focuses on agencies that currently have an
administrative fines program, the same issues are also relevant in evaluating
whether a model program would appeal to agencies that do not currently use
administrative fines.
Differences in Legal and Institutional Characteristics
Two key legal/institutional factors shape agencies' administrative fines
programs: the enabling legislation that authorizes the agency to assess
fines, and the existing organizational structure for carrying out air
pollution regulation and enforcement. These important influences on agency
programs are often the most visible response to the more fundamental
differences in enforcement philosophy and caseload discussed later.
Enabling legislation provides the basic ground rules for any
administrative fines program: it authorizes the environmental agency or
commission to assess fines for air pollution violations and spells out minimum
requirements that the program must satisfy. The enabling legislation for the
aiue programs reviewed in this report varies greatly: some statutes do little
more than convey the essential authority in one or two paragraphs, while
others spell out very detailed conditions for program operation. The examples
below illustrate the different approaches states have used in developing
legislation for administrative fines programs and also indicate the options
available to the designer of a model program.
As the following example from Indiana's air pollution control statute
indicates, some states have very brief enabling legislation that does little
more than convey the authority to assess civil penalties:'
"Civil Penalties; (a) Any person who violates any provision of this
article, or any regulation or standard adopted pursuant to this article,
or who violates any determination or order of the board or any agency
made pursuant to this article, shall be liable to a penalty not to exceed
$25,000 per day of any violation which may be recovered in a civil action
commenced in any court of competent jurisdiction by the board or any
agency..."
This simplicity can be somewhat deceiving since other portions of the law
guvtirning orders and hearings also influence the assessment of civil
i-'-'iialtiea. Nevertheless, this enabling legislation allows administrative
officials great latitude in establishing many of the key features of a civil
penalties program.
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Louisiana's enabling legislation,8 reproduced below, is more typical of
that reviewed in this study. It limits the penalty that can be assessed,
indicates who has the authority to assess penalties, provides safeguards for
alleged violators, and spells out factors to be considered in determining the
penalty amount.
"(1) Except as otherwise provided by law, any person to whom a compliance
order or a cease and desist order is issued pursuant to R.S. 30:1073(C),
who fails to take corrective action within the time specified in said
order, may be liable for a civil penalty, to be assessed by the
commission, or assistant secretary, or court, of not more than $10,000
for each day of continued noncompliance and the commission, in order to
enforce the provisions of this Chapter, may suspend or revoke any permit,
compliance order, license, or variance which had been issued to said
person.
(2) No penalty shall be assessed until the person charged shall have been
given notice and an opportunity for a hearing on such charge. In
determining whether or not a civil penalty is to be assessed and in
determining the amount of the penalty, or the amount agreed upon on
compromise, the gravity of the violation and the demonstrated good raith
of the person charged in attempting to achieve rapid compliance after
notification of a violation, shall be considered..."
Although Oregon's legislation is more detailed than most states, it also
illustrates two characteristics found in much simpler legislation:
(1) incorporation of other state laws—such as Administrative Procedures
Acts—by reference, and (2) language specifying how the agency should dispose
of any penalties collected. The excerpt below does not include a lengthy
section indicating which violations are subject to civil penalties or the
rules and regulations promulgated in response to the law.'
"468.130 Schedule of civil penalties; factors to be considered in
imposing civil penalties. (1) The commission shall adopt by rule a
schedule or schedules establishing the amount of civil penalty that may
be imposed for a particular violation. Except as provided in subsection
(3) of ORS 468.140, no civil penalty shall exceed $500 per day. Where
the classification involves air pollution, the commission shall consult
with the regional air quality control authorities before adopting any
classification or schedule.
(2) In imposing a penalty pursuant to the schedule or schedules
authorized by this section, the commission and regional air quality
control authorities shall consider the following factors:
(a) The past history of the person incurring a penalty in taking all
feasible steps or procedures necessary or appropriate to correct any
violation.
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(b) Any prior violations of statutes, rulas, orders and permits
pertaining to water or air pollution or air contamination or solid waste
disposal.
(c) The economic and financial conditions of the person incurring a
penalty.
(3) The penalty imposed under this section may be remitted or mitigated
upon such terms and conditions as the commission or regional authority
considers proper and consistent with the public health and safety.
(4) The commission may by rule delegate to the department, upon such
conditions as deemed necessary, all or part of the authority of the
commission provided in subsection (3) of this section to remit or
mitigate civil penalties.
468.135 Procedures to collect civil penalties. (1) Subject to the
advance notice provisions of ORS 468.125, any civil penalty imposed under
ORS 468.140 shall become due and payable when the person incurring the
penalty receives a notice in writing from the director of the department,
or from the director of a regional air quality control authority, if the
violation occurs within its territory. The notice referred to in this
section shall be sent by registered or certified mail and shall include:
(a) A reference to the particular sections of the statute, rule,
standard, order of permit involved;
(b) A short and plain statement of the matters asserted or charged;
(c) A statement of the amount of the penalty or penalties imposed;
(d) A statement of the party's right to request a hearing.
(2) The person to whom the notice is addressed shall have 20 days from
the date of mailing of the notice in which to make written application
for a hearing before the commission or before the board of directors of a
regional air quality control authority.
(3) All hearings shall be conducted pursuant to the applicable provisions
of ORS 183.310 to 183.500.
(4) Unless the amount of the penalty is paid within 10 days after the
order becomes final, the order shall constitute a judgment and may be
filed in accordance with the provisions of ORS 18.320 to 18.370.
Execution may be issued upon the order in the same manner as execution
upon a judgment of a court of record.
(5) All penalties recovered under ORS 468.140 shall be paid into the
State Treasury and credited to the General Fund, or in the event the
penalty is recovered by a regional air quality control authority, it
shall be paid into the county treasury of the county in which the
violation occurred."
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Two key organizational variables also influence the design of the nine
agencies' administrative fines programs. Agencies with separate enforcement
programs for air, water, and solid waste pollution often develop an
administrative fines program specifically tailored to the unique
characteristics of air pollution violations. Agencies that have consolidated
environmental enforcement activites seem to prefer more flexible
administrative fines programs that are suitable for a variety of environmental
violations. Existing institutional arrangements for handling environmental
disputes—hearing boards, commissions, etc.—also shape the design of
agencies' administrative fines programs. Some agencies can rely on an
elaborate and well-established structure to resolve contested penalty
assessments while other agencies must use less formal existing procedures or
develop new arrangements specifically for their administrative fines program.
States that prefer a more flexible administrative fines program may be
reluctant to adopt a model program tailored specifically to the needs of air
pollution enforcement. Although it should be possible to develop a model
program that will be suitable for other types of pollutants as well, officials
mentioned several factors that may make this more difficult. Louisiana
recently raised the minimum fine from $100 to $2500. The official contacted
believed that the reason for this change was to ensure consistency with RCRA
requirements. A few agencies with combined programs also indicated that air
pollution violations are harder to prove or are not perceived as serious or
threatening to public health and therefore receive less attention in combined
programs that focus on the most blatant or serious violations. The two-tiered
approach outlined later, in Section 3, may help address this problem by
providing streamlined and somewhat less demanding procedures for minor
violations. As the discussion below indicates, however, some states seem
philosophically opposed to the use of small fines.
Agencies appear to vary greatly in the extent to which they rely on a
formal hearing board to handle contested assessments. New Jersey, for
example, rarely, if ever, holds hearings on disputed assessments, relying
instead on courts to provide a forum for violators who wish to contest their
penalties. Nevada, on the other hand, insists on scheduling a formal
quasi-judicial hearing whenever a violator has more than one violation for the
same offense within 12 months. The discussion here and later in Section 3
points to the need for an administrative hearing at some point in the penalty
assessment process. A model program should recognize that some agencies can
draw on already established procedures in designing their programs while
others have to develop a new set of procedures specifically for their
administrative fines program. Section 3 discusses the advantages and
disadvantages of many of the common approaches of holding hearings for
contested assessments.
Differences in Enforcement Philosophy
The nine agencies surveyed have very different philosophies about the
role administrative fines ought to play in enforcing air pollution
regulations. As the discussion on effectiveness indicates, many agencies
prefer to use negotiations and compliance orders as their principal
22
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enforcement technique; these agencies usually feel that the primary role of
administrative fines is to reinforce or strengthen their bargaining position,
hence they only assess fines as a last resort when negotiations fail. Other
agencies feel that assessing small fines for many or most violations is the
most effective way to discourage sources from violating air pollution
regulations.
Unlike Pennsylvania, which has both a small fines program for minor
violations and a civil penalties program that focuses on recalcitrant sources,
many agencies that prefer to use administrative fines primarily as a last
resort are philosophically opposed to "parking ticket" type fines. An
official from Louisiana, for example, indicated that the State Environmental
Commission, which assesses most penalties, is "just not excited about little
bits of money." To back up this contention, he pointed out that in 1979,
Louisiana raised the minimum penalty from $100 to $2500; the lowest fine he
remembers for air pollution violations was $7500. This official also felt
that allowing inspectors to hand out "traffic ticket" type fines might
compromise their credibility with sources by detracting from their primary
function of "writing neutral, factual reports about violations."
Other agencies echoed these sentiments as well as expressing strong
preferences for negotiated settlements rather than penalties. An official
Erora Nevada stated that they "try to use everything except a 'hammer' to
handle violations; they consider a fine a 'hammer' and avoid it whenever
possible." This official stressed that a notice, followed by informal
conferences and negotiation, allows sources to find out what the problem is
and provides an opportunity to explain extenuating circumstances and propose
corrective action. Even Oregon, which runs what it considers a successful
"parking ticket" program for agricultural burning violations, indicated that
it believes administrative fines are primarily a short run solution to
enforcing regulations. The agency would like to rely more on voluntary
controls as it does with fixed sources, and feels that, in the long run,
enforcement will be more effective if the agency tries to improve its
relationship with commercial grass-seed growers through better communication
and understanding.
Two of the agencies surveyed, New Jersey and Puget Sound, share a very
different enforcement philosophy. According to a recent study,^ the Puget
Sound Air Pollution Control Agency (PSAPCA) believes that most stationary
sources have had ample time to become familiar with the requirements imposed
by the agency's regulations. Thus, PSAPCA always issues fines unless: the
inspector did not gather sufficient evidence; the incident really was
unavoidable and the source has a good history; or it was a minor, first-time
violation. A New Jersey official indicated that "twenty years ago, the
'conference, conciliation, persuasion approach" was the order of the day in
N<>w Jeraey." He believes that now, however, the increased sophistication and
costs of regulation make penalties necessary since sources "are no longer in
auch a conciliatory posture."
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Differences in Enforcement Caseload
The differences in legal/institutional arrangements and enforcement
philosophy discussed above are often a response to differences in the nature
and size of agencies' enforcement caseload. Two enforcement variables seem to
play the greatest role in shaping administrative fines programs: (1) the
number of sources/violations the agency handles, and (2) the nature of these
violations.
Some of the examples scattered throughout this section hint at this
relationship. Both New Jersey and Oregon, for instance, have tailored or
changed their programs to respond to the size and nature of the sources they
regulate. Oregon has developed special arrangements to deal with the unique
enforcement problems that agricultural burning by commercial grass-seed
growers presents. The climatic conditions of Oregon's principal agricultural
areas require that burning restrictions fluctuate with the weather. To
enforce these violations, which are fleeting in duration, Oregon has developed
a "parking ticket" approach to issuing fines for agricultural burning. As
indicated above, New Jersey has also changed its enforcement philosophy to
respond to changes in the size and nature of its caseload.
The enforcement caseload of an agency can also shape its program in less
subtle ways. It would almost certainly be impossible for an agency that
handles as many violations as New Jersey—approximately 1600 a year according
to a recent study^—to adopt procedures that mandate a hearing for every
source before penalties can be assessed. Even a program like Nevada's, which
only requires a hearing for recalcitrant sources, would probably strain the
resources of a large, heavily industrialized and regulated state such as
Pennsylvania, Indiana, or New Jersey. The following section indicates how a
larger volume of penalty assessments—-due to changes in either the number of
sources or the frequency of assessments—forces agencies to modify the
structure of their administrative fines programs.
EASE OF IMPLEMENTATION AND ADMINISTRATION
A model administrative fines program cannot be successful if it makes
unrealistic demands on the capabilities or resources of the agencies that try
to implement it. The purpose of the remainder of this section is to highlight
financial and other constraints that hamper the implementation of
administrative fines programs by the nine agencies surveyed.
Most officials were unable to point out problems or difficulties in
implementing their administrative fines programs. Several officials indicated
they were pleased with the way their programs were structured, and that all of
the personnel and capabilities needed to run the program-inspectors, legal,
administrative, and clerical staff, as well as some sort of tribunal to
resolve disputed cases—were already in place to implement other aspects of
their air pollution control programs. Because of the interrelationships
between various components of the agencies' pollution control programs, no
official was able to provide an estimate of how much the administrative fines
program cost to run. Officials from agencies that issued few penalties tended
24
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to believe that the cost was small relative to other aspects of the air
pollution control program, while officials that issued many penalties were
divided over whether the penalty revenues were sufficient to cover program
costs.
Aa discussed earlier, however, some agencies cited problems that can be
traced, in part, to financial constraints. Several officials felt that the
effectiveness of their administrative fines programs was undermined by the
lack of resources devoted to detecting and documenting violations. Although a
few officials indicated that the nature of air pollution violations inherently
makes them difficult to prove, others stressed that this problem is aggravated
by an insufficient or poorly trained inspection staff. Several agencies also
mentioned that they had difficulty collecting penalties; at least one of these
agencies felt that the lack of sufficient resources to follow up on penalties
contributed to this problem. New Jersey, which depends heavily on the
judicial system to review contested penalty assessments, also indicated that
the rising importance of other environmental issues, such as hazardous waste,
has squeezed the already scarce legal resources available for air pollution
enforcement.
Surprisingly few agencies felt that the program structure itself
contributed to implementation problems. An official from Pennsylvania
speculated that perhaps fewer penalties were assessed because only the
Environmental Hearings Board or the courts actually, have the authority to
assess a penalty, but he did not seem to feel that this situation caused
serious problems. A similar issue was raised by Louisiana where recent
legislative changes provided the agency with greater flexibility in assessing
fines. The official contacted felt it was too early to evaluate whether this
change will actually improve program implementation.
SUMMARY OF NINE ADMINISTRATIVE FINES PROGRAMS SURVEYED
Table I indicates how the nine agencies surveyed in this study have
designed administrative fines programs that meet their enforcement needs. The
table is organized around the three functional components that any
administrative fines program must contain: penalty assessment procedures,
procedures for handling contested assessments, and procedures for penalty
collection and disposition. Section 3 presents recommendations about the most
appropriate way to handle each of these functions. The information in Table 1
provides a rough sketch of each program; Appendix D, which is contained in
Volume 2 of this report, provides a more detailed description of each of the
nine programs and also includes enabling legislation and regulations for each.
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TABLE 1. SUMMARY OF NINE AGENCIES' PROGRAMS AND PROCEDURES
Oregon
Field- Fixed S-nwiry Civil
Indiana Ixmisiana Mississippi Nevada New Jersey burning sources olfeasrfs penalties
Puget
Sound
ro
Type ol Program
1. Size of "Typical" Fine4 (Small Moderate Snail Large Snail Snail Co Small
tlOOO; Moderate J1000-S5000, Large Moderate
•$5000)
2. enforcement Philosophy; Vse Yes No Yes Yes Yes No
Penalties Only as Last Resort
(Yes/No)
3. Separate Program/Procedures/ Yes Yes No No Yes Yes
Legislation for Air Pollution
Violations (Yes/No)
Penalty Assessment Procedures
1. Enabling Legislation Specify Yes No Yes No No Yes
Criteria to be Used in Determining
Penalty (Yes/No)
2. Formal Penalty Assessment Schedule No Yes No No Yes Yes
or Policies (Yes/No)
3. Locus of Penalty Assessment Authority:
Inspector/Junior Enforcement
Official
Small co Moderate Snail
>4o
Yes
Soall
Yes Yes Yes Yes
Yes Yes No Yes
Yes Yes No No
.40
Agency Director
Environmental Board or Ccnmission XX
Other or Not Specified XXX
Procedures for Contested Assessments
1. Informal Conferences/Negotiations
(Usually /Sometimes/Rarely) to
Discuss Violation and for Penalty
Assessment
Usually Usually Usually Usually
Usually Rarely Rarely Usually Rarely Usually Sometimes
(continued)
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TABLE 1 (continued)
Pennsv I van*a
r i-»ld- Fixed Suanary LIVI t
Indiana uOJisiana Mississippi Nevada New Jersey Darling sources otfeases penaUi.es
r\:
2. Hold r anal Admnist rative Hearing.
\utomatically or at \genct's
Request
At Sou re e' s Re que s t
Seldom or Never
3. Court Review.
De Novo
On t he Hea ri ng Rec ord
Other or Not Specified
Pe na 1
^Cg I lee t ion
c L°n Proc edu re s
1. Penalty Collection Techniques:
Civi 1 court suit
Lien on property
Otner or not specified
2. Penalty Disposition:
Agency Budget
Special Environmental Fund
General Treasury
Other or not specified
X X
X
aSorae legislation uefines each day a violation continues as a separate offense so total fine on any particular source can be quite large.
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SECTION 3
MODEL PROGRAM DESIGN
The previous section highlighted some important issues that should be
considered in the development of a model administrative fines program; this
section focuses on the actual design of such a program. It outlines the three
major structural components that any administrative fines program must
contain:
(1) procedures for assessing penalties;
(2) procedures for handling contested assessments; and
(3) procedures for penalty collection and disposition.
It indicates why these components are essential, evaluates the advantages
and disadvantages of the various approaches the nine agencies used in
designing their programs, and, whenever possible, recommends the best approach
to be used in a model program.
PENALTY ASSESSMENT
Penalty assessment procedures are the most basic element of any
administrative fines program. These procedures address three key questions:
(1) when are penalties assessed?;
(2) how is the penalty amount determined?; and
(3) who has responsibility for making these decisions?
The answers to these questions shape the character of the fines program and
influence the design of the other two program components discussed later in
this section.
Articles on administrative fines consistently recommend that agencies
develop formal penalty assessment policies or schedules to guide officials in
deciding when a fine is appropriate and how large it should be. Most
arguments in support of this position focus on the protection that policies or
schedules provide violators. Penalty schedules, for example, play a large
role in curbing the arbitrary and capricious use of administrative power by
indicating in advance what violations the agency assesses fines for, which of
29
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these violations it considers the most serious, and what fine is most
appropriate for each type of violation. Policies and schedules also help
ensure fairness by promoting consistency in penalty assessments for similar
violations. Commentators have also pointed out that there are benefits to the
agency in adopting penalty assessment policies and schedules. Agencies that
have made explicit decisions about which violations are most serious can
allocate their enforcement resources more effectively. Penalty schedules can
also strengthen an agency's bargaining position when it negotiates penalties
with violators: in adopting a schedule, the agency has already achieved some
consensus that the penalty amount in question is reasonable and fair.
Finally, penalty schedules can reduce the time it takes for officials to
determine an appropriate penalty, thus promoting efficient operations in
agencies that assess many penalties.
Although many agency officials confirmed some or all of these advantages,
only four of the agencies surveyed—Indiana, Nevada, New Jersey and
Oregon—actually use penalty assessment policies or schedules in their
administrative fines programs, while a fifth state—Pennsylvania—is
considering this possibility. Most of the remaining agencies assess penalties
only for the most serious and flagrant violations and prefer co retain a great
deal of discretion to tailor the penalty amount to the individual
circumstances of the violation.
A few agencies also incorporate formal or informal rebate policies into
their penalty assessment procedures. New Jersey's penalty schedule (which is
reproduced in Appendix A) lists the amount of the nenalty that can be rebated
for various types of violations. Other agencies indicated that they are
willing to negotiate penalty rebates under some circumstances. Law review
commentators and enforcement officials generally agreed that a rebate policy,
if applied judiciously, can reduce the number of contested penalty assessments
without undermining the effectiveness of an administrative fineo program.
A recent law review article on the assessment of civil penalties by
federal agencies^ discusses administrative officials' ambivalence about
penalty assessment policies and suggests that rigid penalty schedules which
specify the precise amount of the fine for each type of violation are more
appropriate under some circumstances than under others. This article
distinguishes three penalty assessment scenarios: (1) a small-penalty case
(fines $200) where "the dominant constraint is, of course, the amount of the
penalty itself;" (2) a moderate-penalty case (fines range from $200-$2,000)
where violations "require some degree of individuation;" and (3) a
large-penalty case where "attainment of the regulatory objective may require a
penalty finely tuned to the precise circumstances of the case." The author
suggests that written penalty schedules that specify a penalty amount are most
appropriate for the first two cases. For the third caae, he recommends that
Che agency centralize penalty assessment authority and develop
"penalty-determination criteria" rather than "mathematical formulae."
The evidence from law review articles and agency experience supports the
recommendation presented in Section 1 that a model program contain a
"dual-approach" to penalty assessment. Th^ first approach would be reserved
10
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for serious violations or recalcitrant sources where it is important to tailor
the penalty to the specific circumstances of each violation. Since a rigid
penalty schedule is inappropriate under these circumstances, a model program
should recommend that penalty assessment authority be centralized in the hands
of either a few senior agency officials or an environmental hearing board to
promote consistency in penalty assessments. Extra procedural safeguards,
discussed below, are also necessary to ensure that the administrative
discretion inherent in this arrangement is not abused. Agencies that prefer
to use fines only as a last resort may choose to adopt only this portion of
the model program.
The second approach would be used to assess small or moderate-size fines
for relatively minor violations. Since this portion of the program may cover
a large number of the violations an agency handles, a penalty schedule that
specifies the appropriate amount of the fine (or a narrow range) for each type
of violation would improve both the efficiency and the fairness of the
program. Penalty assessment authority can be fairly decentralized since the
penalty schedule limits the administrative discretion exercised in any
specific case.
The discussion below illustrates how the penalty assessment procedures of
the nine agencies surveyed compare with the approaches recommended for a model
program. As Section 2 indicated, the nine agencies already tend to rely on
these two approaches to penalty assessment. Several agencies prefer to assess
fines only when other enforcement techniques fail. Since fines are reserved
for handling serious or flagrant violations and for recalcitrant sources, the
amount of the fine tends to be large. The decision to assess a penalty is
usually made by a senior agency official or environmental hearing board that
has broad discretion to tailor the penalty to the individual circumstances of
the violation. Other agencies routinely assess penalties even for "minor"
violations. In these cases, penalty assessment authority tends to be rather
decentralized, and most agencies have established formal policies and/or
penalty schedules to assist officials in deciding when to assess a penalty and
how large the fine should be. A few agencies rely on some combination of
these two approaches; both Pennsylvania and Nevada, for example, have small
fines programs for minor violations and more individualized procedures to
handle serious violations or recalcitrant sources.
Louisiana's civil penalties program clearly illustrates the first
approach to penalty assessment. The Louisiana Department of Natural Resources
believes that compliance orders are the most appropriate way to handle all but
rhe most serious or flagrant violations. Civil penalties are usually assessed
only if the violation either poses an immediate and serious danger to public
health or indicates complete disregard for the law, e.g., failure to report a
major upset. Between October 1980 and June 1981, Louisiana imposed only three
civil penalties for air pollution violations.10
The Louisiana enabling legislation authorizing civil penalties**
specifies that the agency consider "the gravity of the violation and the
demonstrated good faith of the person charged in attempting to achieve rapid
compliance" in determining "whether or not a civil penalty is to be assessed
-------
and in determining the amount of the penalty, or the amount agreed upon on
compromise." In January of 1980, Louisiana raised the ceiling on civil
penalties from $10,000 to $25,000 for each day of continued noncompliance.
Louisiana alao has a limit of $2,500 on the minimum penalty that can be
assessed. Officials have broad discretion to assess penalties within these
basic constraints.
The Louisiana statute limits assessment authority to the Environmental
Control Commission, the Assistant Secretary of the agency, or the District
Court. According to Louisiana officials, all of the penalties to date have
been assessed by the Commission. The state is reluctant to take violators to
court unless it feels that this is the only way the company will pay attention
to the violation. Court procedures are expensive and it can easily take years
before a case is resolved. Until recently, the Assistant Secretary had not
assessed any penalties because he lacked the authority to hold adjudicatory
hearings. Since Louisiana law ensures the violator the opportunity for a
hearing, it was impossible for the Assistant Secretary to assess penalties
unless he was sure that the violator would not request a hearing.
The Louisiana Environmental Control Commission, which is composed of
seven individuals who run large state departments, acts on the recommendation
of the Assistant Secretary and the Program Administrators of the Air Quality,
Water Pollution Control, and other Divisions. The Commission abides by the
Uniform Administrative Procedures Act in conducting hearings, but, as outlined
above, is subject to few constraints in setting the penalty amount. The
Commission decides whether it will assess the penalty or refer the case to the
district court.
Mississippi's program is very similar to Louisiana's. When the Bureau of
Pollution Control is unable to bring a source into voluntary compliance, it
issues a Letter of Complaint and prepares for an adjudicatory hearing before
the Mississippi Commission on Natural Resources. The Commission makes
findings of fact and conclusions of law, then sets the penalty it believes is
appropriate within the limits established by state enabling legislation.^
Only the Commission - not the Bureau of Pollution Control - is authorized to
assess penalties. According to a Mississippi official, the state typically
assesses two or three civil penalties a year for air pollution violations with
fines usually ranging from $500 to $1000.
Georgia also imposes penalties only if voluntary compliance fails but
prefers to negotiate penalties into consent orders. Under the state's
enabling legislation,-* the Director of the Agency "may cause a hearing to be
conducted before a hearing officer appointed by the Board." The hearing
officer is empowered to impose penalties. The enabling legislation limits
civil penalties to not more than $25,000 per day and instructs the hearing
officer to consider relevant factors such as the nature of the violation, good
faith of the violator in correcting the violation, and injury to public
health, safety, or welfare, The typical fine ranges from $1000 to $2500.
Last year Georgia collected $46,5QO from 12 assessments.
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Three agencies, Indiana, New Jersey, and Puget Sound, tend to rely on the
second approach to penalty assessment outlined above. These agencies do not
view fines as a last resort and thus assess penalties more frequently for both
major and minor violations. Two of the three agencies have adopted penalty
assessment policies or schedules to improve efficiency, promote consistency,
and reduce abuses of administrative discretion. Penalty assessment authority
tends to be fairly decentralized.
Perhaps the most striking characteristic of these agencies is their
higher frequency of penalty assessment. Indiana, which has written policies
governing penalty assessment, tries to resolve most violations through consent
orders. Records supplied by the State Board of Health indicate that almost
half of the consent agreements signed by the State's Air Pollution Control
Division between January 1979 and July 1981 contained penalty provisions. A
recent study^ indicates that Puget Sound has levied civil penalties in
conjunction with more than half of the NOVs issued between 1977 and 1979. The
New Jersey Department of Environmental Protection issues fines for a smaller,
but still significant, percentage of violations. According to data compiled
by the Environmental Law Institute,^ slightly under 20 percent of all
violations result in a Notice of Prosecution (NOP) accompanied by an offer of
penalty settlement. In 1981, New Jersey issued 354 NOPs for air pollution
violations. ^^
All three agencies tend to assess relatively small fines. Indiana's
records reveal that fewer than 20 percent of all fine* issued between January
1979 and July 1981 exceeded $1000; over half were for $500 or less. In Puget
Sound, state enabling legislation limits the fine to $250 per violation per
Jay. 13 Although no information is available about the typical fine actually
assessed in New Jersey, the penalty schedule reproduced in Appendix D^
recommends penalties of less than $1000 for most violations. Both New Jersey
and Indiana have adopted penalty assessment policies or schedules to guide
officials in setting the penalty amount.
New Jersey's penalty schedule for air pollution violations, which is
contained in the State's Administrative Code, indicates appropriate penalties
for 13 types of violations. The schedule outlines progressively more severe
penalties for second, third, and subsequent offenses and indicates when a
violation should be referred to the attorney general's office for
prosecution. It also indicates how much of the penalty the agency can rebate
if the violation is corrected promptly. The schedule does not entirely
eliminate administrative discretion. The regulations explicitly allow the
Commission, Division Director, or Bureau Chief to deviate from the schedule
when "good and sufficient cause exists." These officials are still bound by
the statutory provision that limits penalties to $2500 per
Indiana has less formal procedures for assisting officials in deciding
when to assess fines or how large those fines should be. The Enforcement
branch has developed written policies and/or penalty schedules to cover three
common violations: construction without a permit; operating without a permit;
and open burning violations. Broader discretion is permitted for other types
of violations. State enabling legislation' limits penalties to $25,000 per
day.
33
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As Section 2 indicated the remaining three states surveyed in this study
rely on some combination of the two approaches to penalty assessment outlined
above. Both Pennsylvania and Nevada have developed a small fines approach for
handling minor violations and a more discretionary approach for major
violations or recalcitrant sources. Nevada's enabling legislation classifies
air pollution violations as either minor or major. The Environmental
Commission has promulgated regulations^ specifying penalties for minor
violations. This penalty schedule, which is reproduced in Appendix D,
specifies fines for five types of violations: open burning, incinerator
burning, fugitive dust, organic solvents, and odor. The fines for a first
offense are fairly low, however, the fines double if the source commits a
second or third violation. All minor violations become major violations upon
the occurrence of the fourth violation in any 12 consecutive months. There is
no penalty schedule for major violations although state enabling
legislation37 does limit the fine to no more than $5000. The State
Environmental Commission has established a policy of requiring a
quasi-judicial hearing for any source that commits two major violations of the
same provision within any 12-month period.
Officials from both Pennsylvania and Nevada indicated that a dual
approach to assessing administrative fines enabled them to enforce air
pollution violations more effectively. The Pennsylvania official, for
example, felt that his state's multifaceted program "affords the agency the
kind of coverage they need to handle any violation." The Executive Secretary
of the Nevada Environmental Commission believes that the State's new policy of
holding automatic hearings for recalcitrant sources improved both the
effectiveness and the fairness of its administrative fines program.
CONTESTED ASSESSMENTS
The second necessary component of a model administrative fines program is
a set of procedures for handling contested assessments. These procedures
ensure that violators who wish to dispute the appropriateness of their penalty
assessment have the opportunity for a fair and impartial hearing of their
case. The discussion below outlines the type of hearing procedures and court
review recommended by legal scholars and indicates how the experience of the
nine states surveyed in this study reinforces these recommendations.
Many legal commentators feel that the fairest and most effective way to
handle contested penalty assessments is to provide the violator with the
opportunity for a quasi-judicial administrative hearing rather than a trial de
novo (i.e., anew, from the beginning) in district court. Violators that wish
to dispute the findings of the administrative hearing would be permitted to
appeal to the courts, for a trial on the hearing record, rather than a trial
de novo. Mont of the nine agencies surveyed for this study handle contested
assessments this way. Only New Jersey uses the approach, more common at the
federal level, of making the violator an uffer of penalty settlement which he
Chen must accept or else contest in a de novo trial. As the following excerpt
from a report of the Administrative Conference of the United States^ (pp.
889-900) indicates, this latter approach of relying on a de novo trial has
serious drawbacks for both the agency and the violators.
34
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"Agencies now settle well over 90 percent of cases by means of a
compromise, remission or mitigation device. Settlements are made because
civil penalty cases generally involve relatively small amounts of money
(an average of less than $1,000 per case), and most adjudications would
require substantial inputs of time and effort, familiarity with
specialized vocabularies and other matters of expertise, and meaningful
litigation axptns*.
Settlements are not wrong per se. But the quality of the settlements
being made under the present money penalties system is of real concern.
Those who suggest that it 'is probably of little significance1 which
system is used are surprisingly far from the mark. The most significant
finding in this report is that settlements reached under the present
system are, as a rule, substantially inferior to those that would occur
under an administrative imposition scheme.
There is evidence that under the present system regulatory needs, at
times, are being sacrificed for what is collectable; i.e., agencies are
settling for what the traffic will bear. Agency administrators suggest
that unwise settlements are being made principally because 'the
Department of Justice presents an immovable roadblock; we cannot get our
cases into court.1 Manifestly, a knowledgeable defendant may have undue
leverage and may ultimately be able to force an unwise settlement (from
the standpoint of the public interest) as a result of his situation....
The present system may also be allowing some of the worst offenders (who
will not settle and cannot feasibly be brought to trial) to get away.
Even when cases are carried forward, serious enforcement problems are
often created by excessive delay....
From the standpoint of alleged offenders, the present system is
unsatisfactory because, as a practical matter, they are often denied
procedural protections and an impartial forum, and may be forced to
acquiesce in unfair settlements because of the lack of a prompt and
economical procedure for judicial resolution. When, for example, the
Bureau of Customs seizes $1,000 worth of goods can be alleged offender -
no matter how much he believes in his case - afford to litigate in
federal district court rather than settle for $1,200?"
A more recent article on federal assessment of civil penalties contains a
lengthy discussion of the various design options available for handling
contested penalty assessments.6 This article also advocates that agencies
provide violators with trial-like administrative hearings to avoid de novo
court review but recognizes that some agencies' enabling legislation either
mandates de novo review or is ambiguous about the authority of the court to
review penalty decisions. Even in these cases, however, the author argues
that providing violators the opportunity for a trial-type hearing, although
expensive for the agency, may reduce the number of cases that require judicial
intervention. As the following quotation indicates,6 (pp. 1490-1491) this
same article advocates the use of informal, prehearing conferences to improve
the fairness and efficiency of the penalty imposition process:
35
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"The opportunity for a judicial or, in some cases, administrative trial
is not, by itself, a sufficient process for the disposition of contested
assessments. A trial procedure alone may not fully satisfy the twin
objects of fairness and efficiency that a disposition process should
serve; the expense of a trial-type hearing can nullify its practical
utility. The very decision to make a formal charge, moreover, may impose
a kind of injury - a psychological anxiety or a weakening of credit
position - that generates a legitimate demand for more immediate
explanatory and participatory procedures. Informal prehearing procedures
can resolve a dispute on a more economical and expeditious basis than is
possible by trying the case. In the absence of a powerful countervailing
interest, then, an agency should provide a structured opportunity to
pursue consensual prehearing resolution of a disputed assessment case."
As Section 2 indicates, most of the agencies surveyed have already
adopted the procedures recommended by these legal commentators. Many
officials indicated that the opportunity for an administrative rather than
judicial hearing was central to the success of their administrative fines
programs and cited many of the same advantages touted in the law review
articles: administrative hearings enable the agency to resolve cases quickly;
administrative tribunals usually have a better understanding of the technical
issues that underlie air pollution violations than do judges and juries; and
agencies do not have to rely as heavily on the scarce and expensive resources
of their attorney general's office.
Agencies that issue many small fines tend to have more streamlined
procedures for handling contested assessments than agencies that only assess
fines for serious violations or recalcitrant sources. Several of the agencies
surveyed for this study have developed two sets of procedures for contested
assessments: one for minor "small-fine" violations and another for more
serious violations. Nevada, for example, holds hearings at the violator's
request when the penalty is for a minor violation or the first major
violation, but automatically schedules a quasi-judicial hearing whenever a
source is cited for a second major violation of the same offense within 12
months. Oregon, which has a small-fines program for agricultural burning,
requires violators that wish to contest their penalties to reply in writing
only. Violators have the right to appeal the decision of the hearing officer
who reviews this reponse. The state is required by law to rely on somewhat
more elaborate procedures to handle other types of violations.
Although a model program should afford all violators the opportunity for
a trial-like administrative heaing at some point in the penalty imposition
process, EPA should consider developing procedures like those used in Oregon
or Nevada that distinguish between minor and major violations. This
recommendation is consistent with the one advanced earlier that EPA consider
developing separate penalty assessment procedures for minor and major
violations. In many ways, these two recommendations reinforce each other. A
detailed penalty schedule that specifies small fines for minor violations
reduces the possibilities for arbitrary and capricious use of administrative
discretion. Thus, agencies can rely on somewhat less elaborate procedures,
36
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like the ones used in Oregon for agricultural burning violations, without
compromising the fairness of their administrative fines program as long as
dissatisfied sources can request a more formal administrative hearing. More
elaborate procedural safeguards should be developed for sources that wish to
contest penalty assessments for major violations since fines for these
violations would tend to be larger and the agency would have more discretion
in deciding when a fine should be assessed. A model program should suggest
that agencies routinely schedule informal conferences with violators, and if
the agency's enforcement caseload and resources permit, follow the example of
Mississippi and Nevada and hold formal adjudicator/ hearings prior to penalty
assessment.
PENALTY COLLECTION/DISPOSITION
The final essential component of a model administrative fines program is
a set of procedures for penalty collection and the disposition of the revenues
collected. These procedures are critical to the success of an administrative
fines program: an inability to collect penalties or any suggestion that the
primary purpose of the program is to raise revenue rather than deter
violations can undermine an otherwise effective, fair and well-designed
program. In spite of their importance, these aspects of program design have
been somewhat neglected by both legal commentators and environmental officials
and lawmakers. As the discussion below indicates, the most common approach
tor collecting overdue penalties—initiating a civil court suit against the
violator—appears to be most effective for agencies that assess only a few
large penalties. Further study is needed before a model program can recommend
more effective penalty collection techniques for agencies that assess many
small fines. Although there is also little agreement about the best way to
dispose of the penalty revenues collected, only two options-depositing the
money in the general fund or earmarking it for a nonenvironmental
purpose—guarantee that the agency will not be accused of using its
administrative fines program to enrich or supplement its own coffers.
A? Section 2 indicated, a few agencies had experienced some problems
collecting penalties. One state that assesses many small fines for air
pollution and other environmental violations, recently reviewed its penalty
collection practices; officials were concerned that there might be a backlog
of uncollected penalties. Further atudy indicated that the number and amount
of uncollected penalties were not as large as first suspected. Although the
official contacted does not believe the problem is serious, he did indicate
that the agency has difficulty following up on the penalties it assesses.
Nevada indicated that it had experienced similar problems until it improved
its recordkeeping and established a policy of holding automatic hearings
whenever a source is charged with two violations for the same offense within
12 months. Puget Sound, which assesses over 400 civil penalties a year,
indicated that it collects most penalties within 60 days of the violation but
rf rew "require years."
It should not be surprising that only a tew of the agencies surveyed
reported problems collecting penalties. Many of the nine agencies assess
fewer than 10 civil penalties a year or else negotiate penalties with
37
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violators and then include them in consent agreements. Penalty collection
appears to be a problem primarily for the agencies that assess many small
fines.
Most of the agencies ultimately rely on civil action in district court to
collect penalties. When the penalty involved is small, this technique is
almost worthless because of the time and expense involved in litigating a
case. State and local agencies may wish to examine the usefulness of less
u ascic techniques to collect penalties. One possible approach is to place
liens on violators' property if they do not pay their penalties promptly. In
some states, new enabling legislation may be necessary to give agencies the
authority to use liens to collect administrative fines. Other states, such as
Pennsylvania, already have the authority to use liens to collect large civil
penalties. Further study is needed to assess the effectiveness of this
approach in collecting small penalties.
The enabling legislation authorizing civil penalties usually indicated
how the agencies surveyed should dispose of the revenues collected: three
statutes specified that revenues should be credited to the State treasury;
three others allocated the revenues to a special fund to be used for pollution
abatement; the remaining states either allocated the revenues to the agency
budget, specified that they be used for a designated nonenvironmental program,
or did not place any restrictions on the use of penalty revenue.
Many officials believed that the credibility of their fines program would
be jeopardized if the penalty revenues were channeled into the agency budget.
A Georgia official indicated that he would oppose any plans to transfer
revenues to the agency's budget because he does not want the agency "to have a
pecuniary incentive to collect penalties." A New Jersey official felt that
industry might perceive a penalty program as a fundraising operation if the
revenues collected went to the agency budget rather than the State treasury.
Agencies that use penalty revenues to support environmental programs see no
harm in this arrangement; however, many of these agencies only collect
penalties as a last resort, and are thus less vulnerable to charges that they
use their administrative fines program as a revenue-raising program.
Nevada has developed an interesting alternative to the more commonly used
approaches of placing the money in either the agency or the state's general
fund. Revenues from Nevada's administrative fines program are deposited in
the county school district fund of the county where the violation occurred.
This arrangement does not jeopardize the credibility of the fines program but
provides some reassurance to both violators and agency officials that the
revenues collected are used for a worthwhile purpose. Nevada has considered
changing this system, but is reluctant to tamper with it because it "works so
well."
SUMMARY
Table 2 summarizes the recommended components of a model administrative
fines program. The table distinguishes between the two penalty approaches
discussed earlier in this section: small or moderate fines assessed for
relatively minor violations, and large fines reserved for serious violations
or recalcitrant sources.
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TA2LE 2. RECOMMENDED COMPONENTS FOR A MODEL DMINISTRATIVE FINES PROGRAM
Small or
moderate fines
Large fines
oo
Penalty Assessment Procedures
i. General Policies or Assessment Criteria
2. Formal Penalty Assessment Schedule
3. Decentralized Penalty Assessment Authority
(Inspectors, Junior Enforcement Officials)
4. Centralized Penalty Assessment Authority (Senior
Agency Officials, Hearing Ex. or Board"*
Procedures for Contested Assessments
1. Informal Pre-penalty Conference:
Automatic
At source or agency request
2. Fonsal Administrative Hearing:
Automatic
At source or agency request
3. Court Review on Hearing Record at Source
or Agency Request
Penalty Collection/Disposition
1. Penalty Collection Techniques:
Civil court suit
Lien on property
Other (to be developed)
2. Penalty Disposition:
Agency budget
Special environmental fund
General state or county treasury
Optional
X
X
Possible for agency with
small caseload or for
oversight only
X
X
X
X
X
Optional
Optional
X
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REFERENCES
1. Goldschraid, H. J. An Evaluation of the Present and Potential Use of
Civil Money Penalties as a Sanction by Federal Administrative Agencies
in: 2. Recommendations and Reports of the Administrative Conference of
the United States, 1972.
2. Farrell, S. 0., and M. S. Jensen, An Institutional Assessment of the
Clean Air Act, Puget Sound Case Study. Prepared for the National
Commission on Air Quality, Washington, D.C., March 1981.
3. Harper, John W., Chief of Law Enforcement, Mississippi Department of
Natural Resources, Bureau of Pollution Control. Written Communication
with Andrew Bagley, GCA/Technology Division, August 28, 1981.
4. Vickery, J. S., L. Cohen, and J. Cummings, Profile of Nine State and
Local Air Pollution Agencies, U.S. Environmental Protection Agency,
Office of Planning and Evaluation, Washington, D.C., February 1981.
5. Georgia Air Quality Control Law, Section 16(1).
6. Diver, C. S., The Assessment and Mitigation of Civil Money Penalties by
Federal Administrative Agencies. Columbia Law Review, Volume 79, No. 8,
December 1979.
7. Indiana Environmental Management Act, Indiana Code, Title 13, Article 7,
Section 13-1.
8. Louisiana Environmental Affairs Act, Louisiana Revised Statutes, Title
30, Chapter 2, Section 1073(E).
9. Oregon Air Pollution Control Laws, Oregon Revised Statutes
467.130-468.135.
10. Gustave Von Bodungen, Program Administrator, Air Quality Division,
Louisiana Department of Natural Resources. Written Communication with
James Morgester, Chief, Enforcement Division, California Air Resources
Board, July 2, 1981.
11. Mississippi Air and Water Pollution Control Act Mississippi Code, Title
49, Chapter 17 - Pollution of Waters, Streams, and Air, Section 43.
40
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12. Thomas A. Pluta, Chief, Division of Environmental Quality, Bureau of
Enforcement, New Jersey Department of Environmental Protection. Written
Communication with Lisa Baci, CCA/Technology Division, February 17, 1982.
13. Washington Clean Air Act, Chapter 70.94, RCW, Section 431.
14. New Jersey Administrative Code, 7:27A-1.5, Penalties and rebates.
15. New Jersey Air Pollution Control Laws, 26:2C-19.
16. Nevada Air Quality Regulations, Article 2.8, Administrative Fines.
17. Nevada Revised Statutes, Title 40, Chapter 445 - Water Control; Air
Pollution, Section 445.601.
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APPENDIX A
REVIEW OF STATES' ENFORCEMENT LAWS AND
REGULATIONS PERTAINING TO ADMINISTRATIVE FINES
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(~~^ f^ /\
Technology Division
Michael Randall, DSSE Oaln 25 September 1981
NeJl Collins, Planning & Analysis Department <-
Administrative Fines Study
This memorandum outlines the findings of GCA's review of the enforcement
provisions of the laws and regulations of the 50 states. The states have
bet>n categorized into three principal groupings with the general character-
istics of each group delineated. Those states listed in the first group
will comprise the states to be studied in the model administrative fines
project. Three local government agencies have been included in that group-
ing as candidate study agencies.
jhose states with enabling legislation clearly and fully delineating adminis-
trative civil penalties powers are listed fir'it. The remainder of the states
die listed according to decreasing clarity as to their administrative
penalties powers or the increasing clarity oi the lack of such powers.
Croup I. Thia grouping of states includes those with the clear power to
establish an administrative civil penalties air pollution enforcement pro-
gram. Such a program generally includes: (1) the power for an administrative
official to assess a fine against a violator, (2) the right of the accused
violator to an administrative hearing, (3) a listing of criteria to be con-
sidered by the administrative agency in establishing the amount of the fine,
(A) the right of a fined violator to appeal the fine, (5) the limitation that
an appeal to a state court shall be based on the administrative hearing
record, as opposed to a new trial, (6) the ability of the administrative
hearing body to file its judgment with a state court and, if not appealed, to
collect on its Judgment as if the judgment were a judgment of the state court,
and (7) the ability to use collected penalties for the operating budget of
the air pollution control program.
I uc states most clearly possessing most i>f Must- powera are:
Georgia Mississippi
New Jersey Oregon
Pennsylvania lennessee
Hawaii Nevada
A-l
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Michael Randall, DSSK 2 25 September 1981
States that possess eighty percent of the civil penalty program factors listed
above include:
Louisiana Montana
Indiana (but see letter) Washington
Local government with administrative civil penalties programs include:
Puget Sound Chicago
Louisville New York City
Group II. A number of states have the power to administratively assess
"non-compliance" penalties similar to the non-compliance penalties of
Section 120 of the Clean Air Act. Under these laws the elements of the
administrative assessment program are virtually identical to the civil
penalties program discussed in the group one above. The principal
difference is that the assessment must be basijd in part on the cost saving;:
to the violator for not complying with state law. The state non-compliance
penalties programs often include mitigation clauses allowing the agency to
reduce the penalty amount after considering specified criteria.
The states in thi;; j;roup include:
Connecticut Ohio
Colorado iennessee
Oeorgia Virginia
Montana "tali
Croup 111. A large number of state law^ include a penalties section for
violation of a state air pollution control law or regulation. Such laws
often simply provide that the violation of an air pollution regulation
can subject the violator to a penalty of up to twenty-five thousand dollars
per day, collectable in a civil court action. Some state laws specifically
require that all court actions for penalties must be initiated by the state
attorney general's office. Some specify that a penalty amount shall be
determined by the court. Some specify that penalties collected shall go to
the air pollution control agency, others that the money shall go to the
general state funds.
Those states which allocate money collected to the state air agency, and
therefore can be considered as having a somewhat stronger agency orientation
than the others, are:
Alabama He 1aware
California Wisconsin
A-2
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Those states with a strong court oriental ion MI this category include:
Alaska I'>wa
Kansas Maryland
Michigan Missouri
New Mexico North Carolina
Those states in this category which seem not 10 favor either the state agency
or the state court system include:
Arizona Arkansas
Idaho Kentucky
Maine New Hampshire
Massachusetts Oklahoma
New York Smith Dakota
Rhode Island V.'ishington, D.C.
Texas
West Virginia
Croup IV. The final grouping of states encompasses those for whom no civil
money penalties provisions could be found. These include:
Florida Nebraska
Minnesota Vermont
South Carolina Wvoming
Nei1 Collins
NC/ss
A-3
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APPENDIX B
TELEPHONE INTERVIEW GUIDE
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ADMINISTRATIVE FINES
TELEPHONE INTERVIEW GUIDE
PERSON INTERVIEWED
AGENCY
LOCATION
UACKGROUND
1.
When did the agency begin to assess administrative fines (civil
penalties) for air pollution enforcement? How did the program originate?
2. rtas the program changed since it started?
1. What are (were) the program's goals?
4. In the last 3 years, how many penalties were collected? For what types
of violations?
S. How many air pollution violations does the agency handle each year?
Allegation
1. ik>w are air pollution violations discovered? Does the administrative
fines program cover the following types of violations: failure to report
malfunctions? violation of permit conditions? control equipment
maintenance?
'. Who alluJges the violation: inspector? agency head? other?
5. Is tlierc a recordkeeping system — NOVs, fines, inspections? Is this
record used in building cases against recalcitrant sources?
' '''•''* E >' Assess men t
t, ATP chore written goals or policy statements affecting penalty assessment
•>r collection? Is there any penalty amount schedule?
Who sets Lhe penalty amount? For what type of cases?
b. Ls ther« a log or precedent system for establishing appropriate fines?
7. What is Lhe typical penalty amount? limited by practice or legislation?
B-l
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Review Procedures
8. Under what circumstances are sources entitled to an administrative review
of their penalty assessment?
9. What regulations or policies govern the conduct of the hearing?
10. What percentage of the penalty cases actually involve an administrative
hearing?
11. Can all fines by appealed to the courts? How frequently does this happen?
12. Is a court appeal based on the record or does the court conduct a de novo
trial?
Penalty Collection and Disposition
13. What penalty collection powers does the agency possess?
L4. What is the typical time period between t!ie identification of a violation
and penalty recovery?
15. Is collection affected by the penalty amount? by other factors?
16. Do the funds collected go into the air agency budget?
PROGRAM EFFECTIVENESS
i. What role do administrative fines play in the agency's air pollution
enforcement strategy? How effective are they compared to consent
agreements, or NOVs followed by informal negotiations?
2. What aspects of an administrative fines program are critical to its
success?
3. Are there any drawbacks or disadvantages to the agency's current program
organization? What steps, if any, could be taken to make the program
more effective?
4. How much does it cost the agency to run the program? Are there any
aspects of program operation that could b^. improved if more funds were
available?
5-2
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APPENDIX C
LIST OF STATE AND REGIONAL CONTROL AGENCY OFFICIALS CONTACTED
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AGENCY CONTACTS
Name
Georgia
Marvin Lowry
Chief-Air Quality Control Section
Environmental Protection Division
Indiana
Sue A. Shadley
Attorney
Air Pollution Control Division
Louisiana
George Eldredge
Deputy Counsel
Legal Division
Mississippi
John W. Harper
Chief of Law Enforcement
Dwight Wylie
Chief, Air Division
Nevada
James Hannah
Executive Secretary
Dick Serdoz
Air Quality Officer
Division of Env. Protection
New Jersey
Thomas A. Pluta
Chief, Division of Environmental
Quality, Bureau of Enforcement
Agency Address
Department of Natural Resources
270 Washington Street, S.W.
Atlanta, Georgia 30334
Indiana State Board of Health
1330 West Michigan Street
Indianapolis, Indiana 46206
Department of Natural Resources
P.O. Box 44396
Baton Rouge, Louisiana 70804
Department of Natural Resources
Bureau of Pollution Control
P.O. Box 10385
Jackson, Mississippi 39209
Nevada Environmental Commission
201 South Fall Street, Room 104
Carson City, Nevada 89710
Department of Conservation and Natural
Resources
Capitol Complex
Carson City, Nevada 89710
Department of Environmental Protection
John Fitch Plaza, CN 027
Trenton, New Jersey 08625
C-l
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Oregon
Van Kollias
Supervisor-Investigation and
Compliance
Regional Operations Division
Pennsylvania
Morris S. Malin
Chief, Division of Abatement and
Compliance
Bureau of Air Quality Control
Puget Sound
Harry Twomey
Supervisor One-Enforcement
Department of Environmental Quality
522 S.W. Fifth Avenue
Portland, Oregon 97207
Department of Environmental Resources
P.O. Box 2063
Harrisburg, Pennsylvania 17120
Puget Sound Air Pollution Control
Agency
P.O. Box 9863
Seattle, Washington 98109
C-2
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TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing)
\ RfcPORTNO. [2.
4. TITLE AND SUBTITLE
Initial Design Considerations for a Model State
and Local Administrative Fines Program,
Volume I
7 AUTHORS)
Lisa A. Baci, J. O'Neill Collins, Andrew Bagley,
Robert J. Kindya
f) PERFORMING ORGANIZATION NAME AND ADDRESS
GCA/Technology Division
213 Burlington Road
Bedford, Massachusetts 01730
12 SPONSORING ACI NCY NAME AND ADDRESS
U.S. Environmental Protection Agency
Division of Stationary Source Enforcement
Washington, D.C. 20460
*
3. RECIPIENT'S ACCESSION NO.
6. REPORT DATE
August 1982
6. PERFORMING ORGANIZATION CODE
8. PERFORMING ORGANIZATION REPORT NO.
GCA-TR-82-19-G(l)
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
68-01-6316, Technical
Area 3, Task Order No.
13. TYPE OF REPORT AND PERIOD
Final
Service
25
COVERED
14. SPONSORING AGENCY CODE
11 SllPPI. 1 Ml N I ARY NO! HS
f
5
1l. A US TRACT
EPA has determined that an effective enforcement strategy for ensuring
<,ontinuing compliance with air pollution regulations must provide quickly imposed
sanctions, appropriate remedies, and a means of building a record in cases
Jnvolving recalcitrant sources. EPA believes that an enforcement strategy which
incorporates an administrative fines component may be well suited to meeting
these goals and has decided to pursue development of a model administrative
fines program. This report develops a list of issues that must be addressed by a
model administrative fines program, and then formulates an initial set of design
criteria for such a program. This analysis is based on the operating experience
of nine state and local agencies that currently employ administrative fines
programs as part of their overall air pollution enforcement effort.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
Air Pollution
"n ! orrt-ment
Administrative Fines
•Jontinuini^ Compl iance
b. IDENTIFIERS/OPEN ENDED TERMS
c. COSATl Held/Group
! ION iiTATtMENT
19. SECURITY CLASS 'This Report)
Unclassified
21. NO. OF PAGES
54
20. SECURITY CLASS (This page)
Unclassified
22. PRICE
Farm JV?0- ! (R«v. 4-77) PREVIOUS EDITION is OBSOLETE
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