Clean Air Act Stationary Source Civil Penalty Policy
450R91101 United States Environmental Protection Agency
)ffice of Enforcement and Compliance Assurance
Washington, DC
10/25/1991
(This title page is not a part of the original document and is included for clarity by the cataloger.
The following document was downloaded on September 11 2002 from
http://www.epa.gov/compliance/resources/policies/civil/caa/stationary/penpol.pdf and includes a
clarification dated Jul 23 [1995].
-------
KF3812
.C54 Co
1991
o
o
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
JUL23
OFFICE OF
ENFORCEMENT AND
COMPLIANCE ASSURANCE
MEMORANDUM
SUBJECT: Clarification of the Use of Appendix I of the Clean Air
Act Stationary Source Civil Penalty Policy
FROM: Kathie A. Stein (2242.A) (Signature)
Air Enforcement Division
Office of Enforcement and Compliance Assurance
TO: Regional Division Directors
Region IV recently raised questions concerning the Clean Air
Act Stationary Source Civil Penalty Policy (general policy).
Specifically, the Region asked whether the Gravity Component in
Appendix I ("The Permit Penalty Policy") should be used in
addition to the general policy's gravity component when
calculating the penalty amount, and specifically, whether "size
of the violator" is included in addition to the penalty amount as
calculated using the appendix. The policy may be confusing
because of a clerical error on page 3 of Appendix I, which reads
as follows:
The economic benefit component and the gravity
component are added together to determine the preliminary
deterrence amount. This initial amount should then be
adjusted, using the general stationary source civil penalty
policy factors which take into consideration individual
equitable considerations (Part III of the general policy).
This paragraph applied to Part III of September 12,1984
general Clean Air Act policy, Adjusting the Gravity Component,
and to the later policy revision in March 1987. The error
occurred when the table of contents was changed during the 1991
revision of the general policy. Part III became Parts II.B.4.
-------
and IV, but the reference was inadvertently left unchanged in the
above passage in Appendix I. The paragraph should read as
follows:
The economic benefit component and the gravity
component are added together to determine the preliminary
deterrence amount. This initial amount should then be
adjusted, using the general stationary source civil penalty
policy Part II.B.4., Adjusting the Gravity Component, Part
III, Litigation Risk, Part IV, Ability to Pay, and other
relevant adjustments.
Therefore, Appendix I is to be used instead of Parts II.B.1
through Part H.B.3., which include the calculations for actual
or possible harm, importance to the regulatory scheme, and size
of violator. However, the adjustments to the gravity component
contained hi Part H.B.4.(which was Part III of the 1984 and 1987
policies), still apply when Appendix I is used. These
adjustments include degree of willfulness or negligence, degree
of cooperation, history of noncompliance, and environmental
damage.
As stated on page 2 of Appendix I, the gravity component is
calculated based on the matrix in the appendix, which assesses a
penalty based on an estimate of the total cost of air pollution
control at the source, times the number of months of isolation.
If there are not other violations for which the gravity component
of the general policy apples, then you do not add the size of the
violator component from Part H.B.3. of the general policy. The
reason is that Appendix I of the policy provides larger penalties
for larger violators, under the assumption that they will have
larger (and more expensive) control equipment involved in the
violation. The Appendix I matrix, in addition to the economic
benefit component, is intended to provide a sufficient penalty to
deter violations. However, if there are other violations for
which the general policy applies (e.g., emissions violations),
then "size of violator" is factored in as a one-time addition to
the proposed penalty.
If you have any questions concerning this or any other
penalty policy matter, you may direct them to Mr. Gary Secrest of
my staff at (202) 564-8661.
-------
Table of Contents
I. Introduction 1
II. Preliminary Deterrence Amount 4
A. Economic Benefit Component 4
1. Benefit from delayed costs 4
2. Benefit from avoided costs 5
3. Adjusting the economic benefit component 6
A. Economic benefit component involves
Insignificant amount 7
B. Compelling public concerns 7
C. Concurrent Section 120 administrative
Action 8
B. Gravity Component 8
n 1. Actual or possible harm 10
A. Level of violation
B. Toxicity of the pollutant
C. Sensitivity of environment
* D. Length of time of violation
2. Importance to regulatory scheme 12
3. Size of violator 14
4. Adjusting the Gravity Component 15
A. Degree of Willingness or Negligence 16
B. Degree of Cooperation 16
C. History of Noncompliance 17
D. Environmental Damage 19
III. Litigation Risk 19
IV. Ability to Pay 20
V. Offsetting Penalties Paid to State and Local Governments
-------
or Citizen Groups for the Same Violations 21
VI. Supplemental Environmental Projects 22
VII. Calculating a Penalty in Cases with More Than
One Violation 22
VEI. Apportionment of the Penalty Among Multiple
Defendants 23
IX. Examples 24
X. Conclusion 31
XI. Appendices
I. Permit Penalty Policy
n. Vinyl Chloride Penalty Policy
III. Asbestos Penalty Policy
IV. VOC Penalty Policy
V. Air Civil Penalty Worksheet
VI. Volatile Hazardous Air Pollutant Penalty Policy
VII. Residential Wood Heaters Penalty Policy
VHI.Stratospheric Ozone Penalty Policy
-------
CLEAN AIR ACT STATIONARY SOURCE CIVIL PENALTY POLICY
I. INTRODUCTION
Section 113(b) of the Clean Air Act, 42 U.S.C. § 7413(b),
provides the Administrator of EPA with the authority to commence
a civil action against certain violators to recover a civil
penalty of up to $25,000 per day per violation. Since July 8,
1980, EPA has sought the assessment of civil penalties for Clean
Air Act violations under Section 113(b) based on the
considerations listed in the statute and the guidance provided In
the Civil Penalty Policy issued on that date.
On February 16,1984, EPA issued the Policy on Civil
Penalties (GM-21) and a Framework for Statute-Specific Approaches
to Penalty Assessments (GM-22). The policy focuses on the
general philosophy behind the penalty program. The Framework
provides guidance to each program on how to develop medium-specific penalty policies. The Air
Enforcement program followed
the Policy and the Framework in drafting the Clean Air Act
Stionary source Civil Penalty Policy, which was issued on
September 12, 1984, and revised March 25, 1987. This policy
amends the March 25,1987 revision, incorporating EPA's further
experience in calculating and negotiating penalties. This
guidance document governs only stationary source violations of
the clean Air Act. All violations of Title II of the Act are
governed by separate guidance.
The Act was amended on November 15, 1990, providing the
Administrator with the authority to issue administrative penalty
orders in Section 113(d), 42 U.S.C. § 7413(d). These penalty
orders may assess penalties of up to $25,000 per day of violation
and are generally authorized hi cases where the penalty sought is
not over $200,000 and the first alleged date of violation
occurred no more than 12 months prior to initiation of the
administrative action. In an effort to provide to initiation of
the administrative action. In an effort to provide consistent
application of the Agency's civil penalty guidance used in
calculating administrative penalties under Section 113(d) of the
Act and will be used in calculating a minimum settlement amount
in civil judicial cases brought under Section 113(b) of the Act.
In calculating the penalty amount which should be sought in
an adminstrative complaint, the economic benefit of noncompliance
and a gravity component shuld be calculated under this penalty
-------
policy using hte most agreesive assumptions supportable.
Pleadings will always include the full economic benefit
component. As a general rule, the gravity component of the
penalty plead in admistrative complaints may not be mitigated.
However, the gravity coponent portio nof te plead penalty may be
mitigated by up to ten per cent solely for degree of cooperation.
Any mitigation for this factor must be justified under Section
II.BAb. of this Policy. The total mitigation for good faith
efforts to comply for purpose of determining a settlemtn tamount
may never exceed thirty per cent. Applicable adjustment factors
which aggravate the penatty must be included in the amunt plead
in the administrtive complaint. Where key financial or cost
figures are not available, for example those costs involved in
calculating the BEN calculation, the highest figures suportable
should be used.
This policy will ensure the penalty plead in the complaint
is never lower than any revised penalty calculated later based no
more detailed information. It will also encourage sources to
provide the litigation team with the more accurate cost or
financial information. The penalty may then be recalculated
during negotiations where justified under this policy to reflect
any appropriate adjustment factors. In administrative cases,
where the penalty is recalculated based upon information received
in negotiations or the preheating exchange, the administrative
complaint must be amended to reflect the new amount if the case
is going to or expected to go to hearing. This will ensure the
complaint reflects the amount the government is prepared to
justify at the hearing. This pleading policy also fulfills the
obligation of 40 C.F.R. § 22.14(a)(5) that all administrative
complaints include "a statement explaining the reasoning behind
the proposed penalty."
This policy reflects the factors enumerated in Section
113(e) that the court (in Section 113(b) actions) and the
Administrator (in Section 113(d) actions) shall take into
consideration in the assessment of any penalty. These factors
include: the size of the business, the economic impact of the
penalty on the business, the violator's full compliance history
and good faith efforts to compoy, the duration of the vioaion,
payment by te violator of panelties assessed for the same
violation and such other factors as justice may reuire.
This document s not meant to contro Ithe panlty amount
requested in judicial actions to enforce exidtig consent
-------
decrees. 1 In judicial cases, the use of this guidance is touted
to pre-trial settlement of enforcement actins. In a trial,
government attorneys may find it relevant and helpful to
introduce a penalty calculated under this policy, s a poit of
reference in a demand for penalties. However, once a case goes
to trial, goernment attorneys hsould demand a larger penalty than
the miminum settlemtnt figure as calculated undr the policy.
The general policy applies to most Ciena air Act violations.
There are some types of violtons, however, thta have
characteristics which make the use of the genral policy
inappropriate, these are treated in separate guidance, included
as appendices. Appendix I covers violations of PSD/NSR permit
requirements. Appendix II deals with the gravity component for
vinyl chloride NESHAP violations. Appendix III covers the
economic benefit and gravity components for asbestos NESHAP
demolition and renovation violaions. The general policy applies
to violations of volatile organic compoujd regulations where the
method of compliance involves installation of cnotol equipment.
Separate guidance is provided for VOC violators which comply
through reformulation (Appendix IV). Appendix VI deals with the
gravity component for volatile hazardous air pollutants
violatons. Appendic VII covers violations of the residential
wood heaters NSPS regulations. Violation of the regulations to
protect stratospheric ozone are covered in Apendix VIII. These
appendixes specifyf how the gravity component and/or economic
benefit components will be calsulated for these types of
violations. Adjustent, aggravation or mitigation, of penalties
calculated under any of the appendixes is governed by this
general peanlty policy.
This penalty policy contains two components. First, it
describes how to achieve the goal of detterence through a peanlty
that removes the economic benefit of noncompliance and eflects
the gravity of the violation. Second, it discusses adjustment
factors appplied so that a fir and equitable penalty will result.
The litigation team! should calculate the full economic benefit
and gravity components and then decide whether any of the
adjustment factors applicable to wither coponent are
appropriates. The final penalty obtained shuld never be lower
than the penalty calculated under this policy taking into account
all appropriate adjustment factors including litigation risk and
inability to pay.
All consent agreeents should state that penalties paid
-------
pursuant to this penalty policy are not decutible for federal tax
purposes under 28 U.S.C. § 162(f).
The procudures set out in this document are intended solely
for the guidance of government personnel. They are not intended
and cannot be relied upon to create rights, substantive or
procedural, enforceable by any party in litigation with the
United States. The Agency reserves the right to act at variance
with this policy and to change it at any time without public
notice.
This penalty policy is effective immediately with respect to
all cases in which the first penalty offer has not yet been
transmitted to the opposing party.
II. THE PRELIMINARY DETERRENCE AMOUNT
The February 16, 1984, Policy on Civil Penalties establishes
deterrence as an important goal of penalty assessment. More
specifically, it says that any penalty should, at a minimum,
remove any significant economic benefit resulting from
noncompliance. In addition, it should include an amount beyond
recovery of the economic benefit to reflect the seriousness of
the violation. That portion of the penalty which recovers the
economic benefit of noncompliance is referred to as the "economic
benefit component;" that part of the penalty which reflects the
seriousness of the violation is referred to as the "gravity
component." When combined, these two components yield the
"preliminary deterrence amount."
This section provides guidelines for calculating the
economic benefit component and the gravity component. It will
also discuss the limited circumstances which justify adjusting
either component.
A. THE ECONOMIC BENEFIT COMPONENT
In order to ensure that penalties recover any significant
economic benefit of noncompliance, it is necessary to have
reliable methods to calculate that benefit. The existence of
reliable methods also strengthens the Agency's position in both
litigation and negotiation. This section sets out guidelines for
computing the economic benefit component. It first addresses
costs which are delayed by noncompliance. Then it addresses
costs which are avoided completely by noncompliance. It also
-------
identifies issues to be considered when computing the economic
benefit component for those violations where the benefit of
noncompliance results from factors other than cost savings. The
section concludes with a discussion of the limited circumstances
where the economic benefit component may be mitigated.
1. Benefit from delayed costs
In many instances, the economic advantage to be derived from
noncompliance to achieve compliance. For example, a facility
which fails to install a scrubber will eventually have to spend
the money needed to install the scrubber in order to achieve
compliance. But, by deferring these capital costs until EPA or a
State takes an enforcement action, that facility has achieved an
economic benefit. Among the types fo violations which may result
in savings from deferred cost are the following:
Failure to install equipment needed to meet emission
control standards.
Failure to effect process changes needed to reduce
pollution.
Failure to test where the test still must be performed.
Failure to install required monitoring equipment.
The economic benefit of delayed compliance should be
computed using the "Methodology for Computing the Economic
Benefit of Noncompliance," which is Technical Appendix A of the
BEN User's Manual. This document provides a method for computing
the economic benefit of noncompliance based on a detailed
economic analysis. The method is a refined version of the method
used in the previous Civil Penally policy issued July 8,1980,
for the Clean Water Act and the Clean Air Act. Ben is a computer
program available to the Regions for performing the analysis .
Questions concerning the BEN model should be directed to he
Program Development and Training Branch in the office of
Enforcement, FTS 475-6777.
2. Benefit from avoided costs
Many types of violations enable a violator to avoid
permanently certain costs associated with compliance. These
include cost savings for:
-------
Disconnecting or failing to properly operate and
maintain existing pollution control equipment (or other
equipment if it affects pollution control).
Failure to employ a sufficient number of adequately
trained staff.
Failure to establish or follow precautionary methods
required by regulations or permits.
Removal of pollution equipment resulting in process,
operational, or maintenance savings.
Failure to conduct a test which is no longer required.
Disconnecting or failing to properly operate and
maintain required monitoring equipment.
Operation and maintenance of equipment that the
violator failed to install.
The benefit from avoided costs must also be computed using
methodology in Technical Appendix A of the BEN User's Manual.
The benefit from delayed and avoided costs is calculated
together, using the Ben computer program, to arrive at an amount
equal to the economic benefit of noncompliance for the period
from the first provable date of violation until the date of
compliance.
As noted above, the BEN model may be used to calculate only
the economic benefit accruing to a violator through delay or
avoidance of the costs of complying with applicable requirements
of the Clean Air Act and its implementing regulations. There are
instances in which the BEN methodology either cannot compute or
will fail to capture the actual economic benefit of
noncompliance. In those instances, it will be appropriate for
the Agency to include in its penalty analysis a calculation of
the economic benefit in a manner other than that provided for in
the Ben methodology.
hi some instances this may include calculating an including
in the economic benefit component profits from illegal
activities. An example would be a source operating without a
preconstruction review permit under PSD/NSR regulations or
-------
without an operating permit under Title V. In such a case, an
additional calculation wold be performed to determine the present
value of these illegal profits which would be added to the Ben
calculation for the total economic benefit component. Cae must
be taken to account for the preassessed delayed or avoided costs
included in the Ben calculation when calculating illegal profits.
Otherwise, these costs could be assessed twice. The delayed or
avoided costs already accounted for in the BEN calculation should
be subtracted from any calculation of illegal profits.
3. Adjusting the Economic Benefit Component
As noted above, settling for an amount which does not
recover the economic benefit of noncompliance can encourage
people to wait until EPA or the State begins an enforcement
action before complying. For this reason, it is general Agency
policy not to adjust or mitigate this amount. There are three
general circumstances (described below) in which mitigating the
economic benefit component may be appropriate. However, in any
individual case where the Agency decides to mitigate the economic
benefit component, the litigation team must detail those reasons
in the case file and in any memoranda accompanying the
settlement.
Following are the limited circumstances in which EPA can
mitigate the economic benefit component of the penalty:
a: Economic benefit component involves insignificant
amount
Assessing the economic benefit component and subsequent
negotiations will often represent a substantial commitment of
resources. Such a commitment may not be warranted in cases where
the magnitude of the economic benefit component is not likely to
be significant because it is not likely to have substantial
financial impact on the violator. For this reason, the
litigation team has the discretion not to seek the economic
benefit component where it is less than $5,000. In exercising
that discretion, the litigation team should consider the
following factors:
Impact on violator: The likelihood that assessing the
economic benefit component as part of the penalty will
have a noticeable effect on the violator's competitive
position or overall profits. If no such effect appears
-------
likely, the benefit component should probably not be
pursued.
The size of the gravity component: If the gravity
component is relatively small, it may not provide a
sufficient deterrent, by itself, to achieve the goals
of this policy. In situations like this, the
litigation team should insist on including the economic
benefit component in order to develop an adequate
penalty.
b. Compelling public concerns
The Agency recognizes that there may be some instances where
there are compelling public concerns that would not be serviced
by taking a case to trial. In such instances, it may become
necessary to consider mitigating the economic benefit component.
This may be done only if it is absolutely necessary to preserve
the countervailing public interests. Such settlement might be
appropriate where the following circumstances occur:
The economic benefit component may be mitigated where
recovery wold result hi plant closings, bankruptcy, or
other extreme financial burden, and there is an
important public interest in allowing the firm to
continue in business. Alternative payment plans, such
as installment payments with interest, should be fully
explored before resorting to this option. Otherwise,
the Agency will give the perception that shirking one's
environmental responsibilities is a way to keep a
failing enterprise afloat. This exemption does not
apply to situations where the plant was likely to close
anyway, or where there is a likelihood of continued
harmful noncompliance.
The economic benefit component may also be mitigated in
enforcement actions against nonprofit public entities,
such as municipalities and publicly-owned utilities,
where assessment threatens to disrupt continued
provision of essential public services.
c. Concurrent Section 120 administrative action
EPA will not usually seek to recover the economic benefit
of noncompliance from one violation under both a Section 113(b)
-------
civil judicial action or 113(d) civil administrative action and a
Section 120 action. Therefore, if a Section 120 administrative
action is pending or has ben concluded against a source for a
particular violation and an administrative or judicial penalty
settlement amount is being calculated for the same violation, the
economic benefit component need not include the period of
noncompliance covered by the Section 120 administrative action.
In these cases, although the agency will not usually seek
double recovery, the litigation team should not automatically
mitigate the economic benefit component by the amount assessed in
the Section 120 administrative action. The Clean Air Act allows
dual recovery of the economic benefit, and so each case must be
considered no its individual merits. The Agency may mitigate the
economic benefit component in the administrative or judicial
action if the litigation team determines such a settlement is
equitable and justifiable. The litigation team should consider
in making this decision primarily whether the penalty calculated
without the Section 120 noncompliance penalty is a sufficient
deterrent.
B. THE GRAVITY COMPONENT
As noted above, the Policy on Civil Penalties specifies that
a penalty, t to achieve deterrence, should recover any economic
benefit or noncompliance, and should also include an amount
reflecting the seriousness of the violation. Section 113(e)
instructs courts to take into consideration hi setting the
appropriate penalty amount several factors including the size of
the business, the duration of the violation, and the seriousness
of the violation. These factors are reflected in the "gravity
component." This section of the policy establishes an approach
to quantifying the gravity component.
Assigning a dollar figure to represent the gravity of the
violations is a process which must, of necessity, involve the
consideration of a variety of factors and circumstances. Linking
the dollar amount of the gravity component to these objective
factors is a useful way of insuring that violations of
approximately equal seriousness are treated the same way. These
objective factors are designed to reflect those listed in Section
113(e)oftheAct.
The specific objective factors in this civil penalty policy
designed to measure the seriousness of the violation and reflect
-------
the considerations listed in the Clean Air Act are as follows:
Actual or possible harm: This factor focuses on whether
(and to what extent) the activity of the defendant
actually resulted or was likely to result in the
emission of a pollutant in violation of the level
allowed by an applicable State Implementation Plan,
federal regulation or permit.
Importance to the regulatory scheme: This factor
focuses on the importance of the requirement to
achieving the goals of the Clean Air Act and its
implementing regulations. For example, the NSPS
regulations require owners and operators of new sources
to conduct emissions testing and report the results
within a certain time after start-up. If a source
owner or operator does not report the test results, EPA
wold have no way of knowing wether that source is
complying with NSPS emissions limits.
Size of violator: The gravity component should be
increased, in proportion to the size of the violator's
business.
The assessment of the first gravity component factor listed
above, actual or possible harm arising from a violation, is a
complex matter. For purposes of determining how serious a given
violation is, it is possible to distinguish violations based on
certain considerations, including the following:
Amount of pollutant: Adjustments based on the amount of
the pollutant emitted are appropriate.
Sensitivity of the environment: this factor focuses on
where the violation occurred. For example, excessive
missions in a nonattainment area re usually more
serious than excessive emissions in an attainment area.
Toxicity of the pollutant: Violations involving toxic
pollutants regulated by a National Emissions Standard
for Hazardous Air Pollutants (NESHAP) or listed under
Section 112(b)(l) of the Act are more serious and
should result in larger penalties.
The length of time a violation continues: Generally, the longer a
-------
violation continues unconnected, the greater the risk of harm.
Size of violator: A corporation's size is indicated by its
stockholder's equity or "net worth." This value, which is
calculated by adding the value of capital stock, capital surplus,
and accumulated retained hearings, corresponds to the entry for
"worth" in the Dun and Bradstreet reports for publicly traded
corporations. The simpler bookkeeping methods employed by sole
proprietorships and partnerships allow determination of their
size on the basis of net current assets. Net current assets are
calculated by subtracting current liabilities from current
assets.
The following dollar amounts assigned to each factor should
be added together to arrive at the total gravity component:
1. Actual or possible harm
a. Level of violation
Percent Above Standards Dollar Amount
1-30%
$5,000
31-60%
10,000
61-90%
15,000
91-120%
20,000
121-150%
25,000
151-180%
30,000
-------
181-210%
35,000
211-240%
40,000
241-270%
45,000
271-300%
50,000
over 300%
50,000 + $5,000 for each 30% or
fraction of 30% increment above the
standard
This factor should be used only for violations of emissions
standards. Ordinarily the highest documented level of violation
should be used. If that level, in the opinion of the litigation
team, is not representative of the period of violation, then a
more representative level of violation may be used. If that
level, in the opinion of the litigation team, is not
representative of the period of violation, then a more
representative level of violation may be used. This figure
should be assessed for each emissions violation. For example, if
a source which emits particulate matter is subject to both an
opacity standard and a mass emission standard and is in violation
of both standards, this figure should for both violations.
b. Toxicity of the pollutant
Violations of NESHAPs emission standards not handled by a
separate appendix and non-NESHAP emission violations involving
pollutants listed in Section 112(b)(l) of the Clean Air Act
Amendments of 19904: $15,000 for each hazardous air pollutant for
which there is a violation.
c. Sensitivity of environment (for SIP and NSPS cases
only).
-------
The penalty amount selected should be based on the status of
the air quality control district in question with respect to the
pollutant involved in the violation.
1. Nonattainment Areas
I. Ozone:
Extreme $18,000
Severe 16,000
Serious 14,000
Moderate 12,000
Marginal 10,000
ii. Carbon Monoxide and Particulate Matter:
Serious $14,000
Moderate 12,000
iii. All Other Criteria Pollutants: $10,000
2. Attainment area PSD Class I: $10,000
3. Attainment area PSD Class II or III: $5,000
d. Length of tune of violation
To determine the length of time of violation for purposes of
calculating a penalty under this policy, violations should be
assumed to be continuous from the first provable date of
violation until the source demonstrates compliance if thee have
been no significant process or operational changes. If the
source has affirmative evidence, such as continuous emission
monitoring data, to show that the violation was not continuous,
appropriate adjustments should be made. In determining the
length of violation, the litigation team should take full
advantage of the presumption regarding continuous violation in
Section 113(e)(2). This figure should be assessed separately for
each violation, including procedural violations such as
monitoring, recordkeeping and reporting violations. For example,
if a source violated an emissions standard, a testing
requirement, and a reporting requirement, three separate length
of violation figures should be assessed, one for each of the
-------
three violations based on how long each was violated.
Months
0-1
2-3
4-6
7-12
13-18
19-24
25-30
31-36
37-42
43-48
49-54
55-60
Dollars
$5,000
8,000
12,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
2. Importance to the regulatory scheme
The following violations are also very significant in the
regulatory scheme and therefore require the assessment of the
following penalties:
Work Practice Standard Violations:
-failure to perform a work practice requirement:
$10,000-15,000
(See Appendix III for Asbestos NESHAP violations.)
Reporting and Notification Violations:
-failure to report or notify: $15,000
-late report or notice: $5,000
-incomplete report or notice: $5,000 - $15,000
(See Appendix III for Asbestos NESHAP violations.)
Recordkeeping Violations:
-failure to keep required records: $15,000
-incomplete records: $5,000 - $15,000
Testing Violations:
-failure to conduct required performance testing or testing using
an improper test method: $15,000
-late performance test or performing a required test method using
an incorrect procedure: $5,000
Permitting Violations:
-failure to obtain an operating permit: $15,000
-------
-failure to pay permit fee: See Section 502(b)(3)(c)(ii) of the
Act
Emission Control Equipment Violations:
-failure to operate and maintain control equipment required by
the Clean Air Act, its implementing regulations or a permit:
$15,000
-intermittent or improper operation or maintenance of control
equipment: $5,000-15,000
Monitoring Violations:
-failure to install monitoring equipment required by the clean
Air Act, its implementing regulations or a permit: $15,000
-late installation of required monitoring equipment: $5,000
-failure to operate and maintain required monitoring equipment:
$15,000
Violations of Administrative OrdersS: $15,000
Section 114 Requests for Information Violations:
-failure to respond: $15,000
-incomplete response: $5,000 - $15,000
Compliance Certification Violations:
-failure to submit a certification: $15,000
-late certifications: $5,000
-incomplete certifications: $5,000 - $15,000
Violations of Permit Schedules of Compliance:
-failure to meet interim deadlines: $5,000
-failure to submit progress reports: $15,000
-incomplete progress reports: $5,000 - $15,000
-late progress reports: $5,000
A penalty range is provided for work practice violations to
allow Regions some discretion depending on the severity of the
violation. Complete disregard of work practice requirements
should be assessed the full $15,000 penalty. Penalty ranges are
provided for incomplete notices, reports, and recordkeeping to
allow the Regions some discretion depending on the seriousness of
the omissions and how critical they are to the regulatory
program. If the source omits information in notices, reports or
records which document the source's compliance status, this
omission should be treated as a failure to meet the requirement
-------
and assessed $15,000.
A late notice, report or test should be considered a failure
to notify, report or test I the notice or report is submitted or
the test is performed after the objective of the requirement is
no longer served. For example if a source is required to submit
a notice of a test so that EPA may observe he test, a notice
received after the test is performed should be considered a
failure to notify.
Each separate violation under this section should be
assessed the corresponding penalty. For example, a NSPS source
may be required to notify EPA at startup and be subject to a
separate quarterly reporting requirement thereafter. If the
source fails to submit the initial start-up notice and violates
the subsequent reporting requirement, then the source should be
assessed $15,000 under this section for each violation. In
addition, a length of violation figure should be assessed for
each violation based on how long each has ben violated. Also, a
figure reflecting the size of the violator should be assessed
once for the case as a whole. If, however, the source violates
the same reporting requirement over a period of time, for example
by failing to submit quarterly reports for one year, the source
should be assessed one $15,000 penalty under this section for
failure to submit a report. In addition, a length of violation
figure of $15,000 for 12 months of violation and a size of the
violator figure should be assessed.
3. Size of the violator
Net worth (corporations); or net current assets
)partnerships and sole proprietorships):
Under $100,000 $2,000
$100,00141,000,000 5,000
1,000,001-5,000,000 10,000
5,000,001-20,000,000 20,000
20,000,001-40,000,000 35,000
40,000,001-70,000,000 50,000
70,000,001-100,000,000 70,000
over 100,000,000 70,000 + $25,000 for every additional
$30,000,000 or fraction thereof
In the case of a comppany with more than one facility, the
size of the violator is determined basd no the company's entie
-------
operation, not just the violatign gacility. With regard to
paretn and subsidiary corporations, only the size of the entity
sued shuld be considered. Where the size of the violator figure
represents over 50% of the total preliminary deterrence amount,
the litigation team may reduce the size of the violator figure to
50% of the preliminary deterrence amount.
The process by which the gravity component was computed must
be memorialized inthe case file. Combining the econoic benefit
component with the gravity component yields the preliminary
deterrence amount.
4. Adjusting the Gravity Component
The second goal of the Policy on Civil Penalties is the
equitable treatment of the regulated commuity. One important
mechanism for promoting equitable treatment of the regulated
community. One important mechnaism for promoting equitable
treatment is to include the economic benefit component discused
above in a civil penalty assessment. This approach prevents
violators from benefitting economically from their noncompliance
relative to paries which have complied with environmental
requirements.
In addition, in order to promote equity, te system for
penalty assessmsnet must bhave enough flexibility to account for
the unique facts of each case. Yet it still must produce
consistent enough rsults to ensure similarly-situated violators
are treated similarly. This is accomplished by identifying many
of the legitimate differences between cases and providing
guidelines for how to adjust the gravity component amount when
those facts occur. The application of these adjustments to the
gravity component prior to the commencement of negotiation yields
the initial minimum settlement amount. During the course of
negotiation, the litigation team may further adjust this figure
based on new information learned during negotiations and
discovery to yield the adjusted minimum settlement amount.
The purpose of this section is to establish adjustment
factors which promote flexibility while maintaining national
consistency. It sets guidelines for adjusting the gravity
component which account for some factors that frequently
distinguish different cases. Those factors are: degree of
willfulness or negligence, degree of cooperation, history of
noncompliance, and environmental damage. These adjustment
-------
factors apply only to the gravity component and not to the
economic benefit component. Violators bear the burden of
justifying mitigation adjustments they propose. The gravity
component may be mitigated only for degree of cooperation as
specified in II.B.4.b. The gravity component may be aggravated
by as much as 100% for the other factors discussed below: degree
of willfulness or negligence, history of noncompliance, and
environmental damage.
The litigation team is required to base any adjustment of
the gravity component on the factors mentioned and to carefully
document the reasons justifying its application in the particular
case. The entire litigation team must agree to any adjustments
to the preliminary deterrence amount. Members of the litigation
team are responsible for ensuring their management also agrees
with any adjustments to the penalty proposed by the litigation
team.
a. Degree of Willfulness of Negligence
This factor may be used only to raise a penalty. The Clean
Air Act is a strict liability statute for civil actions, so that
willfulness, or lack thereof, is irrelevant to the determination
of legal liability. However, this does not render the violator's
willfulness or negligence irrelevant in assessing an appropriate
penalty. Knowing or willful violations can give rise to criminal
liability, and the lack of any negligence or willfulness would
indicate that no addition to the penalty based on this factor is
appropriate. Between these two extremes, the willfulness or
negligence of the violator should be reflected in the amount of
the penalty.
In assessing the degree of willfulness or negligence, all of
the following points should be considered:
The degree of control the violator had over the events
constituting the violation.
The foreseeability of the events constituting the
violation.
The level of sophistication within the industry in
dealing with compliance issues or the accessibility of
appropriate control technology (if this information is
readily available). This should be balanced against the
-------
technology-forcing nature of the statute, where
applicable.
The extent to which the violator in fact knew of the
legal requirement which was violated.
b. Degree of Cooperation
The degree of cooperation of the violator in remedying the
violation is an appropriate factor to consider in adjusting the
penalty. In some cases, this factor may justify aggravation of
the gravity component because the source s not making efforts to
come into compliance and is negotiating with the agency is ad
faith or refusing to negotiate. This factor may justify
mitigation of the gravity component in the circumstances
specified below where the violator institutes comprehensive
corrective action after discovery of the violation. Prompt
correction of violations will be encouraged if the violator
clearly sees that it will be financially disadvantageous to
litigate without remedying noncompliance. EPA expects all
sources in violation to come into compliance expects all sources
in violation to come into compliance expeditiously and to
negotiate in good faith. Therefore, mitigation based on this
factor is limited to no more than 30% of the gravity component
and is allowed only in the following three situations:
1. Prompt reporting of noncompliance
The gravity component may be mitigated when a source
promptly reports its noncompliance to EPA or the state or local
air pollution control agency where there is no legal obligation
to do so.
2. Prompt correction of environmental problems
The gravity component may also be mitigated where a source
makes extraordinary efforts to avoid violating an imminent
requirement or to come into compliance after learning of a
violation. Such efforts may include paying for extra work shifts
or a premium on a contract to have control equipment installed
sooner or shutting down the facility until it is operating in
compliance.
3. Cooperation during pre-filing investigation
-------
Some mitigation may also be appropriate in instances where
the defendant is cooperative during EPA's pre-filing
investigation of the source's compliance status or a particular
incident.
c. History of Noncompliance
This factor may be used only to raise a penalty. Evidence
that a party has violated an environmental requirement before
clearly indicates that the party was not deterred by a previous
governmental enforcement response. Unless one of the violations
was caused by factors entirely out of the control of the
violator, the penalty should be increased. The litigation team
should check for and consider prior violations under all
environmental statutes enforced by the Agency in determining the
amount of the adjustment to be made under this factor.
In determining the size of this adjustment, the litigation
team should consider the following points:
Similarity of the violation in question to prior
violations.
Time elapsed since the prior violation.
The number of prior violations
Violator's response to prior violation(s) with regard
to correcting the previous problem and attempts to
avoid future violations.
The extent to which the gravity component has already
been increased due to a repeat violation. (For
example, under the Asbestos Demolition and Renovation
Penalty Policy in Appendix III.)
A violation should generally be considered "similar" if a
previous enforcement response should have alerted the party to a
particular type of compliance problem. Some facts indicating a
"similar violation" are:
Violation of the same permit.
Violation of the same emissions standard.
-------
Violation at the same process points of a source.
Violation of the same statutory or regulatory
provision.
A similar act or omission.
For purposes of this section, a "prior violation" includes
any act or omission resulting in a State, local, or federal
enforcement response(e.g., notice of violation warning letter,
administrative order, field citation, complaint, consent decree,
consent agreement, or administrative and judicial order) under
any environmental statute enforced by the Agency unless
subsequently dismissed or withdrawn on the grounds that the party
was not liable. It also includes any act or omission for which
the violator has previously been given written notification,
however informal, that the regulating agency believes a violation
exists. In researching a defendant's compliance history, the
litigating team should check to see if the defendant has been
listed pursuant to Section 306 of the Act.
In the case of large corporations with many divisions or
wholly-owned subsidiaries, it is sometimes difficult to determine
whether a prior violation by the parent corporation should
trigger the adjustments described in this section. New ownership
often raises similar problems. In making this determination, the
litigation team should ascertain who in the organization
exercised or had authority to exercise control or oversight
responsibility over the violative conduct. Where the parent
corporation exercised or had authority to exercise control over
the violative conduct, the parent corporation's violations should
be considered part of the subsidiary or division's compliance
history.
In general, the litigation team should begin with the
assumption that if the same corporation was involved, the
adjustment for history of noncompliance should apply, In
addition, the team should be wary of a party changing operations
or shifting responsibility for compliance to different groups as
a way of avoiding increased penalties. The Agency may find a
consistent pattern of noncompliance by many divisions or
subsidiaries of a corporation even though the facilities are at
different geographic locations. This often reflects, at best, a
corporate-wide indifference to environmental protection.
Consequently, the adjustment for history of noncompliance should
-------
apply unless the violator can demonstrate that the other
violating corporate facilities are under totally independent
control.
d. Environmental Damage
Although the gravity component already reflects the amount
of environmental damage a violation causes, the litigation team
may further increase the gravity component based on severe
environmental damage. As calculated, the gravity component takes
into account such factors as the toxicity of the pollutant, the
attainment status of the area of violation, the length of time
the violation continues, and the degree to which the source has
exceeded an emission limit. However, there may be cases where
the environmental damage caused by the violation is so severe
that he gravity component alone is not a sufficient deterrent,
for example, a significant release of a toxic air pollutant in a
populated area. In these cases, aggravation of the gravity
component may be warranted.
III. LITIGATION RISK
The preliminary deterrence amount, both economic benefit and
gravity components, may be mitigated in appropriate circumstances
based on litigation risk. Several types of litigation risk may
be considered. For example, regardless of the type of violations
a defendant has committed or a particular defendant's
reprehensible conduct, EPA can never demand more in civil
penalties than the statutory maximum (twenty-five thousand
dollars per day per violation). In calculating the statutory
maximum, the litigation teams should assume continuous
noncompliance from the first date of provable violation (taking
into account the five year statute of limitation) to the final
date of compliance where appropriate, fully utilizing the
presumption of Section 113(e)(2). When the penalty policy yields
an amount over the statutory maximum, the litigation team should
propose an alternative penalty which must be concurred on by
their respective management just like any other penalty.
Other examples of ligation risks would be evidentiary
problems, or an indictment from the court, mediator, or
Administrative Law Judge during settlement negotiations that he
or she is prepared to recommend a penalty below the minimum
settlement amount. Mitigation based on the concerns should
consider the specific facts, equities, evidentiary issues or
-------
legal problems pertaining to a particular case as well as the
credibility of government witnesses.
Adverse legal precedent which the defendant argues is
indistinguishable from the current enforcement action is also a
valid litigation risk. Cases raising legal issues of first
impression should be carefully chosen to present the issue fairly
in a factual context the Agency is prepared to litigate.
Consequently in such cases, penalties should generally not be
mitigated due to the risk the court may rule against EPA. If an
issue of first impression is litigated and EPA's position is
upheld by the court, the mitigation was not justified. If EPA's
position is upheld by the curt, the mitigation was not justified.
If EPA's position is not upheld, it is generally better that the
issue be decided than to avoid resolution by accepting a low
penalty. Mitigation based on litigation risk should be carefully
documented and explained in particular detail. In judicial cases
this should be done in coordination with the Department of
Justice.
IV. ABILITY TO PAY
The Agency will generally not request penalties that re
clearly beyond the means of the violator. Therefore, EPA should
consider the ability to pay a penalty in adjusting the
preliminary deterrence amount, both gravity component and
economic benefit component. At the same time, it is important
that the regulated community not see the violation of
environmental requirements as a way of aiding a financially-troubled business. EPA reserves the
option, in appropriate
circumstances, of seeking a penalty that might contribute to a
company going out of business.
For example, it is unlikely that EPA would reduce a penalty
where a facility refuses to correct a serious violation. The
same could be said for a violator with a long history of previous
violations. That long history would demonstrate that less severe
measures are ineffective.
The litigation team should asses this factor after
commencement of negotiations only if the source raises it as an
issue and only if the source provides the necessary financial
information to evaluate the source's claim. The source's ability
to pay should be determined according to the December 16,1986
Guidance on Determining a Violator's Ability to Pay a Civil
-------
Penalty (GM-56) along with any other appropriate means.
The burden to demonstrate inability to pay, as with the
burden of demonstrating the presence of any other mitigating
circumstances, rests on the defendant. If the violator fails to
provide sufficient information, then the litigation team should
disregard this factor in adjusting the penalty. The Office of
Enforcement Policy has developed the capability to assist the
Regions in determining a firm's ability to pay. This is done
through the computer program, ABEL. If ABEL indicates that the
source may have an inability to pay, a more detailed financial
analysis verifying the ABEL results should be done prior to
mitigating the penalty.
Consider delayed payment schedule with interest: When EPA
determines that a violator cannot afford the penalty prescribed
by this policy, the next step is to consider a delayed payment
schedule with interest. Such a schedule might even be contingent
upon an increase in sales or some other indicator of improved
business. EPA's computer program, ABEL, can calculate a delayed
payment amount for up to five years.
Consider straight penalty reductions as a last recourse: If
this approach is necessary, the reasons for the litigation team's
conclusion as the size of the necessary reduction should be
carefully documented in the case file.6
Consider joinder of a corporate violator's individual
owners: This is appropriate if joinder is legally possible and
justified under the circumstances. Joinder is not legally
possible for SIP cases unless the prerequisite of Section 113 of
the Clean Air Act has been met — issuance of an NOV to the
person.
Regardless of the Agency's determination of an appropriate
penalty amount to pursue based on ability to pay considerations,
the violator is always expected to comply with the law.
V. OFFSETTING PENALTIES PAID TO STATE AND LOCAL GOVERNMENTS OR
CITIZEN GROUPS FOR THE SAME VIOLATIONS
Under Section 113(e)(l), the court in a civil judicial
action or the Administrator in a civil administrative action must
consider in assessing a penalty "payment by the violator of
penalties previously assessed for the same violation." While EPA
-------
will not automatically subtract any penalty amount paid by a
source to a State or local agency in an enforcement action or to
a citizen group in a citizen suit for the same violation that is
the basis for EPA's enforcement action, the litigation team may
do so if circumstances suggest that it is appropriate. The
litigation team should consider primarily whether the remaining
penalty is a sufficient deterrent.
VI. SUPPLEMENTAL ENVIRONMENTAL PROJECTS
The February 12, 1991 Policy on the Use of Supplemental
Environmental Projects in EPA Settlements must be followed when
reducing a penalty for such a project in any Clean Air Act
Settlement.
VII. CALCULATING A PENALTY IN CASES WITH MORE THAN ONE TYPE OF
VIOLATION
EPA often takes an enforcement action against a stationary
source for more than one type of violation of the Clean Air Act.
The economic benefit of noncompliance with all requirements
violated should be calculated. Next, the gravity component
factors under actual or possible harm and importance to the
regulatory scheme which are applicable should be calculated
separately for each violation. The size of the violator factor
should be figured only once for all violations.
For example, consider the case of a plant which makes
laminated particle board. The particle board plaint is found to
emit particulate in violation of the SIP particulate emission
limit and the laminating line which laminates the particle board
with a vinyl covering is found to emit volatile organic compounds
in violation of the SIP VOC emission limit. The penalty or the
particulate violation should be calculated figuring the economic
benefit of not complying with that limit (capital cost of
particulate control, etc., determined by running the BEN computer
model), and then the gravity component for this violation should
be calculated using all the factors in the penalty policy. After
the particulate violation penalty is determined, the VOC
violation should be calculated as follows: the economic benefit
should be calculated for the VOC violation using all the
applicable factors under actual or possible harm and importance
to the regulatory scheme. The size of the violator factor should
be figured only once for both violations.
-------
Another example would be a case where, pursuant to Section
114, EPA issues a request for information to a source which emits
SO2, such as a coal-burning boiler. The source does not respond.
Two months later, EPA issues an order under Section 113 (a)
requiring the source to comply with the Section 114 letter. The
source does to respond. Three months later, EPA inspects the
source and determines that the source is violating the SIP SO2
emission limit.
In this case, separate economic benefits should be
calculated, if applicable. Thus, if the source obtained any
economic benefit from not responding to the Section 114 letter or
obeying the Section 113 (a) order, that should be calculated. If
not, only the economic benefit from the SO emission violation
should be calculated using the BEN computer model. In
determining the gravity component, the penalty should be
calculated as follows:
1. Actual or possible harm
a. level of violation - calculate for the emission violation only
b. toxicity of pollutant - applicable to the emission
violation only
c. sensitivity of environment - applicable to the emission violation only
d. length of time of violation - separately calculate
the time for all three violations. Note the Section
114 violation continues to run even after the Section
113(e) order is issued until the Section 114
requirements are satisfied.
2. Importance to regulatory scheme
Section 114 request for information violation - $15,000
Section 113 administrative order violation - $15,000
3. Size of violator
a. One figure based on the source's assets.
VIII.APPORTIONMENT OF THE PENALTY AMONG MULTIPLE DEFENDANTS
This policy is intended to yield a minimum settlement
-------
penalty figure for the case as a whole. In many cases, there may
be more than one defendant. In such instances, the Government
should generally take the position of seeking a sum for the case
as a whole, which the defendants allocate among themselves.
Civil violations of the Clean Air Act are strict lability
violations and it is generally not in the government's interest
to get into discussions of the relative fault of the individual
defendants. The government should therefore adopt a single
settlement figure for the case and should not reject a settlement
consistent with the bottom line settlement figure because of the
way the penalty is allocated.
Appointment of the penalty in a multi-defendant case may be
required if one party is willing to settle and others are not.
In such circumstances, the government should take the position
that if certain portions of the penalty are attributable to such
party (such as economic benefit or aggravation due to prior
violations), that party should pay those amounts and a reasonable
portion of the amounts not directly assigned to any single party.
If the case is settled as to one defendant, a penalty not less
than the balance of the settlement figure for the case as a whole
must be obtained from the remaining defendants.
There are limited circumstances where the Government may try
to influence apportionment of the penalty. For example, if one
party has a history of prior violations, the Government may try
to assure that party pays the amount the gravity component has
been aggravated due to the prior violations. Also, if one party
is known to have realized all or most of the economic benefit,
that party may be asked to pay that amount.
IX. EXAMPLES
Example 1
I. Facts:
Company A runs its manufacturing operations with power
produced by its own coal-fired boilers?. The boilers are major
sources of sulfur dioxide. The State Implementation Plan has a
sulfur dioxide emission limitation for each boiler of .68 Ibs.
Per million B.T.U. The boilers were inspected by EPA on March
19,1989, and the SO2 emission rate was 3.15 Ibs. Per million
B.T.U for each boiler. A NOV was issued for the SO2 violations
on April 10, 1989. EPA again inspected Company A on June 2, 1989
-------
and found the SO2 emission rate to be unchanged. Company A had
never installed any pollution control equipment on its boilers,
even though personnel from the state pollution control agency had
contacted Company A and informed it that the company was subject
to state air pollution regulations. The state had issued an
administrative order on September 1,1988 for SO2 emission
violations at the same boilers. The order required compliance
with applicable regulations, but Company A had never complied
with the state order. Company A is located in a nonattainment
area for sulfur oxides. Company A has net current assets of
$760,000. Company A's response to an EPA Section 114 request for
information documented the first provable day of violation of the
emission standard as July 1,1988.
II. Computation of penalty
A. Economic benefit component
EPA used the BEN computer model in the standard mode to
calculate the economic benefit component. The economic benefit
component calculated by the computer model was @243,500.
B. Gravity component
1. Actual or possible harm
a. Amount of pollutant: between 360-390%
above standard - $65,000
b. Toxicity of pollutant: not applicable.
c. Sensitivity of the environment: nonattainment -
$10,000
d. Length of time of violation: Measured
from the date of first provable
violation, July 1,1988 to the date of
final compliance under a consent decree,
hypothetically December 1, 1991. (If
consent decree or judgment order is
filed at a later date, this element, as
well as elements in the economic benefit
component must be recalculated.) 41 mos.
- $40,000
-------
2. Importance to regulatory scheme.
No applicable violations.
3. Size of violator: net assets of $760,000 -
$5,000
$243,500 economic benefit component
+120,000 gravity component
$363,500 preliminary deterrence amount
C. Adjustment Factors
1. Degree of willfulness/negligence
Because Company A was on notice of its
violations and, moreover, disregarded the
state administrative order to comply with
applicable regulations, the gravity component
in this example should be aggravated by some
percentage based on this factor.
2. Degree of Cooperation
No adjustments were made in the category
because Company A did not meet the criteria.
3. History of noncompliance
The gravity component should be aggravated by
some percentage for this factor because
Company A violated the state order issued for
the same violation.
Initial penalty figure: $353,500 preliminary deterrence
amount plus adjustments for history of noncompliance and degree
of willfulness or negligence.
Example 2:
I. Facts
Company C, located in a serious nonattainment area for
particulate matter, commenced construction in January 1988. It
began its operations in April 1989. It runs a hot mix asphalt
-------
plant subject to the NSPA regulations at 40 C.F.R. Part 60,
Subpart I. Subpart I requires that emissions of particulate not
exceed 90 mg/dscm (.04 gr/dscf) nor exhibit 20% opacity or
greater. General NSPS regulations require that a source owner or
operator subject to a NSPS fulfill certain notification and
recordkeeping functions (40 C.F.R. § 60.7), and conduct
performance tests and submit a report of the test results (40
C.F.R. § 60.8).
Company C failed to notify EPA of: the date it commenced
construction within 30 days after such date (February 1988)(40
C.F.R. § 60.7(a)(l)); the date of anticipated start-up between
30-60 days prior to such date (March, 1989)(40 C.F.R. §
60.7(a)(2)); or the date of actual start-up within 15 days after
such date (April, 1989) (40 C.F.R. § 60.7(a)(3). Company C was
required under 40 C.F.R. § 60.8(a) to test within 180 days of
start-up, or by October 1989. The company finally conducted the
required performance test in September 1990. The test showed the
plant to be emitting 120 mg/dscm of particles and to exhibit 30%
opacity.
Company C did submit the required notices in November 1989
in response to a letter from EPA informing it that it was subject
to NSPS requirements. It did negotiate with EPA after the
complaint was filed in September 1991, and agreed to a consent
decree requiring compliance by December 1, 1991. Company C has
assets of $7,000,000.
II. Computation of penalty
A. Benefit component
The Region determined after calculation that the economic
benefit component was $90,000 for violation of the emissions
standard according to the BEN computer calculation. The
litigation team determined that the economic benefit from the
notice and testing requirement was less than $5,000. Therefore,
the litigation team has discretion not to include this amount in
the penalty consistent with the discussion at II.A.3.3.
B. Gravity component
1. Actual or possible harm
a. Actual of pollutant:
-------
I. mass emission standard: 33% above
standard-$10,000
ii. opacity standard: 50% over standard
-$10,000
b. Toxicity of pollutant: not applicable
c. Sensitivity of the environment serous
nonattainment - $14,000
d. Length of time of violation
1) Performance testing: October, 1989
- September 1990: 12 months -
$15,000
2) Failure to report commencement of
construction: February 1988 -
November 1989: 21 months (date of
EPA's first letter to Company) -
$25,000
3) Failure to report actual start-up:
April, 1989 - November 1989: 7
months-$15,000
4) Failure to repot date of
anticipated startup between 30-60
days prior to such date: March,
1989 - November 1989: 8 months -
$15,000
5) Mass Emission Standard Violation:
September 1990 - December 1991: 15
months - $20,000
6) Opacity Violation: September 1990 -
December 1991: 15 months - $20,000
2. Importance to regulatory scheme:
Failure to notify 40 C.F.R. § 60.7(a)(l) - $15,000
Failure to notify 40 C.F.R. § 60.7(a)(2) -
$15,000
-------
Failure to notify 40 C.F.R. § 60.7(a)(3) -
$15,000
Failure to conduct required performance test
40 C.F.R. § 60.8(a) - $15,000
3. Size of violator: Net current Assets -
$7,000,000 - $20,000
$ 90,000 economic benefit component
224,000 gravity component
$314,000 preliminary deterrence amount
C. Adjustment factors
1. Degree of willfulness/negligence
No adjustments were made based on willfulness in
this category because there was no evidence that
Company C knew of the requirements prior to
receiving the letter from EPA. Specific evidence
may suggest that the company's violations were due
to negligence justifying an aggravation of the
penalty on that basis.
2. Degree of Cooperation
No adjustments were made in this category because
Company C did not meet the criteria.
3. History of noncompliance
The gravity component should be aggravated by an
amount agreed to by the litigation team for this
factor because the source ignored two letters from
EPA informing them of the requirements.
Example 3:
I. Facts
Chemical Inc. Operates a mercury cell chlor-alkali plant
which produced chlorine gas. The plant is subject to regulations
under the National Emissions Standard for Hazardous Air
Pollutants (NESHAP) for mercury, 40 C.F.R. Part 61, Subpart E.
On September 9,1990, EPA inspectors conducted an inspection of
-------
the facility, and EPA required the source to conduct a stack test
pursuant to Section 114. The stack test showed emissions at a
rate of 3000 grams of mercury per 24-hour period. The mercury
NESHAP states that emissions from mercury cell chlor-alkali
plants shall not exceed 2300 grams per 24-hour period. The
facility has been in operation since June 1989.
In addition under 40 C.F.R. § 61.53, Chemical Inc. Either
had to test emissions from the cell room ventilation system
within 90 days of the effective date of the NESHAP or follow
specified approved sign, maintenance and housekeeping practices.
Chemical Inc. has never tested emissions. Therefore, it has
committed itself to following the housekeeping requirements. At
the inspection, EPA personnel noted the floors of the facility
were badly cracked and mercury droplets were found in several of
the cracks. The inspectors noted that the mercury in the floor
cracks was caused by leaks from the hydrogen seal pots and
compressor seals which housekeeping practices require be
collected and confined for further processing to collect mercury.
A follow up inspection was conducted on September 30, 1990 and
showed that all of the housekeeping requirements were being
observed.
Chemical Inc. will have to install control equipment to come
into compliance with the emissions standard. A complaint was
filed in June 1991. The equipment was installed and operational
by June 1992. A consent decree was entered and penalty paid in
February 1992. Chemical Inc. has a net corporate worth of
$2,000.000.
II. Calculation of Penalty
A. Economic Benefit Component
the delay in installing necessary control equipment from
June 1989 to June 1992 as calculated using the BEN computer model
resulted in an economic benefit to Chemical Inc. Of $35,000.
B. Gravity Component
1. Actual or possible harm
a. Amount of pollutant: 30 % above the
standard - $5,000
-------
b. Toxicity of pollutant: $ 15,000 for
violations involving a NESHAP
c. Sensitivity of the environment: not
applicable
d. Length of time of violation:
1) Emissions violation: 22 mos. -
$25,000
2) Work Practice violation: 1 mo. -
$5,000
2. Importance to regulatory scheme.
Failure to perform work practice requirements
-$15,000
3. Size of Violator: net worth of $2,000,000 -
$10,000
$35,000 economic benefit component
+75,000 gravity component
$110,000 preliminary deterrence amount
C. Adjustment Factors
1. Degree of willfulness/negligence
It is unlikely Chemical Inc. would not be aware of
the NESHAP requirements. Therefore, an adjustment
should probably be made for this factor.
2. Degree of Cooperation
No adjustments made because Chemical Inc. Did not
meet the criteria.
3. History of Compliance
No adjustments were made because Chemical Inc. Had
no prior violations.
X. CONCLUSION
-------
Treating similar situations in a similar fashion is central
to the credibility of EPA's enforcement effort and to the success
of achieving the goal of equitable treatment. This document has
established several mechanisms to promote such consistency. Yet
it still leaves enough flexibility for tailoring the penalty to
still leaves enough flexibility for tailoring the penalty to
particular circumstances. Perhaps the most important mechanisms
for achieving consistency are the systematic methods for
calculating the benefit component and gravity component of the
penalty. Together, they add up to the preliminary deterrence
amount. The document also sets out guidance on uniform
approaches for applying adjustment factors to arrive at an
initial amount prior to beginning settlement negotiations or an
adjusted amount after negotiations have begun.
Nethertheless, if the Agency is to promote consistency, it
is essential that each case file contain a complete description
of how each penalty was developed as required by the August 9,
1990 Guidance on Documenting Penalty Calculations and
Justifications in EPA Enforcement Actions. This description
should cover how the preliminary deterrence amount was calculated
and any adjustments made to the preliminary deterrence amount.
It should also describe the facts and reasons which support such
adjustments. Only through such complete documentation can
enforcement attorneys, program staff and their managers learn
nfrom each other's experience and promote the firness required by
the Policy on Civil Penalties.
-------
FOOTNOTES
1. In these actions, EPA will normally seek the penalty amount
dictated by the stipulated penalty provisions of the consent
decree. If a consent decree contains no stipulated penalty
provisions, the case development team should propose penalties
suitable to vindicate the authority of the Court.
2. With respect to civil judicial cases, the litigation team
will consist of the Assistant Regional Counsel, the Office of
Enforcement attorney, he Assistant United States Attorney, the
Department of Justice attorney from the Environmental Enforcement
Section, and EPA technical professional assigned to the case.
With respect to administrative cases, the litigation team will
generally consist of the EPA technical professional and Assistant
Regional Counsel assigned to the case. The recommendation of the
litigation team must be unanimous. If a unanimous position
cannot be reached, the matter should be escalated and a decision
made by EPA and the Department of Justice managers, as required.
3. Compliance is equivalent to 0% above the emission standard.
4. An example of a non-NESHAP violation involving a hazardous
air pollutant would be a violation of a volatile organic compound
(VOC) standard in a State Implementation Plan involving a VOC
contained in the Section 112(b)(l) list of pollutants for which
no NESHAP has yet been promulgated.
5. This figure should be assessed even if the violation of the
administrative order is also a violation of another requirement
of the Act, for example a NESHAP or NSPS requirement. In this
situation, the figure for violation of the administrative order
is in addition to appropriate penalties for violating he other
requirement of the Act.
6. If a firm fails to pay the agreed to penalty in a final
administrative or judicial order, then the Agency must follow the
procedures outlined in the February 6, 1990 Manual on Monitoring
and Enforcing Administrative and Judicial Orders for collecting
the penalty amount.
7. Note that a penalty is assessed for the entire facility and
not for each emission unit. In this example, the source has
several boilers. However, the penalty figures are not multiplied
by the number of boilers. The penalty is based on the violations
-------
at the facility as a whole, specifically the amount of pollutant
factor and length of violation factor are assessed once based on
the amount of excess emissions at the facility from all the
boilers.
-------
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON D.C. 20460
JAN 17 1992
MEMORANDUM
SUBJECT: Clarification to the October 25, 1991 Clean Air Act
Stationary Source Civil Penalty Policy
FROM: John B. Rasnic, Director (Signature)
Stationary Source Compliance Division
Office of Air and Radiation
Michael S. Alushin, Enforcement Counsel (Signature)\
Air Enforcement Division
Office of Enforcement
TO: Addressees
As a result of the many comments and suggestions received
during the Administrative Enforcement Training in Chicago on
November 5-6,1991, we would like to clarity several issues
regarding the October 25, 1991 Clean Air Act Stationary Source
Civil Penalty Policy. In addition to the addresses, we are
distributing this clarification memorandum to all those who
attended the training in Chicago.
We would like to clarify that the toxicity of pollutant and
sensitivity of the environment figures o the gravity component
apply only to violations of emissions standards and to work
practice or technology standards that re serving as emissions
standards. In addition, the length of violation figure of the
gravity component is based on the number of actual days of
violation, not calendar months. The number of actual days of
violation should be counted and divided by thirty to determine
the number of months. Any portion of a thirty day period should
be counted as another month. In addition, any days over a
calendar year should be counted as another month (i.e., 368 days
should be counted as 13 months).
Several Regions questioned which enforcement forum would be
appropriate where a portion of the violation occurred over twelve
-------
months from the initiation of the enforcement action. In
determining whether the action may be pursued administratively,
EPA may never drop viable causes of action. However, if some
portion of he alleged violating occurred over 12 months prior to
filing of the complaint, the portion of those violations which
occurred over 12 months prior to filing of the complaint may be
disregarded and the case may be pursued administratively with the
following qualification. This can only be done where no caused
of action are dropped and the resulting preliminary deterrence
amount (PDA) is at least 90% of the PDA calculated with the
entire length of all violations included.
One Region suggested that Headquarters adopt an air-specific
Supplemental Environmental Projects (SEP) policy. Both the
Stationary Source Compliance Division (SSCD) and Air Enforcement
Division (AED) will work next year to develop such a policy which
will include examples of appropriate air SEPs. Supplemental
Environmental Projects which are appropriate under the current
Office of Enforcement guidance may be included in consent
agreements and final orders (CAFOs) in administrative actions.
As one Region suggested, this could be done by conditionally
remitting a portion of an assessed penalty by requiring in the
CAFO that the defendant pay that portion offset by the SEP unless
all the actions required by the SEP are performed by a certain
date. The burden is always on the defendant to establish that
the SEP has been fully complied with. Actions which the
respondent must take to come into compliance can not be addressed
in the CAFO but must be addressed through 113 (a) administrative
compliance orders or a civil judicial action under 113(b) in
accordance with the October 29, 1991 "Guidance on Choosing the
Appropriate Forum in Clean Air Act Stationary Source Civil
Enforcement."
The penalty policy requires that members of the litigation
team are responsible for ensuring their management agrees with
any adjustment to the PDA. We would like to emphasize that each
member of the litigation team must keep formal documentation of
management concurrence in his or her case file. The
documentation of management concurrence must include a signature
on the penalty calculation worksheet (or similar document) by the
first line supervisor of the team members.
Finally, attached are three replacement pages which correct
Example 3. The original example incorrectly left out a length of
violation figure for the work practice violation. The
-------
appropriate length of violation figure should always be assessed
for each violation.
Several suggestions which were made have not yet been
adopted but are under consideration. We will evaluate the
implementation of the revised penalty policy after one year. To
the extent changes in the policy are warranted, we will
reconsider the unincorporated suggestions at that time.
Several Regions disagreed with Example 1 in the policy
because it only calculates the gravity component once even though
the emissions standard applies to each individual boiler and was
violated at several boilers at the same facility. The Regions
believed the gravity component should be calculated separately
for each violation at each boiler. SSCD and AED have decided to
maintain the position that in instances where a particular
regulation applies to each individual emissions unit and the
standard is violated at several emissions units, the gravity
component is calculated only once for the entire facility. The
main reason for this is a concern that calculating for each
emissions unit separately would lead to unrealistically high
penalties. Nonetheless, several factors will result in a higher
penalty or these multiple unit violations. The economic benefit
as calculated by BEN should be significantly higher if the
standard is being violated at more than one emissions unit. The
level of violation figure of the gravity component will also
generally be higher if the standard is being violated at more
than one emissions unit. Of course, the violation at each boiler
would be separately alleged in the complaint.
One Region suggested that the policy should allow the
litigation team to mitigate the gravity component by as much as
15% for degree of cooperation anytime the defendant is wiling to
settle. The penalty policy still takes the position that EPA
expects every source to negotiate in good faith and come into
compliance expeditiously and doing so does not justify
mitigation. The litigation team still has room to negotiate
under the policy. The penalty plead I the administrative
complaint is generally the unmitigated preliminary deterrence
amount. Therefore, any mitigation justified under the policy may
take place during negotiations to reach a settlement. Also, the
penalty plead in the administrative complaint is to be based on
the most aggressive assumptions supported by the facts available
eat that time concerning such factors as length of violation and
level of violation. These factors may be recalculated if
-------
defendants demonstrate that they are inaccurate.
If you have any questions about these changes, please
contact us or Scott Throwe in SSCD at FTS 678-8699 or Elise
Hoerath in AED at FTS 260-2843 or (202) 260-2843.
Attachment
Addresses: Regional Administrators, Regions I-X
Regional Counsels, Regions I-X
Air Management Division Director
Region I
Air and Waste Management Division Director
Region II
Air, Toxics and Radiation Management Division
Director
Region III
Air, Pesticides, and Toxics Management Division
Director
Region IV
Air and Radiation Division Director
Region V
Air, Pesticides, and Toxics Division Director
Region VI
Air and Toxics Division Director
Regions VII, VIII, DC and X
Bruce Rothrock, OCAPO
Robert Heiss, OCAPO
Jonathan Libber, OCAPO
John Cruden, Chief
Environmental Enforcement Section
U.S. Department of Justice
-------
Bill Becker
STAPPA-ALAPCO
cc: Scott S.Fulton
Acting Deputy Assistant Administrator
Office of Enforcement
Robert Van Huevelen
Acting Director of Civil Enforcement
John Seitz, Director
Office of Air Quality Planning and Standards
-------
APPENDIX I
Penalty Policy for Violations of Certain Clean Air Act Permit
Requirements for the Construction or
Modification of Major Stationary Sources of Air Pollution
I. Introduction
EPA's Clean Air Act Stationary Source Civil Penalty Policy
applies generally to stationary sources of air pollution which
violate requirements enforceable under Section 113 of the Clean
Air Act when such violations are the result of a failure to make
capital expenditures and or failure to employ operation and
maintenance procedures which are necessary to achieve compliance.
The general policy does not, however, specifically address
violations of permit requirements related to the construction or
modification of major stationary sources under the prevention of
significant deterioration (PSD) program and the nonaetainment
area new source review program.
This document outlines a penalty policy which applies to
certain permit-related violations of the Clean Air Act and
provides a method of calculating a minimum settlement amount for
such violations. This "Permit Penalty Policy" was originally
issued in February 1981 to deal with a subject area not covered
by the 1980 penalty policy. It has been revised for inclusion in
the-1987 policy to reflect more realistic penalty amounts.
As illustrated by the examples, a source may have violated a
new source requirement which makes it subject to this Permit
Penalty Policy, and, in addition, violated a regulation subject
to the general policy or another appendix. If this is the case,
the Permit Penalty Policy should be used to find the minimum
settlement figure for the permit violation(s) and the general
policy or applicable appendix should be used to establish a
penalty amount for the other violation(s). These two figures
should be added together to produce an appropriate overall
settlement amount. It is also important to note that the policy
outlined in this document, Like the general stationary source
civil penalty policy, is used to set a minimum settlement figure.
Therefore, the penalty actually negotiated for can always be
higher than the figure derived through use of this Permit Penalty
Policy.
II. The Permit Penalty Policy
-------
The Permit Penalty Policy covers cases involving a sources
which begin construction or operation without first obtaining the
required PSD or nonattainment new source permit, as well as those
which construct or operate in violation of such valid permits.
Construction proceeding in compliance with an invalid permit is
considered to be, in the context of thin penalty policy,
construction without a permit.
In these cases, when the source is operating and has enjoyed
an economic benefit from noncompliance, that benefit -should be
calculated as directed in the general stationary source civil
penalty policy. As directed by the general policy, however, the
Regional Office may decide not to calculate the economic benefit
if that office decides that the economic benefit is likely to be
below $5,000. The gravity component is then calculated based on
the matrix contained in this permit penalty policy. Construction
in the absence of a permit or in violation of a permit has been
assigned a scale of dollar values on a matrix. The matrix also
provides for the assessment of an additional penalty for certain
specified violations of substantive permit preconditions or
requirements. The appropriate dollar value for a violation is
dependent on an estimate of the total cost of air pollution
control at those facilities of the source for which the permit is
required. I/ This value is then multiplied by the number of
months of violation.2/ When there are multiple permit-related
violations, a penalty figure is calculated for each violation and
the individual penalty figures are added together to produce one
minimum settlement figure. In those cases where a source subject
to a valid permit violates only the requirements of Section
173(1) and/or Section 173(3) (requirements for construction
permits in nonattainment areas), the appropriate penalty amount
is determined by reference only to the matrix column(s) citing
the violation(s).
The economic benefit component and the gravity component are
added together to determine the preliminary deterrence amount.
This initial amount should then be adjusted, using the general
stationary source civil penalty policy factors which take into
consideration individual equitable considerations -(Part III of
the general policy.) This will yield the initial penalty figure.
The period of civil penalty liability will, of course,
depend upon the nature and circumstances of the violation. For
example, if a source has begun actual construction without a
required permit or under an invalid permit, the penalty period
-------
begins on the date the source began construction and continues
either until the source obtains a-valid permit, notifies the
State or EPA that it-has permanently ceased construction and the
project has been abandoned, or the State issues a federally
enforceable construction permit containing operating restrictions
which keep the source below the new source review applicability
threshold.3/ A temporary cessation in construction does not toll
the running of the penalty period. The Agency may, however,
consider mitigation of the calculated civil penalty if a source
ceases construction within a reasonable time after being notified
of the violation and does not resume construction until a valid
permit is issued. If a source violates a permit condition, the
period of penalty liability for purposes of calculating a
settlement figure begins on the-first date the violation can be
documented and will cease when the violation is corrected.
EPA realizes that in certain cases, it is highly unlikely
that the Agency will be able to obtain the full amount of the
initial penalty figure in litigation. This may be due to
applicable precedent, competing public interest considerations,
or the specific facts, equities, or evidentiary issues pertaining
to a particular case. In such a situation it-is unrealistic to
expect EPA to-obtain a penalty settlement which it could not
achieve through Litigation. The litigation team must- receive the
approve-L of the Associate Enforcement Counsel for Air in order
to propose settling for Less than the minimum penalty amount from
the matrix because of litigation practicalities.
-------
PERMIT PENALTY POLICY MATRIX
MINIMUM SETTLEMENT FIGURES
(per month of violation)
PSD SOURCES
TOTAL COST OF AIR
POLLUTION CONTROL
FOR NEW OR MODIFIED
SOURCE ($ THOUSANDS)
CONSTRUCTION OR
OPERATION WITHOUT A
PERMIT OR IN
VIOLATION OF A VALID
PERMIT
INCREMENT
EXCEEDED
less than 50
50-150
150-500
500-1,500
1,500-5,000
5,000-15,000
15,000-50,000
over 50,000
$2,000
4,000
7,000
11,000
16,000
22,000
29,000
37,000
$7,000
11,000
16,000
18,000
2,000
25,000
31,000
-------
39,000
PART D AND OFFSET INTERPRETATIVE RULING SOURCES
TOTAL COST OF
AIR POLLUTION
CONTROL FOR
NEW OR
MODIFIED
SOURCE ($
THOUSANDS)
CONSTRUCTION
OR OPERATION
WITHOUT A
PERMIT OR IN
VIOLATION OF A
VALID PERMIT
FAILURE TO
SATISFY §
173(1) OR
OBTAIN OFFSETS
VIOLATION OF
SECTION 173(3)
OR CONDITION 2
less than 50
50-100
150-500
500-1,500
1,500-5,000
5,000-15,000
15,000-50,000
over 50,000
$2,000
4,000
7,000
-------
11,000
16,000
22,000
29,000
37,000
$3,000
4,000
6,000
9,000
11,000
13,000
15,000
17,000
$2,000
3,000
4,000
4,000
5,000
7,000
11,000
12,000
(Add numbers when multiple categories apply)
-------
EXAMPLE CASES
The following hypothetical cases illustrate how the matrix is
used to calculate a minimum settlement figure.
PSO SOURCE
I. Facts
On July 1, 1985, an existing major source began construction
of a modification to its plywood manufacturing plant. The
modification will result in a significant net emission increase
of particulate matter. The source had not obtained or filed for a
PSD permit as of the date construction began.
On July 2, 1985, EPA investigators discovered the
construction during a routine inspection of the plywood plant.
The EPA Regional Office determined that the modification was
subject to PSD review and issued a Notice of Violation on August
1, 1985. The NOV cited the PSD regulations and outlined possible
enforcement alternatives.
The source received the NOV on August 5, 1985, and contacted
the Regional Office on August 10,1985. On August 30,1985, the
Region and the source held a conference at which the source
stated that it had been aware of the need for PSD review and
permitting prior to construction. The source also stated that it
would file an application for a permit but that it would not
cease construction during the review process.
On October 1,1985, the source filed a PSD application.
During the review process the Region discovered that the source
had no plans to install pollution control devices. The Region
also determined that without BACT, the modification's particulate
emissions would result in an exceedance of the particulate matter
increment in the source's area of impact. The source, when
informed of the BACT problem, indicated it would install the
necessary controls.
However, throughout the review process the source continued
construction of the modification. On December 1 1985, the source
began operation of the modified source without the required
permit and without controls.
On January 15, 1986; the source was issued a PSD permit. On
-------
February 28, 1986, the source ceased operation of the plywood
plant to connect the pollution control equipment called for in
the PSD permit. The source resumed operation on March 15,1986 in
a manner consistent with the PSD permit conditions.
II. Computation of Penalty
A. Benefit Component
The penalty calculation beg~ns with a calculation of the
economic benefit of noncompliance (using the BEN model) for the
period of operation without a permit (December 1, 1985 -January
15, 1986). BEN calculated a penalty of $6,400.
B. Gravity Component
This component of the penalty is calculated by initially
assessing the total cost of air pollution control equipment at
the modification. For purposes of this example, assume BACT costs
$140.000.
Next, the PSD Matrix must be consulted and the type and
number of matrix categories determined, hi this example the
source (1) began construction without a permit, (2) operated the
plant without a PSD permit and (3) exceeded the growth increment
for particulate matter. Therefore, this source is subject to both
of the columns of dollar values under the heading "PSD Sources."
Once the type, number and dollar values of the penalty are
determined, these figures are multiplied by the number of months
in violation. The sums are then added together to "produce the
matrix penalty &mount.
In this example, the source's period of construction without
a permit runs from July 1, 1985, until operations began on
December 1,1985 (5 months). The period of operation without a
permit runs from the time the source began operation (December 1,
1985) to the date the source received a permit (January 15,1986)
(2 months). The source also exceeded the area growth increment
for particulate matter during the period of operation from
December 1, 1985, to February 28, 1986 (3 months).4/
-------
The matrix penalty figure for this source's PSD related
violations, based on a $140,000 total cost of control estimate,
is:
for the 5 month period of construction without a
permit, 5 x $4,000 = $20,000
- for the 2 month period of operation without a permit,
2 x $4,000 = $8,000
for the 3.month period of operation during which the
increment was exceeded, 3 x 11,000 = $33,000
matrix penalty figure =
$20,000 + $8,000 + $33,000 = $61,000
This is added to the economic benefit component
$ 6,400 economic benefit
61,000 gravity
$67,400 preliminary deterrence amount.
C. Adjustment Factors
1. Degree of willfulness/negligence
Because the source knew it needed a PSD permit and commenced
construction without applying for a PSD permit, the gravity
component is increased 10%
10% of $61,000 = $6,100
2. Degree of cooperation
No adjustment
3. History of noncompliance
No past history-of noncompliance
4. Ability to pay
No adjustment here because the source did not provide EPA
with financial information indicating inability to pay.
-------
Total Penalty
$67,400 preliminary deterrence amount
+ 6,100 adjustment
$73,500 initial minimum penalty figure
The source paid the U.S. Treasury 573,500.
Section 173 and Offset Policy Sources
I. Facts
On December 1, 1984, a plywood manufacturing company began
operation of a modification at its plant which is located in a
nonattainment area for particulate matter. The modification is
subject to new source review permitting and, in fact, the source
has obtained a valid NSR permit from the ~ State. The permit
specifies 1) that the applicant has demonstrated that all other
major stationary source owned or operated by the applicant in the
State are in compliance with the Act, 2) what constitutes
required LAER, and 3) what offsets (internal)5/.would be required
to be obtained prior to start-up or commencement of operation.
(These requirements are found in Section 173 of the Clean Air
Act.)
In March of 1985, the Regional Office learned that the
source did not install controls on a certain piece of process
equipment and therefore did not have LAER as specified in the
State permit. On April 1,1985, the Region issued an NOV for
failure to comply with the terms of the permit by not installing
LAER prior to start-up. At an April 15, 1985, conference between
EPA and the source, the source agreed to meet the terms of its
permit and to demonstrate compliance. On November 15, 1985, the
equipment had been installed and a performance demonstration
showed that the source was in compliance-with the LAER limit
specified in the permit.
II. Computation of Penalty
A. Benefit Component
The BEN model determined that the economic benefit from
operating without LAER controls from December 1,1984 until
November 15, 1985 was $63,400.
-------
B. Gravity Component
First the cost of the pollution control equipment must be
determined. In this case, LAER costs $110,000. Since the
plant operated from December-1, 1984 until November 15, 1985
without LAER, the period of violation is 12 months. The
matrix yields a gravity component of 12 x 4,000 - $48,000.
The other two categories of the NSR matrix need not be used
because there were no violations in these categories.
The gravity component is-added to the economic benefit
component
$63,000 economic benefit
+ 48,000 gravity
$111,400 preliminary deterrence amount
C. Adjustment factors
1. Degree of willfulness
No adjustment here. At the NOV conference, EPA learned
that the company had had serious, but temporary economic
reverses that prevented it fro~n installing the control
equipment.
2. Degree of cooperation
No adjustments here.
3. History of compliance
No past history of noncompliance.
4. Ability to pay
No adjustment here because the company had reversed
its financial losses and was currently financially healthy.
Total penalty - initial penalty target figure same as
preliminary deterrence amount.
Because the State had intervened in the case and had
gathered the evidence of violation, the U.S. split the
penalty with the State.
-------
The Company paid $55,700 to the U.S. treasury ant $55,700 to
the State,
-------
FOOTNOTES
I/ "Total cost of air pollution control" should include, where
relevant, pollution control equipment costs, design costs,
operation and maintenance costs, differential cost of complying
fuel v. noncomplying fuel, and other costs pertaining to adequate
control of the new source. Total cost is to be determined by
examination of what would have been required as BACT (for a PSD
violation) or LAER (int he case of an Offset Policy or Part D
violation). When construction is done in phases, the operative
amount is the total cost of air pollution controls for the entire
project. If a source has installed partial control before the
enforcement action commenced, that part of the cost can be
subtracted from the total costs.
2. Month-by-month accrual of penalties was selected for purposes
of convenience and for consistency with the general policy. Any
fraction of a month is violation is counted as a full month of
violation unless circumstances present a case for mitigation this
rule.
3. The period of liability is not be be confused with the period
of continuing violation for Section 113 notice of violation (NOV)
purposes. A source which constructs without a valid permit is in
continuing violation of the Clean Air Act for NOV purposes until
it receives a valid permit or it dismantles the new construction.
4. It is important to note that some aspects of the matrix do
not necessarily track the statutory provision regarding
violations. For example, there is no Clean Air Act provision
which makes increment exceedance, in an of itself, a violation by
an individual source. (The SIP must protect the increment. The
method used in PSD review with permit conditions such as BACT,
fuel use limitations, etc.) However, as a portion of the gravity
component, considering the seriousness of the violation if a
source operates and thereby violates the increment due to failure
to go through PSD review as required, and added penalty in
appropriate.
5. In light of the Supreme Court decision in Chevron U.S.A. Inc.
v. NRDC, U.S. , 104 S. Ct. 2778 (1984), a state may choose
to adopt a plant-wide definition of source in nonattainment
areas. In such instances, sources obtaining internal offsets may
be exempt from nonattainment new source review requirements.
-------
APPENDIX II
Vinyl Chloride Civil Penalty Policy
The attached chart shall be used to determine the gravity
component of the civil penalty settlement amount for cases
enforcing the National Emission Standard for Vinyl Chloride. It
is to be used in Lieu of the scheme for determining the gravity
component set forth in the general Clean Air Act Stationary
Source Civil Penalty Policy.
The settlement penalty for vinyl chloride cases, as for
other Clean Air Act cases, consists of a gravity component and an
economic benefit component. Adjustments for degree of willfulness
or negligence, degree of cooperation/noncooperation, history of
noncompliance, ability to pay, "other unique factors," and
litigation practicalities should be made, if appropriate, in
accordance with the Stationary Source Civil Penalty Policy.
The gravity component of the penalty reflects the
seriousness of the violation. A separate scheme was developed for
vinyl chloride cases because several of the factors in the
general policy, such as length or time of violation, whether the
area is primary non-attainment, and level of violation as a
percentage above the standard largely do not apply to vinyl
chloride cases. Also, the hazardous nature of the pollutant and
the difficulty in determining economic benefit are reflected by
establishing a substantial gravity component.
The vinyl chloride gravity component is therefore tied to
the amount of vinyl chloride released in a given incident, which
is used as a measure of the seriousness of each violation. Also,
for relief valve discharges, manual vent valve discharges, and 10
ppm violations, an adjustment factor is to be used to account for
excessive frequency of discharges in a given time, which is a
reflection of poor performance regardless of the amount of vinyl
chloride discharged to the atmosphere. The frequency adjustment
factor differs from the adjustment factor for history of
noncompliance, which reflects violations occurring prior to those
which are the subject of the current enforcement action.
The chart is to be applied as follows: For each violation,
assign a dollar amount based on the type and magnitude of
violation as described in the chart. Relief valve discharges,
manual vent valve discharges and violations of 10 ppm standards
-------
should then be grouped by calendar years. If the number of these
violations is three or more in any calendar year, the total
penalty for that period should be multiplied by the appropriate
"frequency adjustment factor." The total gravity component for
the case is the sum of the penalty numbers for each violation,
adjusted where appropriate to account for excessive frequency.
The settlement penalty for the case as a whole cannot exceed the
statutory maximum of $25,000 per day per violation. Sample
calculations are attached to this policy.
The economic benefit component may be impractical to
determine in vinyl chloride cases, depending on the nature of the
violations. The benefit component should be determined if
feasible, e.g., where a pattern of violations indicates a need
for specific technology, equipment, or procedures, or where the
defendant has chosen a "fix" to address a series of violations.
This revised policy shall apply to all pending and future
vinyl chloride cases.
-------
Relief Valve Discharges, Manual Vent Valve Discharges, Violations
of 10 ppm Standards
Emissions
Pounds of VC released
Penalty
0-100
>100 - 2000
>2000 - 5000
>5000 - 7500
>7500 -10,000
over 10,000
$1000
2000
5000
10,000
15,000
25,000
Frequency Adjustment Factors
# of Violations in Calendar Year
Multiplier
3
4+
1.5
2
Failure to Report
Size of Release Not Reported (Ibs.)
Penalty
0-100
100- 500
-------
500 - 1000
1000 - 2000
over 2000
$2000
6000
10,000
20,000
25,000
Graduated scale for late reporting (if not in response to direct
request from State or EPA) - 10-day discharge reports (as
percentage of penalty for failure to report)
Within 2 months (from discharge) 25% of penalty
2-4 months 50% " "
4-6 months 75% " "
over 6 months 100%" "
-------
Stripping Violations and Reactor Opening Loss Violations
Stripping
Magnitude of Violation
Suspension/Latex
Dispersion
Penalty
400-500ppm
500-600
600-700
700-800
800-900
900-1200
1200-1400
1400-1600
over 1600
2000-2500 ppm
2500-3000
3000-3500
3500-4000
4000-4500
4500-6000
6000-7000
7000-8000
over 8000
$1000
2000
3000
4000
5000
10000
15000
20000
25000
-------
Reactor Opening Loss
Penalty = $1000/violation (for each reactor)
Failure to Measure
Penalty = Maximum penalty amount for each type of violation
= $25000 (stripping)
= $1000 (reactor opening loss)
Failure to Submit Complete Semiannual Report
Penalty = $25,000
Graduated scale for late semiannual report (if not in response to
direct request from state to EPA)
Within 2 months $6,250
2-4 months 12,500
4-6 months 18,750
Over 6 months 25,000
-------
Example 1
ABC Chemical Corporation owns a polyvinyl chloride plant in
Louisiana. The United States has filed an enforcement action
alleging relief valve discharge violations, failure to report
relief valve discharges, reactor opening violations, and
stripping violations. The settlement penalty is determined as
follows:
Gravity Component
Relief Valve Discharges Penalty/Discharge
July 6,1981 446 Ibs. $2,000
August 15, 1981 1250 Ibs $2,000 x 1.5 = $7,500
November 30,1981 46 Ibs $1,000
March 17, 1982 127 Ibs $2,000 x 1 = $12,000
July 15, 1982 6271 Ibs $10,000
Subtotal for Relief Valve Discharges $ 19,500
Failure to Report
Failed to report July 6,1981 discharge $5,000
Report August 15, 1981 discharge 1
Month late - 25% x $20,000 5,000
Subtotal for reporting $ 10,000
Reactor Opening Loss Violations
77 reactor opening loss violations $77,000
Stripping Violations (Suspension)
January 17, 1982 556 ppm $2,000
July 10, 1982 421 ppm $1,000
August 19, 1982 494 ppm $1,000
Subtotal for stripping $4,000
Total Gravity Component $ 110,500
-------
Benefit Component
None determined
Preliminary deterrence amount $ 110,500
Adjustments
Negligence
Add 30% of gravity component - emission
violations generally due to
repetition of same cause
+ 30% (110,500) +$33,150
Minimum penalty settlement amount $ 143,65 0
-------
Example 2
Polynesian Polymers, Inc., owns a polyvinyl chloride plant
in Texas. The United States has filed an enforcement action
alleging relief valve and manual vent valve discharge violations,
reporting violations, and reactor opening loss violations. The
settlement penalty is determined as follows:
Gravity Component
Relief Valve and Manual Vent Valve Discharges
Penalty/Discharge
July 6, 1983 271 Ibs $2,000
July 15, 1983 621 Ibs 2.000
August 21, 1983 710 Ibs. 2,000
November 1, 1983 6,221 Ibs. 10,000 x 2 + 32,000
January 17, 1984 7,721 Ibs 15,000
X 1 + 17,000
November 30, 1984 526 Ibs 2,000
January 14, 1985 2,771 Ibs 5,000
July 19, 1985 4 Ibs 1,000 x 1.5 + 12,000
December 21, 1985 172 Ibs 2,000
Subtotal for Relief Valve Discharges $61,000
Failure to Report
Failed to report Nov. 1, 1984 discharge $25,000
Failed to report Nov. 30, 1984 discharge 10,000
Subtotal for reporting $35,000
-------
Reactor Opening Loss Violations
214 reactor opening loss violations $214,000
Total Gravity Component $310,000
Benefit Component
Economic benefit of delay in installing
"clean reactor" technology-deemed
necessary to comply with reactor
opening loss standard (BEN calculations) $100,000
Preliminary deterrence amount $410,
000
Adjustments
History of Noncompliance
Add 30% of subtotal for reporting violations;
cited for similar violations at his plant
in action under the Clean Water Act + 10,500
No other adjustments
Minimum penalty settlement amount $420,500
-------
APPENDIX III
ASBESTOS DEMOLITION AND RENOVATION CIVIL PENALTY POLICY
Revised: May 5, 1992
The Clean Air Act Stationary Source Civil Penalty Policy
("General Penalty Policy") provides guidance for determinating
the amount of civil penalties EPA will seek in pre-trial
settlement of civil judicial actions under Section 113 (b) of the
Clean Air Act ("the Act"). In addition, the General Penalty
Policy is used by the Agency in determinating an appropriate
penalty in administrative penalty actions brought under Section
113 (d)(l)of the Act. Due to certain unique aspects of asbestos
demolition and renovation cases, this Appendix provides separate
guidance for determining the gravity and economic benefit
components of the penalty. Adjustment factors should be treated
in accordance with the General Penalty Policy.
This appendix is to be used for settlement purposes in civil
judicial cases involving asbestos NESHAP demolition and
renovation violations, but the Agency retains the discretion to
seek the full statutory maximum penalty in all civil judicial
cases which do not settle. In addition, for administrative
penalty cases, the Appendix is to be used in conjunction with the
General Penalty Policy to determine an appropriate penalty to be
pled in the administrative complaint, as well as serving as
guidance for settlement amounts in such cases. If the Region is
referring a civil action under Section 113(b) against a
demolition or renovation source, it should recommend a minimum
civil penalty settlement amount in the referral. For
administrative penalty cases under Section 113 (d)(1), the Region
will plead the calculated penalty in its complaint. In both
instances, consistent with the General Penalty Policy, the Region
should determine a "preliminary deterrence amount" by assessing
an economic benefit component and a gravity component. This
amount may then be adjusted upward or downward by consideration
of other factors, such as degree of willfulness and/or
negligence, history of noncompliance ability to pay, and
litigation risk.
The "gravity" component should account for statutory
criteria such as the environmental harm resulting from the
violation, the importance of the requirement to the regulatory
1 As discussed in the General Penalty Policy, history of
noncompliance takes into account prior violations of all
environmental statutes. In addition, the litigation team should
consider the extent to which the gravity component has laready
been increased for prior violations by application of this
-------
Appendix.
scheme, the duration of the violation, and the size of the
violator. Since asbestos is a hazardous air pollutant, the
penalty policy generates an appropriately high gravity factor
associated with substantive violations (i.e. failure to adhere
to work practices or to prevent visible emissions from waste
disposal). Also, since notification is essential to Agency
enforcement, a notification violation may also warrant a high
gravity component, except for minor violations as set forth in
the chart for notification violations on page 15.
I. GRAVITY COMPONENT
The chart on pages 15-16 sets forth penalty amounts to be
assessed for notification and waste shipment violations as part
of the gravity component of the penalty settlement figure. The
chart on page 17 sets forth a matrix for calculating penalties
for work-practice, emission and other violations of the asbestos
NESHAP.
A. Notice Violations
1. No Notice
The figures in the first line of the Notification and waste
Shipment Violations chart (pp. 15-16) apply as a general rule to
failure to notify, including those situations in which
substantive violations occurred and those instances in which EPA
has been unable to determine if substantive violations occurred.
If EPA does not know whether substantive violations
occurred, additional information, such as confirmation of the
amount of asbestos in the facility obtained from owners,
operators, or unsuccessful bidders, may be obtained by using
section 114 requests for information or administrative subpoenas.
If there has been a recent purchase of the facility, there may
have been a pre-sale audit of environmental liabilities that
might prove useful. Failure to respond to such a request should
be assessed an additional penalty in accordance with the General
Penalty Policy. The reduced amounts in the second line of the
chart apply only if the Agency can conclude, from its own
inspection, a State inspection, or other reliable information,
that the source probably achieved compliance with all substantive
requirements.
2. Late. Incomplete or Inaccurate Notice
Where notification is late, incomplete or inaccurate, the
-------
Region should use the figures in the chart, but has discretion to
insert appropriate figures in circumstances not addressed in the.
matrix. The important factor is the impact the company's action
has on the Agency's ability to monitor substantive compliance.
B. Work-Practice. Emission and Other Violations
Penalties for work-practice, emissions and other violations
are based on the-particular regulatory requirements violated The
figures on the chart (page 17) are for each day of documented
violations, and each additional day of violation in the case of
continuing violations. The total figure is the sum of the penalty
assigned to a violation of each requirement. Apply the matrix for
each distinct violation of sub-paragraphs of the regulation that
would constitute a separate claim for relief if applicable
(e.g.,§ 61.145(c)(6t(il, (ii), and (iii)).
The gravity component also depends on the amount of asbestos
involved in the operation, which relates to the potential for
environmental harm associated with improper removal and disposal.
There are three categories based on the amount of asbestos,
expressed in "units," a unit being the threshold for
applicability of the substantive requirements. 2 If a job
involves friable asbestos on pipes and other facility components,
the amounts of linear feet and square feet should each be
separately converted to units, and the numbers of units should be
added together to arrive at a total. Where the only information
on the amount of asbestos involved in a particular demolition or
renovation is in cubic dimensions (volume), 35 cubic feet is the
applicability limit which is specified in § 61.145(a) (1) (ii).
Where the facility has been reduced to rubble prior to the
inspection, information on the amount of asbestos can be sought
from the notice, the contract for removal or demolition,
unsuccessful bidders, depositions of the owners and operators or
maintenance personnel, or from blueprints if available. The
Region may also make use of § 114 requests and § 307 subpoenas to
gather information regarding the amount of asbestos at the
facility. If the Region is unable to obtain specific information
on the amount of asbestos involved at the site from the source;,
the Region should use the maximum unit range for which it has
adequate evidence.
Where there is evidence indicating that only part of a demolition
or renovation project involved improper stripping, removal,
disposal or handling, the Region may calculate the number of
units based upon the amount of asbestos reasonably related to
such improper practice. For example, if improper
2 This applicability threshold is prescribed in 61.145(a)(1) as
the combined amount of regulated-asbestos containing material
(RACM) on at least 80 linear meters (260 linear feet) of pipes,
-------
or at least 15 square meters (160 square feet) on other facility
components, or at least 1 cubic meter (35 cubic feet) off
facility components.
removal is observed in one room of a facility, but it's apparent
that the removal activities in the remainder of the facility are
done in full compliance with the NESHAP, the Region may calculate
the number of units for the room rather than the entire facility.
C. Gravity Component Adjustments
I. Second and Subsequent Violations
Gravity components are adjusted based on whether the violation is
a first, second, or subsequent (i.e., third, fourth, fifth, etc.)
offense. 3 A "second" or "subsequent" violation should be
determined to have occurred if, after being notified of a
violation by the local agency, State or EPA at a prior demolition
or renovation project, the owner or operator violates the
Asbestos NESHAP regulations during another project, even if
different provisions oŁ the NESHAP are violated. This prior
notification could range from simply an oral or written warning
to the filing of a judicial enforcement action. Such prior
notification of a violation is sufficient to trigger treatment of
any future violations as second or subsequent violations; there
is no need to have an admission or judicial determination of
liability.
Violations should be treated as second or subsequent offenses
only if the new violations occur at a different time and/or a
different job-site. Escalation of the penalty to the second or
subsequent category should not occur within the context of a
single demolition or renovation project, unless the project is
accomplished in distinct phases or is unusually long in duration.
Escalation of the violation to the second or subsequent category
is required, even if the first violation is deemed to be "minor".
A violation of a § 113(a) administrative order (AO) will
generally be considered a "second violation" given the length of
time usually taken before issuing an AO and should be assessed a
separate penalty in accordance with the General Penalty Policy
If the case involves multiple potential defendants and any one of
them is involved in a second or subsequent offense, the penalty
should be derived based on the second or subsequent offense. In
such instance, the Government should try to get the prior-
offending party to pay the extra penalties attributable to this
factor. (See discussion below on apportionment of the penalty).
3 Continuing violations are treated differently than second or
subsequent violations. See, Duration of Violation, below.
-------
2. Duration of the Violation
The Region should enhance the gravity component of the penalty
according to the chart (p. 17) to reflect the duration of the
violation. Where the Region has evidence of the duration of a
violation or can invoke the benefit of the presumption of
continuing violation pursuant to Section 113(e)(2) of the Act,
the gravity component of the penalty should be increased by the
number of additional days of violation multiplied by the
corresponding number on the chart.
In order for the presumption of continuing noncompliance-to
apply, the Act requires that the owner or operator has been
notified of the violation by EPA or a state pollution control
agency and that a prima facie showing can be made that the
conduct or events giving rise to the violation are likely to have
continued or recurred past the date of notice. When these
requirements have been met, the length of violation should
include the date of notice and each day thereafter until the
violator establishes the date upon which continuous compliance
was achieved.
When there is evidence of an ongoing violation and facts do not
indicate when compliance was achieved, presume the longest period
of noncompliance for which there is any credible evidence and
calculate the duration of the violation based on that date. This
period should include any violations which occurred prior to the
notification date if there is evidence to support such
violations. However, if the violations are based upon the
statutory presumption of continuing violation, only those dates
after notification may be included. When the presumption of
continuing noncompliance can be invoked and there is no evidence
of compliance, the date of completion of the demolition or
renovation should be used as the date of compliance.(U.S. v.
Tzavah Urban Renewal Corp., 696 F. Supp. 1013 (D.N.J. 1988) 4
Where there has been no compliance and the demolition or
renovation activities are ongoing, the penalty should be
calculated as of the date of the referral and revised upon a
completion date or the date upon which correction of the
violation occurs.
Successive violations exist at the same facility when there is
evidence of violations on separate days, but no evidence (or
presumption) that the violations were continuing during the
asbestos west" has been properly disposed.696 F. Supp. at 1019.
intervening days. For example, where there has been more than one
inspection and no evidence of a continuing violation, violations
uncovered at each inspection should be calculated as separate
successive violations. As discussed in Section C (I)above,
successive violations occurring at a single demolition or
renovation project will each be treated as first violations,
unless they are initially treated as second or subsequent
violations based upon a finding of prior violations at a
-------
different job-site or because they warrant escalation based upon
the fact that the current job is done in distinct phases or is,
unusually long in duration. The chart on page 16 reflects that
additional days of violation for which there is inspection
evidence are assessed the full substantive penalty amount while
additional days based upon the presumption of continuing
violation are assessed only ten percent of the substantive
penalty per day.
Since asbestos projects are usually short-lived, any correction
of substantive violations must be prompt to be effective.
Therefore, EPA expects that work practice violations brought to
the attention of an owner or operator will be corrected promptly,
thus ending the presumption of continuing violation. This
correction should not be a mitigating factor, rather this policy
recognizes that the failure to promptly correct the environmental
harm and the attendant human health risk implicitly increases the
gravity of the violation. In particularly egregious cases the
Region should consider enhancing the penalty based on the factors
set forth in the General Penalty Policy.
4 The court in Tzavah held that for purposes of asbestos NESHAP
requirements, a demolition or renovation project has not been-
completed until the NESHAP has been complied with and all
3. Size of the Violator
An increase in the gravity component based upon the size of the
violator's business should be calculated in accordance with the
General Penalty Policy. Where there are multiple defendants, the
Region has discretion to base the size of the violator
calculation on any one or all of the defendants' assets . The
Region may choose to use the size of the more culpable defendant
if such determination is warranted by the facts of the case or it
may choose to calculate each defendant's size separately and
apportion this part of the penalty (see discussion of
apportionment below).
II. ECONOMIC BENEFIT COMPONENT
This component is a measure of the economic benefit accruing to
the operator (usually a contractor), the facility owner, or both,
as a result of noncompliance with the asbestos regulations.
Information on actual economic benefit should be used if
available. It is difficult to determine actual economic benefit,
but a comparison of unsuccessful bids with the successful bid may
provide an initial point of departure. A comparison of the
operator's actual expenses with the contract price is another
indicator. In the absence of reliable information regarding a
defendant's actual expenses, the attached chart provides figures
-------
which may be used as a "rule of thumb" to determine the costs of
stripping, removing, disposing of and handling asbestos in
compliance with § 61.145® and §61.150. The figures are based on
rough cost estimates of asbestos removal nationwide. If any
portion of the job is done in compliance, the economic benefit
should be based only on the asbestos improperly handled. It
should be assumed, unless there is convincing evidence to the
contrary, that all stripping, removal, disposal and handling was
done improperly if such improper practices are observed by the
inspector.
III. APPORTIONMENT OF THE PENALTY
This policy is intended to yield a minimum settlement penalty
figure for the case as a whole. In many cases, more than one
contractor and/or the facility owner will be named as defendants.
In such instances, the Government should generally take the
position of seeking a sum for the case as a whole, which the
multiple defendants can allocate among themselves as they wish.
On the other hand, if one party is particularly deserving of
punishment so as to deter future violations, separate settlements
may ensure that the offending party pays the appropriate penalty.
$t is not necessary in applying this penalty policy to allocate
the economic benefit to each of the parties precisely. The total
benefit accruing to the parties should be used for this
component. Depending on the circumstances, the economic benefit
may actually be split among the parties in any combination. For
example, if the contractor charges the owner fair market value
for compliance with asbestos removal requirements and fails to
comply, the contractor has derived an economic benefit and the
owner has not. If the contractor underbids because it does not
factor in compliance with asbestos requirements, the facility
owner has realized the full amount of the financial savings. (In
such an instance, the contractor may have also received a benefit
which is harder to quantify - obtaining the contract by virtue of
the low bid.)
There are circumstances in which the Government may try to
influence apportionment of the penalty. For example, if one party
is a second offender, the Government may try to assure that such
party pays the portion of the penalty attributable to the second
offense. If one party is known to have realized all or most of
the economic benefit, that party may be asked to pay for that
amount. Other circumstances may arise in which one party appears
more culpable than others. We realize, however, that it may be
impractical to dictate allocation of the penalties in negotiating
a settlement with multiple defendants. The Government should
therefore adopt a single "bottom line" sum for the case and
should not reject a settlement which meets the bottom line
because of the way the amount is apportioned.
Apportionment of the penalty in a multi-defendant case may be
-------
required if one party is willing to settle and others are not. In
such circumstances, the Government should take the position that
if certain portions of the penalty are attributable to such party
(such as economic benefit or second offense), that party should
pay those amounts and a reasonable portion of the amounts not
directly assigned to any single party. However, the Government
should also be flexible enough to mitigate the penalty for
cooperativeness in accordance with the General Penalty Policy. If
a case is settled as to one defendant, a penalty not less than
the balance of the settlement figure for the case as a whole
should be sought from the remaining defendants. This remainder
can be adjusted upward, in accordance with the general Civil
Penalty Policy, if the circumstances warrant it. Of course, the
case can also be litigated against the remaining defendants for
the maximum attainable penalty. In order to assure that the full
penalty amount can be collected from separate settlements, it is
recommended that the litigation team use ABEL calculations, tax
returns, audited financial statements and other reliable
financial documents for all defendants prior to making settlement
offers.
IV. OTHER CONSIDERATIONS
The policy seeks substantial penalties for substantive violations
and repeat violations. Penalties should generally be sought for
all violations which fit these categories. If a company
knowingly violates the regulations, particularly if the
violations are severe or the company has a prior history of
violations, the Region should consider initiating a criminal
enforcement action.
The best way to prevent future violations of notice and work
practice requirements is to ensure that management procedures and
training programs are in place to maintain compliance. Such
injunctive relief, in the nature of environmental auditing and
compliance certification or internal asbestos control programs,
are desirable provisions to include in consent decrees settling
asbestos violations.
V. EXAMPLES
Following are two examples of application of this policy 5
Example I (This example illustrates calculations involving
proof of continuing violations based on the
inferences drawn from the evidence)
XYZ Associates hires America's Best Demolition Contractors to
demolish a dilapidated abandoned building containing 1300 linear
feet of pipe covered with friable asbestos, and 1600 square feet
of siding and roofing sprayed with asbestos. Neither company
notifies EPA or State officials prior to commencing demolition of
-------
the building on November 1. Tipped off by a citizen complaint,
EPA inspects the site an November 5 and finds that the contractor
has not been wetting the suspected asbestos removed from the
building, in violation of 40 C.F.R. § 61.145(c) (3). In addition,
the contractor has piled dry asbestos waste material on a plastic
sheet in the work area pending its disposal, in violation of 40
C.F.R § 61.145(c)(6~(I). There is no evidence of any visible
emissions from this pile. During the inspection, the site
supervisor professes complete ignorance of asbestos NESHAP
requirements. An employee tells the inspector that workers were
never told the material on-site contained asbestos and states
"since this job began we've just been scraping the pipe coverings
off with our hammers. The inspector observes there is no water
at the site. The inspector takes samples and sends them to an
EPA approved lab which later confirms that the material is
asbestos. Work is stopped until the next day when a water tank
truck is brought to the facility Łor use in wetting during
removal and storage.
On November 12 the inspector returns to the site only to find
that the workers are dry stripping the siding and roofing because
the water supply had been exhausted and the tank truck removed.
A worker reports that the water supply had lasted four days
before it ran out at the close of the November 9 work day. The
inspector observes a new pile of dry asbestos containing debris
in tall grass at the back of the property. Unlike the pile
observed inside the facility during the first inspection this
pile is presumed to have produced visible emissions. At the time
oŁ the second inspection 70% of the asbestos had been removed
from the building 50% of which is deemed to have been
5 The examples are intended to illustrate application the civil
penalty policy. For purposes of this policy, any criminal
conduct that may be implied in the examples has been ignored. Of
course, in appropriate cases, prosecution for criminal violations
should be pursued through appropriate channels.
improperly removed. After discussion with EPA officials, work is
halted at the site and XYZ Associates hires another contractor to
properly dispose of the asbestos wastes and to remove the
remaining 25% of the asbestos in compliance with the asbestos
NESHAP. The new contractor completes disposal of the illegal
waste pile on November 18.
Neither XYZ Associates nor America's Best Demolition Contractors
has ever been cited for asbestos violations by EPA or the State.
Both companies have assets of approximately $5,000,000.00 and
have sufficient resources to pay a substantial penalty.
The defendants committed the following violations: one violation
of the notice provision (§ 61.145(b) (1)); one violation for
-------
failure to wet during stripping (§ 61.145 (c) (3)) and failure , to
keep wet until disposal (§ 61.145(c) (6) (I)), each detected at the
first inspection and lasting a duration of five days (Nov. 15); a
second separate dry stripping violation (§ 61.145 (c)(3), observed
at the second inspection and lasting for three days (Nov. 10-12);
an improper disposal violation (§ 61.150(b)), discovered during
the second inspection, lasting a duration of nine days (the
violation began on November 10 and continues to November 18 per
Tzavah) and a visible emissions violation (§61.150(a)) discovered
during the second inspection, lasting a duration of seven days
(Nov. 12-18). Thus, the defendants are liable for a statutory
maximum of $750,000 (29 days of work practice violations x
$25,000 (statutory maximum penalty per day of each separate
substantive violation) ~ $25,000 for the notice violation =
$750,000) .
The penalty is computed as follows:
Gravity Component
Notice violation, § 61.145(b)
(first time) $15,000
6 America's Best completed 75% of the work over a 12 day
period. For 4 of the 12 days (Nov.6-9-) there is evidence
that water was used and asbestos properly handled. Assume
that equal amounts of asbestos were removed each day. Thus,
50% of the asbestos was properly removed (25% by America's
Best, 25% by the new contractor.
'Arguable, for purposes of calculating the statutory
maximum, the notice violation can be construed to
have-lasted at least until the EPA has actual notice of the
demolition (or renovation, as the case may be).
--First Inspection Violations
Violation of § 61.145(c)(3)
(10 + 5 = 15 units
of asbestos (1 x $10,000) $10,000
Additional days of violation
($1,000 x4 days of violations) $ 4,000
Violation of § 61.145(c)(6)(I)
(1 x $10,000) $10,000
Additional days of violation
($1,000 x 4 days of violations) $ 4,000
-- Second Inspection Violations
-------
New violation of § 61.145 (c) (3)
(1 x $10,000) $10,000
Additional days of violation
($1,000x2 days of violations) $ 2,000
Violation of §61.150(a)
(lx $10,000) $10,000
Additional days of violation
($1,000x6 days of violations) $ 6,000
Violation of § 61.150(b)
(1 x $10,000) $10,000
Additional days of violation
($1,000 x 8 days of violations) 3 8.000
$109,000
--Size of Violator $20,000
(size of both defendants
combined)
Total Gravity Component $129,000
Economic Benefit component
$20/sq-. foot x 1600 sq. feet + $32,000
$20/linear foot x 1300 linear feet + 26.000
$58,000
$58,000 x 50% (% of asbestos
improperly handled) $29,000
Preliminary Deterrence Amount
Adjustment factors - No adjustment
for prompt correction of environmental
problem because that is what the
defendant is supposed to do. S158. OOP
Minimum penalty settlement amount 5l58f OOP
NOTE: If the statutory maximum had been smaller than this
sum, then the minimum penalty would have to be adjusted
accordingly. Also, for the dry stripping violations, no
additional days were added for the period between the two
inspections because there was no evidence that the dry
stripping had continued in the interim period.
-------
Example 2 (This example illustrates calculations involving
proof of continuing violations based on the
statutory inference drawn from the notice of
violation
Consolidated Conglomerates, Inc. hires Bert and Ernie's
Trucking Company to demolish a building which contains
1,000, linear feet of friable asbestos on pipes. Neither
party gives notice to EPA or. to the state prior to
commencement of demolition. An EPA inspector acting on a
tip, visits the site on April, 1, the first day of the
building demolition. During the inspection he observes
workers removing pipe coverings dry. Further inquiry reveals
there is no water available on-site. He, also finds a large
unconstrained pile of what appears to be dry asbestos-
captaining waste material at the bottom of an embankment
behind the building. He takes samples and issues an oral
notice of violation citing to 40 : C.F.R. §§ 61.145 (c) (3)
(dry removal), : 61.145(c)(6)(I) (failure to keep wet until
disposal), and 61.145(a) (viable emissions) 8, and gives the
job supervisor a copy of the asbestos NESHAP. Test results
confirm the samples contain a substantial percentage of
asbestos.
On April 12, the inspector receives information from
8 Regardless of whether the inspector observes emissions of
asbestos during a site inspection', where there is
circumstantial evidence (such as unconstrained, dry asbestos
piles outside), that support a conclusion that visible
emissions were present, the Region has discretion to include
this violation.
reliable source that the pile of dry asbestos debris has
not been properly disposed of and there is still no access
to water at the facility. This information supports a new
violation of §61.150(b) (improper disposal). The
inspector revisits the site on April 22 and determines
that the was-e pile has been removed. A representative of
Consolidated Conglomerates, Inc. gives the inspector
documents showing that actual work at the demolition site
concluded on April 17, but the contractor cannot document
when the debris pile was removed. Thus, there are at
least 61 days of violation (17 days of dry removal in
violation of § 61.145(c)(3) 22 days of failure to keep wet
until disposal in violation of §61.145(c)(6)(I), 11 days
of visible emissions in violation of §61.150(a) and 11
days of improper disposal in violation of § 61.150(b))
-------
times $25,000 per day, plus $25,000 for the notice
violations, or a statutory maximum of $1,550,000.
Consolidated Conglomerates is a corporation with assets of
over $100 million and annual sales in excess of $10
million. Bert and Ernie's Trucking is a limited
partnership of two brothers who own tow trucks and have
less than $25,000 worth of business each year. This
contract was for $50,000. Bert and Ernie's was once
previously cited by the State Department of Environmental
Quality for violations of asbestos regulations. As a
result, all violations are deemed to be second violations.
The penalty is computed as follows:
Gravity Components
No notice 2nd violation) $ 20,000
Violation of § 61.145® (3)
(approx. 3.85 units)
(second violation) $ 15,000
Additional days of violation
(per presumption) (16 x $1,500) $ 24,000
Violation of §61.145(c) (5) (I) $ 15,000
(second violation)
Additional days of violation
(Per presumption) (21 x $1,500) $31,500
9 See footnote 3.
Violation of 661.150(a)
(Second violation)
Additional days of violation
(per presumption) (10 x $1,500) $15,000
Violation of §61.150(b)
(second violation) $15,000
Additional days of violation
(per presumption) (10 x $1.,500) S 15.000
S18Q.500
Size of Violator $ 2,000
-------
(based on Bert and Ernie's size only)
Total Gravity Component 5182.500
Economic Benefit Component
$20/linear foot, x 1,000 linear feet S 20,000
Preliminary Deterrence Amount $202.500
Adjustment factors — 10% increase for
willfulness $ 18,250
Minimum Settlement Penally Amount $220.750
NOTE: Since this example assumes there was a proper
factual basis for invoking the statutory presumption
of continuing noncompliance, the duration of the
§61.150(a) visible emissions and §61.150(b) disposal
violation runs to April 21 and the §61.145(c) (3) dry
removal violation runs to April 17, the longest
periods for which noncompliance can be presumed.
Apportionment of the Penalty
The calculation of the gravity component of the
penalty in this case reflects a $5,000 increase in
the notice penalty and a $48,500 increase in the
penalty for substantive violations because it involves
a second validation by the contractor. Ordinarily,
the Government should try to get Bert and Ernie's to
pay at least these additional penalty amounts.
However, Consolidated Conglomerate's financial size.
compared to the contractor's may dictate that
Consolidated pay most of the penalty.
Notification and Waste Shipment Record Violations
Notification Violations 1st Violation 2nd Violation Subsequent
No notice $15,000 $20,000 $25,000
No notice $ 5,000 $15,000 $25,000
substantive compliance
Late, Incomplete or Inaccurate notice.
For each notice, select the single largest dollar figure that
applies from the following table. These violations are
-------
assessed a one-time penalty except for waste shipment vehicle
marking which should be assessed a penalty per day of
shipment. Add the dollar figures for each notice or waste
shipment violation:
Notice submitted after asbestos removal completed $15,000
tantamount to no notice.
Notice lacks both job location and asbestos removal $ 4,000
starting and completion dates.
Notice submitted while asbestos removal is in $ 2,000
progress.
Notice lacks either job location or asbestos $ 2,000
removal starting and completion dates.
Failure to update notice when amount of asbestos $ 2,000
changes by at least 20%
Failure to provide telephone and written notice $ 2,000
when start date changes
Notice lacks either asbestos removal starting or $ 1,000
completion dates, but not both.
Amount of asbestos in notice is missing, improperly $ 500
dimensioned, or for multiple facilities.
Notice lacks any required information $ 200
Notice submitted late, but still prior to asbestos $ 200
removal starting date.
Waste Shipment Violations
-------
Failure to maintain records which precludes $ 2,000
discovery of waste disposal activity
Failure to maintain records but other information $1.000
regarding waste disposal available
Failure to mark waste transport vehicles during $1,000
loading and unloading (assess for each day of
shipment)
-------
•c
TJ
id
A
CJ
rt
H
§
•H
0
rt -H
•a >
O O O
00 0
oo in
Ol Ol (N
v> to- w-
4J
/I
U
s
Cf
a
(H
«
^
4-
rt
iH
C
'>
00 0
00 0
o o o
in in in
CN M (N
V*
.
TJ
T)
(d
_c
rt
prT
c
c
•H
M-l
0
is
TI
4J
as
i —
C
"r"
!-i
00 0
o o o
mo in
H 01 0)
V* •!/> */V
i
, -H
-C
C
c
o
01
wl
4J
It
rH
0
•H
o o o
o o o
o o o
•» «. *.
in o in
rH
T
T
rt
.C
fC
PC
g
•d
0
>
a)
•0
-H
4J
re
,C
-n
>
O O O
O O O
in o in
H H
v> -w-
-H
XJ
4J
a
jL
-r
fa.
a:
•Ł
-r
O O O
o o o
00 0
in o in
rH H
V> V> V*
_c
T
C
<4H JI
0 Ł
Ł P
t
§ -H 4-
1 .Ł
cd 0
rH CO C
n) • 4J
rH H (d
P kO rH
2 P >H
n un cj cu
•H rH .d
M-l rti 4J
to o cj a)
'H J± f?
fl\ *>! j ._ X
jy a n> ^D 4J
S It) H
0 ^| CO 1 T)
^ ti) id in T3
H td H id
Js rt T)
rC It! (1) CO 1
•u ay OJ
i id 0)43
2 -9 {" S ft
H 3 M ft m
i WiJ a &
•S -S ° S
•H as 4J id
(U x! ^ ft
i o a! i
4J "§ "^ 'u "9
y as S to
a) a)
MH ^, ^ CU Jj
id ED to u
o —TI — as
•rf m >H a)
^ ^ O —
3 H CJ 01 ^
cj • (u a o
rH M -H ItH
in VD ^
n COT 4J ^ -
!H d H cu
0) MH 0) g rH
^ 4J ° ft CU "§
o 4H T) I— 1 4-> > 10
T) O CO -*
> @ T) O
0) 4J CU COT d -H
(U 4J Id >
m 4-i ns 4->
d ^ ft d i c
•H rH 0) 0
rH J3 X - O TI C
CJ -H O -H 6
o as i-t in > rH c
VO 0) 4J rH td U
01 rd • cu a
4J 6 rH g O 4J
II iH -H -H -r
CU >itOT 4J 4J M-
4J > rH -Ha
§1 111! 1
•
S
o
•H
4->
as
rH
0
-H
>
J)
-rl
•tJ
§
4J
n
o
3
CQ
>i
§
M
0
MH
• •
CO CO
4J 0
S ti
d cu
P ai
cj in
>, °
4J 4J
S 8
•H MH
CJ
a) u
IM -H
^ •§
0) CJ
5 M
0 0
i-i a)
0 (H
id
CQ 3
CU &
ft to
•H
ft
^
d aS
0 cu
CO -5
O rH
4J
CQ i-l
CU CU
A ft
to
as o
O)
SH
Ł
-------
APPENDIX IV
CLEAN AIR ACT PENALTY POLICY AS APPLIED TO
STATIONARY SOURCES OF VOLATILE ORGANIC COMPOUNDS
WHERE REFORMULATION TO LOW SOLVENT TECHNOLOGY
IS THE APPLICABLE METHOD OF COMPLIANCE
Introduction
This addendum provides guidance for calculating the civil
penalties EPA will require in pre-trial settlement of district
court enforcement actions, pursuant to Title I of the Clean Air
Act (CAA), against sources of volatile organic compounds- (VOC's)
in violation of State Implementation Plan emission limitation,
where low solvent technology (LST) is an acceptable control
strategy for achieving compliance. If compliance using LST is the
control strategy chosen by the source and if it can be im-
plemented expeditiously, the penalty analysis methodology set
forth in this appendix must be uses. If compliance using LST is
not the compliance strategy chosen by the source, or if LST
cannot be accomplishes expeditiously or I. not available, the
penalty must be calculated according to the general Clean Air Act
Stationary Source Civil Penalty Policy, (hereinafter CAA Penalty
Policy), based on the costs of add-on controls.
A separate policy for arriving at a penalty figure in VOC
cases where LST is an acceptable control strategy is necessary
because penalties calculated pursuant to the general CAA Penalty
Policy in such instances are insufficient to deter violations."-/
The general is Penalty Policy focuses upon recapturing the
economic savings of non-compliance-based upon the typically
substantial capital expenditures and. operation and maintenance
costs of the necessary pollution control equipment. The capital
costs of implementing LST are by comparison relatively small and
in many cases LST actually results in a net economic savings.2/
This guidance, therefore, sets forth an objective
methodology for arriving at a substantial cash penalty figure in
cases not requiring the expenses associated with add-on
technology. Specifically, in all VOC cases including those where
a source may choose to come into compliance using LST as a
control option, Regions must base their pre-negotiation penalty
calculations for the Economic Benefit Component on the cost of
add-on controls. Once negotiations begin, the Region may
-------
recalculate the penalty figure using the alternative methodology
in this Appendix where applicable based on information to be
supplied by the source. The Economic Benefit Component will be
re-calculated b a-a ed on the cost of LST as a control option. An
additional penalty component (hereinafter referred to as the
Production Component) must thereafter be calculated by
multiplying the dollar amount of sales on' the non-comply-in"
lines as reported by the source, by the average return on sales
for the industry, to be supplied by NEIC. The average return on
sales is the norm for the industry for net profits after taxes
divided by total sales. Industry specific average return on sales
multipliers are available from the Information Services Office at
NEIC in Denver, FTS 776-5124 (contact Charlene Swibas). NEIC will
require the following information from the Region to calculate
the average return on sales multiplier for an individual source:
(1) type' of VOC .source,.(2) total assets or number of
employees, and (3) dollar amount of sales- produced on the non-
complying lines by year. In this regard, EPA should advise
sources that it is to their benefit to supply, EPA with detailed
information such as a plant specific breakdown of assets rather
than company with reports, and line-by-line sales figures. This
will help ensure that the penalty is Limited to sale, from
production on their non-complying lines as opposed to their total
sales. When verifiable line-by- line production information is
not available the Regions must base their estimates on sources'
total sales as reported in company, books and annual reports. In
addition, the Production Component figure may be adjusted to
reflect the source's actual ~ return on sales where this figure
can be established from reliable information.
The total of the Production ant Economic Benefit Components
should be compared to the penalty that would have been imposed
were the source coming into compliance using add-on controls. In
no event should the total of the Economic Benefit and Production
Components exceed-the penalty amount based solely on the cost of
add-on controls.
This policy may be used in all situations involving LST as
an acceptable compliance option, including those where the source
is granted an expeditious schedule to continue~development of
LST, but may ultimately have to, comply' using add-on controls.
In those situations where the source will comply through a
combination of LST and add-on controls, the~penalty may be
adjusted in accordance with this Appendix only to the extent the
two compliance options and the source's financial' date are
-------
segregable on a line-by-line basis.
No other adjustments to the Economic Benefit and Production
Components may be made other than as' contemplated in the general
CAA Penalty Policy. These adjustments are described in Section
II.A.3. of the general Policy. In addition, in all cases the
Gravity Component should be estimated in accordance with the
general CAA Penalty Policy. This policy is based upon the
principles established by the CAA Penalty Policy and general
Agency policies.
The Production Component formula produces penalties which
automatically account for the size of the source and correlate
with the emissions volume from non-complying lines. Moreover,
attaching a source's after tax net profits on noncomplying
production helps to ensure a meaningful penalty without impinging
on employee salaries^ necessary operating costs, or tax
deductions for good faith pollution control expenditures such as
on LST.
Removing the profitability of non-complying production is.
particularly appropriate in cases where LST is an acceptable
control strategy due to the ease with which many such sources
could have come into compliance, as well as the competitive
advantage some VOC sources obtain from non-compliance. For
example, many paper coating concerns have continued to use high
solvent coatings due to the versatility such solutions afford in
meeting customer preferences such as color brightness. Such VOC
sources are, thus., probably able to capture a larger share of
the market due. to their noncompliance. Similarly, metal
furniture coaters have had high solid emulsion-LSTs available for
many years. Many sources have, however, delayed the minimal coats
and process changes necessary to come into compliance, perhaps
enabling these businesses, in the short run, to offer their
products at a slightly reduced price.3/
What follows is the specific methodology to be applied in
calculating civil penalty settlement amounts in actions against
sources of VOC where LST is an acceptable control strategy.
-------
Alternative Methodology for Calculating VOC Penalties Where LSI
is the Applicable Method of Compliance
ECONOMIC BENEFIT COMPONENT*
PRODUCTION COMPONENT
total sales from production on non-complying lines
x industry norm return on sales
Compare this figure to the penalty based on the cost of add-on
controls as the control option. Use the lower of the two figures.
Settlement Adjustments to Production component** substitute the
source's actual return on sales for the average industry return
on sales
GRAVITY COMPONENT*
+
Settlement Adjustments to Gravity Component*
ADJUSTED MINIMUM PENALTY FIGURE
* See, Clean Air Act Civil Penalty Policy for the procedures to
follow in making these calculations. Note, however, that the CAA
Penalty Policy permits Regions in their discretion not to seek to
recover the Benefit Component when it is likely to be less than
65,000. This Appendix contemplates including the Economic Benefit
.Component along with the Production Component even where the
Economic Benefit is estimated to be Less than $5,000. If the
combination of both the Economic Benefit and. Production
Components is estimated to be Jess than $5,000 it is not
necessary for the case development team to include either one in
the minimum settlement penalty amount.
** Note that the considerations described in Section II.A-3 of
-------
the general policy may also be applied in adjusting the
Production Component as well as the Economic Benefit Component.
-------
FOOTNOTES
1. Penalties must be high enough to have the desired specific
and general deterrent effects. They must also be, to the extent
possible, objective in order to ensure fairness. The general CAA
Penalty Policy, relying on the cost of pollution control
equipment, does not provide such penalties in the case of VOC
sources using LST. Indeed VOC penalties have been much smaller
than the penalties collected in other CAA cases. A sample of VOC
sources, with total sales in the $10,000,000 range, have had
civil penalties ranging from $2,000 to $45,000. By comparison, a
company cited for TSP violations, with sales in 1983 of
$4,656,000, will be asked to pay a minimum of &75,000 in
penalties.
2. Although substantial capital expenditures are required for
VOC sources using add-on technology to come into compliance,
sources having the option of using low solvent or water-based
technology derive economic savings by coming into compliance.
For example, reformulation to LST generally involves only minor
mechanical and process modifications costing less than $10,000.
(See note 4 infra.) These small outlays are recaptured by
subsequent cost savings. Fore example, water-based coatings are
usually less expensive. Similarly, high solid emulsion-LSTs,
although perhaps more expensive on a volume basis, are more
efficient when properly applied, requiring fewer coatings.
Reduced VOC emissions result in further indirect savings in the
form of lower employee health problems and absenteism, reduction
in the cost and amount of OSHA-required ventilation, nd lower
fire insurance rates. Finally, the vast majority of VOC sources
having LST as a readily available option for compliance make only
small investments in R&D, expenditures which are, moreover, fully
tax deductible.
3. Use of high solid emulsion-LST requires installation of a $5-
7,000 emulsion heater, retraining of employees to apply the
thicker emulsion, and installation of a larger or more efficient
metal washing system to prevent pitting. As is noted above,
however, these costs are in the long run recaptured by the
economic savings associated with high solid emulsion-LST. (See
note 2 supra.)
-------
new appendix added 03/02/88
APPENDIX VI
Volatile Hazardous Air Pollutant Civil Penalty Policy
This policy shall be used to determine the gravity component
of the civil penalty settlement amount for case~s enforcing the
National Emission Standard for Equipment Leaks (Fugitive Emission
sources), 40 C.F.R. Part 61, Subpart Y, which applies to volatile
hazardous air pollutants (VHAP) and the general reporting
requirements of Subpart A.' It is to be used in Lieu of the
scheme for determining the gravity component set forth in the
general Clean Air Act Stationary Source Civil Penalty Policy, rt
is intended as a supplement to the Vinyl Chloride Civil Penalty
Policy for vinyl chloride cases. In those vinyl chloride cases in
which the vinyl chloride and VHAP civil penalty policies are
inconsistent (such as the $25,000 penalty [or failure to timely
submit a complete semi-annual report under the vinyl chloride
policy versus the $15,000 penalty for the same violation under
the VHAP policy) the vinyl chloride penalty policy should be
applied.
The preliminary deterrence amount for VHAP cases, as for
other stationary source cases, consists of a gravity component
and a benefit component. Adjustments for degree of willfulness or
negligence, degree of cooperation, history of noncompliance,
ability to pay, litigation practicalities, and other unique
factors, should be made, if appropriate, in accordance with the
Stationary source Civil Penalty Policy. Additionally, adjustments
may be considered because a company's VHAP/VOC emissions or
potential emissions are more serious in a nonattainment area for
ozone. Reporting penalties could be adjusted depending on the
number of VHAP sources, that is, whether a plant has few or
numerous valves and pumps.
The gravity component of the penalty reflects the
seriousness of the violation. A separate scheme has been
developed for VHAP cases partly because the economic benefit
component may be difficult to determine, although if the economic
benefit can be calculated, it should be. In addition, several
factors in the general policy, such as the level of violation as.
a percentage above the standard, do not directly apply to VHAP
cases. The. hazardous nature of VHAPs is reflected in
establishing a substantial gravity component.
-------
The attached chart addresses six major types of requirements
in the VHAP standard:
l)Reporting. A source is required to submit initial and
semiannual reports which include, among other things, a listing
of equipment in VE&P service, records of leaks from certain
pieces of equipment and repairs of leaks, and results of
performance tests.
2)Monitoring, inspection, and testing. The standard
includes our types of such requirements: annual testing, such as
testing from certain requirements, under §61.242-2(e)(3}; monthly
monitoring, such as monitoring of valves under §61.242-7(a);
weekly inspection, such as visual inspection of a pump under
§61.242-2(a)(2); and daily checking, such as checking a sensor on
a compressor seal system under §61.242-3(e)(l).
3)Repair of leaks. The standard generally requires that
a source, upon detection of a leak from regulated equipment, make
a first attempt at repair within 5 calendar day. of detection and
complete the repair as soon as practicable but not later than 15
calendar days after detection, since violations of these require-
ments appear to present the greatest potential for emission, of
VHAPs, the associated penalties are substantial.
4)Equipment standards. Certain piece of equipment must
comply with requirements that specify that they be equipped with
certain devices, sometimes as an alternative to another standard.
For example, a compressor must be equipped with a seal system
that includes a barrier fluid system and that prevents leakage of
process fluid to the atmosphere, with certain exceptions, in
accordance with §61.242-3(a). One allowable alternative-is that
the compressor be equipped with a closed-vent system capable of
capturing and transporting any leakage to a control device, in
accordance with § 61.242-3 (h). Another example is open-ended
valves which-must be capped or otherwise secured.
5)Recordkeeping. A source must keep records of a number
of items, including leaks and attempts to repair leaks, design
parameters of certain equipment, and dates of startups and
shutdowns of closed-vent systems and control devices.
6)Marking equipment - Equipment in VHAP service must be
tagged and leaking equipment must be separately or additionally
-------
tagged.
The chart assign a gravity component for each violation. For
equipment standards, noncompliance with respect to each piece of
affected equipment (e.q., pump, compressor, etc.) constitutes a
separate violation for purposes of this policy. For monitoring,
inspection, and testing provisions, noncompliance with respect to
each requirement (e.q., monthly monitoring of pumps, monthly
monitoring of valve) constitutes a separate violation. Do not
count each pump or valve as a separate violation if not
monitored. The gravity component for the case as a whole is the
sum of the numbers associated with all the violations in the
case.
Type of Violation Penalty
REPORTING
Initial Report
Failure to submit initial report $25,000
for new or existing source
Late submission of initial report $500/day up to $25,000
$25,000 x% of infor-
mation missing
On-time but incomplete initial
report. Estimate percentage of
information missing. If missing
information submitted without
prompting $400/day, up to the
figure calculated above
Semi-annual Reports
Failure to submit semiannual report $ 15,000 per report
Late submission of semiannual report $ 15 0/day up
[If submitted only in response to to 15,000 per report
prompting by EPA or delegated
agency, regard as failure to submit
report]
-------
On-time but incomplete semiannual report -$15,000 x % of infor-
estimate percentage of information mation missing
missing. If missing information
submitted without prompting by the
government $125/day up to the figure
calculated above.
-------
Type of Violation
Non-response
Penalty
Failure to respond to prompting $25,000
(written requests) regarding reports
MONITORING, INSPECTION, AND TESTING
Annual requirement
to $25,000 total
Monthly requirement
to $7500 total for
missed month)
Daily requirement
missed for first
10 daily inspection
missed.
For any monitoring,
inspection or testing
timely performed, but
performed incorrectly,
assess 50% of the
above penalties
REPAIR OF LEAKS
Failure to make first attempt
at repair within specified time
$10,000+ $250/day up
$5,000 + $250/day (up
$100/day for each day
$5000/day up to $25,000
per leak
Failure to complete repair within $5000/day up to $25,000
specified time per leak
Violations of alternative standards $5000/day up to $25,000
for valves in VHAP service
pursuant to 40 CFR §61,243
-------
Type of Violation Penalty
EQUIPMENT STANDARDS
Failure to equip with required device $15,000 per item inde-
quately equipped
RECORDKEEPING
Failure to keep records in logs $25,000 per semiannual
pursuant to 40 C.F.R. 61.246 period
for period associated with
semiannual report
Incomplete records - estimate per- $25,000 per semiannual
centage of information missing period x % of
information missing
FAILURE TO MARK (TAG) EQUIPMENT
Mark equipment in VHAP service $100/day per piece of
equipment up to
$5,000
Mark leaking equipment $500/day per piece of
equipment up to
$5,000
-------
CLEAN AIR ACT STATIONARY SOURCE PENALTY POLICY
APPENDIX VII
RESIDENTIAL WOOD HEATERS
40 C.F.R. PART 60, SUBPART AAA
The Clean Air Act Stationary, Source Civil Penalty Policy
("the CAA penalty policy" or "the general penalty policy")
provides the basis for determining the minimum civil penalty U.S.
EPA will accept in settlement of enforcement actions taken
pursuant to Title of the Clean Air Act. The CAA penalty policy
provides guidance to pre-trial settlement of initial enforcement
actions in district courts.
The New Source Performance Standard for Residential Wood
Heaters, 40 C.F.R. Part 60, Subpart AAA, warranty a penalty
scheme related-to the CAA penalty policy, but adjusted to reflect
certain unique features of the wood heater industry. Unlike other
NSPS programs, for example, the wood heater standard regulates a
mass-produced consumer product marketed nationally and is
directed at manufacturers as well as retailers and distributors.
In addition, management-of the wood stove -enforcement program
will be centralized at Headquarters rather than delegated to the
Regions.
This appendix should be used in conjunction with the general
penalty policy to determine the preliminary deterrence amount,
which is the sum of the economic benefit accruing from
noncompliance and the gravity component reflecting the
seriousness of the violation.3 This appendix retains in full the
concept of adjusting the gravity component to provide equitable
treatment of the regulated community. The penalty adjustments may
be based upon consideration of the violator's: (1) degree of
willfulness or negligence, (2) degree of cooperation, including
prompt reporting of noncompliance and prompt correction of
environmental problems, (3) history of noncompliance, (4) ability
to pay, and (5) other unique factors.
The wood stove penalty policy details most of the violations
articulated in the regulations and assesses a basic penalty for
each. Of the factors set forth in the general penally policy
only the size of the violator matrix and the adjustment factors
are retained completely. The matrix for length of time of
-------
violation has been revised. All other factors are inapplicable to
the wood stove penalty policy.
Every gravity component calculation will be based on a case-
by-case examination of the facts underlying the enforcement ~ -'
n developing the penalty values for these violations, we
evaluated the relative importance of each respective requirement
to the regulatory scheme, hi certain instances, U.S. EPA may find
that a deviation from a requirement is tantamount to a complete
violation and hold the violator liable for the full amount of the
assessed penalty. In other instances, however, U.S. EPA may
believe that the deviation is minor and therefore assess a
reduced penalty. As an example, consider the §60.538(b)
violation, offering for sale a stove without a permanent label.
If the stove has no label at all, the full penalty will believed.
If, on the other hand, the permanent label is merely deficient,
not conforming to the requirements under §60.536(a)(l)(2), then
the penalty amount assessed wilt likely be less than the full
amount. The following violations fall into this none/deficient"
category:
- 60.533(0)(2)
- 60.533(0)(3)
-60.536(a)(l),(2)
-60.537(a)(l),(2)
-60.537(a)(l),(3)
- 60.537(a)(l),(4)
-60.537(a)(l),(5)
- 60.537
-60.537(e)(l),(4)
- 60.537(e)(2)
- 60.537(e)(3)
- 60.537(f)
- 60.537(g)
- 60.537(h)
- 60.537(1)
- 60.538(a)
- 60.538(b)
-60.538(d)(l),(2)
- 60.538(d)(l)(ii)
-------
parameter quality assurance program
emission test QA program
permanent label
maintain record of certification test
maintain record of parameter QA program
Maintain record of emission test QA program
maintain record of sales
maintain/produce sealed stove
apply for small manufacturer exemption
report number of exempted stove manufactured
maintain record of production
report biennially on certified model lines
maintain record of exempted stoves
maintain record of used stoves
maintain records for five years
operation of stove without permanent label
offer for sale a stove w/o permanent label
offer for sale a stove w/o temporary label
offer for sale a stove w/o owner's manual
For the other violations contained in pages 3 to 6 of this
penalty policy, U.S. EPA intends to assess the full amount.
-------
CALCULATION OF GRAVITY COMPONENT
SIZE OF THE VIOLATOR (calculate once per violator)
Net worth of corporation or
net current assets of partnership:
Under $100,000 $1,000
$100,001-$1,000,000 2,000
$ 1,000,001 - $5,000,000 8,000
$5,000,001 - $20,000,000 12,000
$20,000,001 - $40,000,000 20,000
$41,000,000 - $70,000,000 40,000
Over $70,000,000 65,000
LENGTH OF THE VIOLATION (calculate for each violation)
0 to 6 months $500
7 to 12 months 1,000
13 to 18 months 1,500
over 19 months 2,000
VIOLATIONS OF 40 C.F.R. PART 60, SUBPART AAA
60.530(c)(2)
Sale of Oregon exempted stove after July 1,
1992
$5,000 per model
line and $500
per unit
60.530(c)(3)
Failure to notify of any modification to
Oregon certification
$500 per unit
60.533(n)
Failure to perform certification testing
$5,000 per model
-------
line and $500
per unit
60.533(o)(2)
Failure to conduct adequate parameter QA
inspection
$500 per unit
not tested as
required
60.533(o)(3)
Failure to conduct emission test QA program
$500 per unit
not tested as
required
60.536(a)(l),(2)
Failure to have permanent label on stove
manufactured after July 1, 1988 (related to
60.538(b), but we can bring both in an
enforcement action)
$2,000 per model
line and $2 per
unit
-------
60.536(1), (j)
Failure to have temporary label on a stove
with a permanent label
$1,000 per model
line and $2 per
unit
60.536(k)
(please see 60.53 8(d)(l(ii))
60.537(a)(l), (2)
Failure to maintain record of certification
test
$100 per model
line
60.537(a)(l),(3)
Failure to maintain record of parameter QA
program
$1,000 per model
line
60.537(a)(l), (4)
Failure to maintain record of emission test
QA program
$1,000 per model
line
60.537(a)(l),(5)
Failure to maintain record of sales
$1,000
60.537
Failure to maintain or produce sealed stove
$750 per sealed
stove required
-------
60.537(e)(l),(4)
Failure to apply for small manufacturer's
exemption
$250
60.537(e)(2)
Failure to report number of exempted heaters
manufactured between 7/1/88 and 6/30/89
$500
60.537(e)(3)
Failure to maintain wood heater production
records for 7/1/87 to 7/1/89
$1,000
60.537(f)
Failure to report biennially on certified
model line
$100 per model
line
60.537(g)
Failure to maintain record or F&D exempted
stoves
$500
60.537(h)
Failure to maintain record of used stoves
$500
60.537(1)
Failure to maintain records for five years
$500
60.538(a)
Operation of affected facility without a
permanent label
-------
$500 per unit
-------
60.538(b)
Offer for sale a stove without certification
test or permanent label
$2,000 per model
line and $2 per
unit
60.538
Offer for domestic sale of export stove
$1,000 per unit
Sale of stove without a permanent label
after July 1, 1990
$1,000 per unit
60.538(d)(l)(I),(2)
Offer for sale a stove with a permanent
label but not temporary label
$1,000 per model
line and $2 per
unit
60.538(d)(l)(ii)
Offer for sale a stove with a permanent
label but no owner's manual (encompasses
60.536(k))
$500 per unit
60.538(d)(l)(iii)
Offer for sale a stove with a permanent
label but without a catalyst warranty
$1,000 per model
line and $2 per
unit
60.538(e)
Sale of stove after notice of certification
revocation
-------
$5,000 per unit
60.538(0
Installation or operation of stove
inconsistent with label or owner's manual
$2,000 per unit
60.538(g)
Operation of stove with deactivated or
removed catalyst
$2,000 per unit
60.538(h)
Operation of altered stove
$5,00 per unit
60.538(1)
Alteration or removal of permanent label
$1,00 per unit
-------
EXAMPLE
An inspector files a violation report against Blockbuster
Manufacturing, which produces the Blue Flame and Heat Jet model
lines. The report, dated November 8,1988, states that the
temporary label on the Blue Flame model line is deficient and
that the company failed to conduct certification testing on the
Heat Jet model line. In addition, the Heat Jet model line lacks
permanent and temporary labels as well as owner's manuals. Blue
Flame production since July 1,1988 totaled 464 units with~ sales
of 223 units, while Heat Jet production since July 1, 1988
totaled 108 units with sales of 36 units. Blockbuster's net
worth is estimated at $800,000.
The initial assessment of Blockbuster's violations indicates
the following violations by model line:
Blue Flame
- attaching deficient temporary label
- selling unit with deficient temporary label
Heat Jet
- failure to conduct certification testing
- failure to attach permanent label
- selling unit without permanent label
(NOTE: the temporary label and owner's manuals violations are
inapplicable for the Heat Jet model line because the units were
not permanently labeled)
U.S. EPA issues a Finding of Violation to Blockbuster which
includes both the Blue Flame and Heat Jet violations. In
addition, an Administrative Order is issued to correct these
violations. Blockbuster does correct all the Blue Flame
violations by the stated deadline, but does not take any action
toward correcting the Heat Jet violations. When contacted by EPA
personnel after the deadline, Blockbuster says it feels no
obligation to correct the Heat Jet violations. At this point, EPA
decides to bring a civil action against Blockbuster concerning
the Meet Jet model line only.
The preliminary deterrence amount is calculated by adding
the economic benefit and gravity components. The economic benefit
component is subdivided into two categories: capital investments,
or one-time costs, and annual expenses. For this example, current
-------
capital investments are $9,000 for a full test series and $4,000
for model line labels and manuals. Current annual expenses
include $3,067 for emissions and parameter inspection quality
assurance and SI, 400 for research and development EPA personnel
run the BENT model assuming compliance in April 1989 and the
payment of penalty in March 1989. The BEHL model shows an
economic-benefit of $3,252. A copy of the BENT printout is
attached for reference. The gravity component of $66,788 is
calculated as shown below:
Violation
Basic
Rate
Per
Unit
Length
of Time
Size of
Violator
No certification test
60,533(n)
$5,000
$500(108
)
$500
$2,000
Not attaching
permanent label
60.536(a)(l), (2)
2,000
2(108)
500
Selling unit without
permanent label
60.538(b)
2,000
2(36)
-------
500
In light of Blockbuster's lack of cooperation in correcting
the Heat Jet violations, EPA decides to increase the gravity
component by 25%. The gravity component becomes $66,788(1.25)
$83,485. The bottom line amount for the purposes of settlement is
$3,252 (the economic benefit) + $83,485 (the adjusted gravity
component) = $86.737.
-------
APPENDIX VIII
CLEAN AIR ACT CIVIL PENALTY POLICY APPLICABLE TO
PERSONS WHO MANUFACTURE OR IMPORT CONTROLLED SUBSTANCES
IN AMOUNTS EXCEEDING ALLOWANCES PROPERLY HELD UNDER
40 C.F.R. PART 82: PROTECTION OF THE STRATOSPHERIC OZONE
Introduction
This appendix provides guidance for calculating the civil
penalties EPA will require in pre-trial settlement of district
court enforcement actions, pursuant to Title I of the Clean Air
Act ("CAA"), against persons who manufacture or import controlled
substances in amounts exceeding allowances properly held under 40
C.F.R. Part 82, Protection of the Stratospheric Ozone ("THE
Rule").l Settlement of violations of the record keeping and
reporting provisions of the Rule need not, for purposes of
penalty assessment, be treated differently from any other CAA
record keeping and reporting violation. See Clean Air Act
Stationary Source civil Penalty Policy, p. 11.
The Rule designates bulk quantities of the chemicals named
in Appendix A as controlled substances" on the basis of the
demonstrated capacity of these chemicals to attack and destroy
ozone in The stratosphere. Manufacturers and importers of the
controlled substances who responded to EPA's request for baseline
data are apportioned yearly production and consumption allowances
which limit the amounts of controlled substances that person or
corporate entity may introduce for use into The United States
during a twelve month control period.2
To assist EPA in monitoring compliance with production and
consumption limits, the Rule requires manufacturers of controlled
substances to keep daily records and submit quarterly reports to
EPA. Importers must submit information to EPA regarding the
quantity of controlled substances brought into the United States
and The country of their origin.
Production and consumption allowances may be traded, but
such transactions are invalid if not reported to EPA. If Agency
records indicate that the seller of allowances holds a sufficient
quantity unexpended, EPA will issue a notice of no objection, and
enter the transfer in its records. If EPA initially does not
object to an allowance trade, but later finds reason to
-------
disapprove, the Agency will rescind the earlier transfer and
correct its records. For The purposes of the Rule, ownership of
The allowances that were the subject of The rescinded transfer
never shifted from The seller to the buyer.
The Penalty for Excess Amounts
The Rule states that each kilogram of controlled substances
manufactured or imported in excess of allowances is a separate
violation.3 Each excess kilogram, therefore, creates potential
liability in The violator for a penalty of up to The statutory
maximum of $25,000. To promote judicial economy and to conserve
Agency resources, EPA will be willing to accept substantially
less in settlement.
The relative amount of stratospheric ozone that will be
destroyed by a given quantity of a controlled substance is called
that substance's ozone depletion weight, and varies from chemical
to chemical.4 Allowances are allocated on the basis of a
calculated level, i.e., the total ozone depletion effect of all
controlled substances produced and imported, a value that is
expressed in kilograms. The holder of allowances is free to
produce or import any combination of controlled substances during
the control period so long as The calculated level of this
activity does not exceed The calculated level of The allowances
it holds. When the rule states that each kilogram in excess of
allowances is a separate violation, the reference is to kilograms
in the sense of a calculated level. Therefore, The statutory
maximum penalty is $25,000 per kilogram of calculated level
manufactured or imported in excess of properly held allowances.
Calculating a Penalty
In accordance with the general practice EPA follows when
calculating all Clean Air Act civil penalties, penalties assessed
for manufacturing or importing excess quantities of controlled
substances will the sum of an economic benefit component and a
gravity component.
Economic Benefit
Detenriining The actual economic benefit accruing to the
violator will be difficult, if not impossible. Some allowance
holders produce a variety of controlled substances at different
locations across the country. Rather than attempt to distinguish
-------
what amount of which chemical produced at each of several
continuously operating facilities was responsible for how many
kilograms of excess calculated level, EPA will instead rely on an
economic benefit rule of thumb. On The basis of financial
information currently available, EPA will assume an economic
benefit (profit margin) or $1.50 per kilogram of calculated level
for both The manufacture and importation of controlled
substances. EPA may supplant this amount by reference to price
lists appearing in industry journals or to any other source which
the agency believes is a reliable indicator. Because the agency's
economic benefit rule of thumb is subject to change, in
situations where the region is applying this penalty policy,
Regional staff should consult with EPA Headquarters before
attempting to assess the violator's economic benefit of
noncompliance.
The violator's economic benefit may be offset by amounts
paid for allowances purchased during the same control period to
cure excess production or imports, as such purchases clearly
lessen The economic benefit of noncompliance.
The economic benefit component may be omitted entirely if an
allowance-apportioned violator agrees in The next control period
to a reduction of its current allowances in amounts equal to The
calculated level of its earlier violations. The economic benefit
component will not be assessed against violators who are not
apportioned allowances if such violators obtain int he next
control period and hold unexpended allowances in amounts equal to
the calculated level of their earlier violations. The Montreal
Protocol odes not permit member nations to meet their national
limits by applying allowances left unexpended in one control
period to negate excess quantities of controlled substances
manufactured or imported in any other control period. EPA,
however, can acknowledge the financial impact on importers of a
reduction of current allowances and adjust the penalty assessment
accordingly in order to provide importers with an incentive to
consent to injunctive relief mandating such reductions. In this
way, EPA can help avert the potential environmental harm
resulting from the violator's actions.
Gravity
Even if the violator demonstrates that its purchase of
additional allowances or its voluntary reduction of current
allowances eliminates its economic benefit, it still must pay the
-------
gravity component of the penalty. The gravity component is the
measure of The seriousness of the violation. Accordingly, this
component is linked both to the integrity of the regulatory
system and to the ozone-depleting effect of the violator's
actions. The Rule states that each kilogram of controlled
substance manufactured or imported in excess of allowances is a
separate violation.
To protect the integrity of The Rule, EPA will assess a
penalty of $15,000 against all violators. An additional $0.50
for each kilogram of calculated level manufactured or imported I
excess of allowances held at the time of manufacture or
importation will be assessed against first time violators, or
$1.00 for each kilogram against repeat offenders.
So that the penalty will reflect the seriousness of the
environmental harm resulting from the violations and to provide
violators with an incentive to cure their violations completely,
EPA will assess a penalty of $15,000 against violators who leave
any amount of their violations, no matter how small, uncured.
EPA will assess an additional penalty of $.50 for each kilogram of
calculated level left uncured at the end of the control period in
question. In the event that the violator expeditiously and fully
cures its violations in the next control period following factor
at $5,000, instead of $15,000, and the kilograms of calculated
level left uncured will be assessed at $0.10 for each kilogram.
A violator can cure the potential environmental harm by
purchasing allowances, by chemically transforming the controlled
substances into other substances not regulated by the rule, by
proper exportation, or by any combination of these means. In
keeping with the matrix provided by the general stationary source
civil penalty policy, p. 11, EPA will assess and additional
amount to scale the penalty to the size of the violator.
Adjustments to the gravity component must be made in
accordance with the provisions of the general stationary source
civil penalty policy, pp. 12-18, taking into account such factors
as degree of willfulness or negligence, degree of cooperation,
and history of noncompliance. EPA construes these adjustment
factors strictly, with a bias toward upward adjustment. Downward
adjustments to the gravity component will be effected only in
rare instances where The defendant manifests extreme cooperation
by agreeing to perform environmentally beneficial actions not
required by law that are directly related to repairing the
-------
environmental harm potentially resulting from its violations.
Mitigating Penalty Amounts
Application of this policy significantly compromises the
penalty amount EPA is authorized to pursue under both the CAA and
the Rule. Penalty amounts calculated in accordance with this
policy represent the minimum penalty that EPA can accept in
settlement of cases of this nature. Reductions from this amount
are acceptable only on the basis of the violator's demonstrated
inability to pay the full amount (substantiated by The ABEL
computer model) or other unique factors. A proposed penalty
reduction, accompanied by a justification memorandum, must be
submitted to the Associate Enforcement Counsel for Air for his
approval.
Examples of Penalty Calculations
Following are four examples of application of this policy.
Adjustments to The gravity component are made in accordance with
the general stationary source civil penalty policy.
Example 1
Due to inadequate communications between its seven
facilities for the production of controlled substances, Chemical
Co. Overshoots its production and consumption allowances of
147,000,000 kg of calculated level by 250,000 kg before ceasing
all production on May 20. On June 5, Chemical Co. Manages to
purchase 200,000 kg of calculated level in additional allowances
at a cost of $200,000.
Assuming that Chemical Co. does nothing more to cure its
violations, the penalty is commuted as follows:
Economic Benefit Component
Profit on sale of wrongfully produced
controlled substances (250,000 kg at $ 1.50/kg*) $375,000
Offset by actual expenditure of $200,000
to purchase additional allowances -200,000
$175,000
-------
Gravity Component
Integrity of Regulation $ 15,000
250,000 kg of calculated level
wrongfully produced (at $0.5/kg) 125,000
Integrity of Regulation
(amounts left uncured) 15,000
50,000 kg of calculated level left uncured
at close of control period (at $0.5/kg) 25,000
Size of violator (worth in excess
of $70,000,000) +65,000
$245,000
Preliminary deterrence amount
Economic Benefit Component $175,000
Gravity Component +245,000
$410,000
Adjustment factors
20% upward adjustment to the gravity
component to reflect defendant's negligence +49,000
Minimum penalty settlement amount
$459,000
If, in the next control period prior to settlement, Chemical
Co. Obtains and holds unexpended sufficient consumption
allowances to avert the environmental harm potentially resulting
from the uncured portion of its wrongful production, the penalty
would be calculated as follows:
Economic Benefit Component
Because Chemical Co. Has obtained
consumption allowances in an amount
equal to the total amount of its
violations, there were not costs
averted, and there is no remaining
-------
economic benefit. $0
Gravity Component
Integrity of Regulation $ 15,000
250,000 kg of calculated level
wrongfully produced (at $0.5/kg) 125,000
Integrity of Regulation
(amounts left uncured, but environmental
harm averted) 5,000
Size of violator (worth in excess
of $70,000,000) +65,000
$215,000
Preliminary deterrence amount
Economic Benefit Component $0
Gravity Component $215,000
$215,000
Adjustment factors
20% upward adjustment to the gravity
component to reflect defendant's negligence +$43,000
Minimum penalty settlement amount
$258,000
Example 2
Commodities, Inc., which does not normally deal in
chlorofluorocarbons (CFCs), works toward buying up the unexpended
consumption allowances it needs to permit its purchase of
1,000,000 kg of calculated level of a controlled substance from a
seller in Country A at a price of $1,5000,000. The shipment of
cheap CFCs is offloaded at The American port of entry while
Commodities, Inc. is still negotiating with Company Z to buy the
last block of 300,000 kg of calculated level of allowances. In
Country B, a major industrial accident virtually destroys that
country's largest producer of CFCs, suddenly crating a huge demand
in that country for Commodities, Inc.'s CFCs. Commodities, Inc.
-------
immediately breaks off negotiations with Company Z and exports its
entire stock of 1,000,000 kg of calculated level to Country B for
a selling price of $3 million. Commodities, Inc. provides proof
to the EPA of its export and receives consumption allowances in
the amount of 1,000,000 kg of calculated level, which it Then
sells on The bullish CFC market at $2,00 per kilogram of
calculated level.
During settlement negotiations with EPA, Commodities, Inc.
introduces records showing that it purchased 700,000 kg of
calculated level of consumption allowances for $0.75 per kilogram
and argues that this amount should be used to calculate its
economic benefit.
The penalty is computed as follows (for the purposes of
this exercise, we assume that Commodities, Inc. bore none of the
shipping expenses):
Economic Benefit Component
Cost averted by not purchasing
allowances (300,000 kg at $ 1,50/kg*) $450,000
Profit on export sale of wrongfully imported
controlled substances (300,000 kg at $ 1.50/kg) 450,000
Profit on sale of wrongfully obtained
consumption rights (300,000 kg at $2.00/kg) +600,000
$1,500,000
In computing Commodities, Inc.'s economic benefit, EPA would
not use $0.75/kg as The cost averted by not purchasing allowances
because Company Z, apparently, was unwilling to sell at The price
Commodities, Inc. was offering. EPA would not use Commodities,
Inc.'s later selling price, $2.00/kg, because that amount does
not necessarily reflect the market rate at the time Commodities,
Inc. was attempting to buy. In the absence of a more reliable
figure, EPA will use The $1.50/kg rule of thumb. The profit on
the sale of wrongfully imported controlled substances is simply
the difference between the selling price and The defendant's
purchase price ($3.00/kg - $1.50/kg = $1.50/kg) as There were no
allowance costs for these 300,000 kilograms. The profit on The
sale of the wrongfully obtained consumption allowances is The
full selling price because the defendant never properly held
consumption allowances for those 300,000 kilograms.
-------
Gravity Component
Integrity of Regulation $ 15,000
300,000 kg of calculated level
wrongfully imported (at $0.5/kg) 150,000
Integrity of Regulation
(amounts left uncured) 15,000
300,000 kg of calculated level left uncured
at close of control period (at $0.5/kg) 150,000
Reporting violation - one incorrect report
See general CAA penalty policy at 11.
(Although Commodities, Inc. did export
1,000,000 kg of calculated level of a
controlled substance, only 700,000 kg of
that amount had entered the country legally.
Therefore, Commodities, Inc.'s transfer
request could not properly claim ownership of
The entire 1,000,000 kg of calculated level.) 15,000
Size of violator (worth between $20-40 million) +20,000
$365,000
Preliminary Deterrence Amount
Economic Benefit Component $ 1,500,000
Gravity Component +365,000
$1,865,000
Adjustments Factors
Degree of willfulness or negligence
(20% of The gravity component) +73,000
Minimum settlement penalty amount
$1,938,000
If, in the next control period prior to settlement,
Commodities, Inc. had obtained and held unexpended The 300,000
kilograms of calculated level of consumption allowances necessary
to avert the potential environmental harm resulting form its
-------
wrongful importation, the penalty would be calculated as follows:
Economic Benefit Component
Profit on export sale of wrongfully imported
controlled substances (33,000 kg at $1.50/kg) 450,000
Profit on sale of wrongfully obtained
consumption rights (3000,000 kg at $2.00/kg) +600,000
$1,050,000
Gravity Component
Integrity of Regulation $ 15,000
300,00 kg of calculated level
wrongfully imported (at $0.5/kg) 150,000
Integrity of Regulation
(amounts left uncured, but environmental
harm averted) 5,000
300,00 kg of calculated level left uncured,
but environmental harm averted (at $0.1/kg) 30,000
Reporting violation - one incorrect report 15,000
Size of violator (worth between $20-40 million) +20,000
$235,000
Preliminary Deterrence Amount
Economic Benefit Component $ 1,050,00
Gravity Component +235,000
$1,285,000
Adjustment Factors
Degree of willfulness or negligence
(20% of the gravity component) +47,000
Minimum settlement penalty amount
$1,332,000
Example 3
-------
During the fourth quarter of the control period, Importers
International contracts to sell 40,000 kg of calculated level of
consumption allowances to CFCs, Inc., a producer and importer of
CFCs, Inc., a producer and importer of CFCs, at $l,25/kg, despite
The act that Importers International has recently exhausted all
of its 250,000 kg allowance. Importers International submits a
transfer request to EPA for which the Agency issues a no
objection notice. (EPA's determination is based on information
contained in Importers International's previous quarterly report.)
Upon receipt of EPA's notice of no objection, CFCs, Inc.
purchases the allowances from Importers International for $50,000
and imports 40,000 kg of calculated level of controlled
substances. EPA discovers during its review of Importers
International's fourth quarter report that the company did not
hold unexpended allowances at the time of the trade, rescinds The
transfer, and notifies both parties to The transaction.
Importers International's action appears to be a fraudulent
transfer in knowing violation of consumption limitations, and this
matter should be referred to OE's Office of Criminal Enforcement.
Importers International is probably subject to fines and
imprisonment under 113(c) of The Clean Air Act, 18 U.S.C. 1001
(supplying false information to the federal government), and
possibly 18 U.S.C. 1341 (fraudulent use of the mails).5
CFCs, Inc., which purchased Importers International's
purported allowances at risk, held other consumption allowances
at the time it imported the 40,000 kg of calculated level. These
other consumption allowances, in part, offset that import. After
analyzing CFCs, Inc.'s final quarter reports, EPA determines that
CFCs, Inc. is liable for the importation of only 15,000 kg of
calculated level of controlled substances for which it did not
hold proper consumption allowances. After receiving notification
from EPA, CFCs, Inc. Agrees to reduce its current-year production
and consumption allowances by the amount.
The penalty for CFC, Inc. is computed as follows:
Economic Benefit Component
Profit on sale of wrongfully produced
CFCs (15,000 kg at $1.50/kg*) $22,500
Offset by reduction of current-year
allowances by 15,000 kg of calculated level -22,500
-------
Gravity Component
Integrity of Regulation $15,000
15,000 kg of calculated level
wrongfully imported (at $0.5/kg) 7,500
Integrity of Regulation
(amounts left uncured, but environmental
harm averted) 5,000
15,000 of calculated level left uncured,
but environmental harm averted (at $0.10/kg) 1,500
Size of violator (worth more that $70 million) +65,000
$94,000
Preliminary Deterrence Amount
Economic Benefit Component $0
Gravity Component +94,000
$94,000
Adjustment Factors
No adjustments of gravity 0
Minimum Settlement Penalty Amount
$94,000
Example 4
Small Brokerage Co., an import broker located in a minor
port city, imports 200 kg of calculated level of CFC-113 for
Company X, a manufacturer of airplane parts. Copany X intends to
use The CFC-113 to degrease precision metal parts prior to
assembly. NeiTher company holds consumption allowances. EPA
discovers the violation during its review of the computer
printout of Customs Entry Summary forms provided to EPA by The
U.S. Census Bureau.
Upon receipt of a SECtion 114 letter from EPA requesting
more informaiton about its imports of controlled substances,
-------
Small Brokerage Co. contracts EPA to explain that neither it nor
Company X was aware of the Rule's prohibition no importing
controlled substances without cvonsumption allowances. EPA
discovers the violation during its review of the computer
printout of Customs Entry Summary forms of the computer printout
of Customs Entry Summary forms provided to EPA by the U.S. Census
Bureau.
Upon receipt of a Section 114 lettter from EPA requesting
more information about its imports of controlled substances,
Small Brokerage Co. contracts EPA to explain that neither it nor
Company X was aware of the Rule's prohibition on importing
contrleled substances without consumption allowances. Small
Brokerage Co. fully responds to the Section 114 request, but
points out that its imports were in noe liter canisters, and
asserts exemption under the "one-gallon rule of thumb."
The one-gallon rule of thumb exempts from regulation imports
of controlled substances in containers of one gallon or smaller
only if the eventual use of the container is not known and cannot
be determined with reasonable eforts. (See GUIDANCE FOR THE
STRATOSPHERIC OZONE PROTECTION PROGRAM, pp. 4-5.) Here, EPA
investigates the process Company X uses to degrease small metal
parts determines that Company X pours CFC-113 from the one liter
canister into a basin containing the parts to be cleaned.
Therefore, the eventual use of the imported canister is known,
and the canister is not part of a "use system." EPA informs
Small Brokerage Co. that its imports are subject to regulation.
Before the end of the control period, Small Brokerage Co. obtains
from another company a sufficient amount of unexpended
consumption allowances to cure its violations.
The penalty is calculated as follows:
Economic Benefit Component
Because Small Brokerage Co. obtained
consumption allowances in an amount
equal to the total amount of its
violations, there were no costs averted,
and there was no economic benefit. $0
Gravity Component
Integrity of Regulation $ 15,000
-------
200 kg of calculated level wrongfully
imported (at $0.5/kg) 100
Size of violator (worth between $100,001
and $1,000,000) $2,000
$17,000
Preliminary Deterrence Amount
Economic Benefit Component $0
Gravity Component $ 17,000
$17,000
Adjustment Factors
Degree of willfulness of negligence
(20% of the gravity component)+$3,400
Minimum Penalty Amount
$20,400
-------
1. The Rule was promulgated in accordance with the Agency's
authority under CAA Part B - Ozone Protection, 42 U.S.C. 150-159
("Part B"), and with the Montreal Protocol (an agreement signed
by most industrial nations in 1987), to protect the stratospheric
ozone layer, a thin blanket of triatomic oxygen fifteen miles
above the surface of the earth that blocks harmful ultraviolet
radiation emitted by the sun. Section 113 of the CAA references
Part B, expressly providing that the 113(b) civil and the 113
criminal remedies are available for violations of regulations
promulgated under that Part.
2. EPA restricted production and consumption of five
chlorofluorocarbons (CFCs) to 1986 levels beginning July 1, 1989.
Additional restrictions on production and consumption of CFCs,
and other controlled substances were in development at this
writing.
3. 40 C.F.R. 82.4(a) and (b).
4. The ozone depletion weights for the controlled substances can
be found in Appendix A of 40 C.F.R. Part 82.
5. EPA's election to pursue a criminal enforcement action must
hinge on its evaluation of the strength of the evidence of
knowing violation and also of the adequacy of available civil
relief. Where a defendant exceeds its production of consumption
allowances and submits inaccurate information in a transfer
request, EPA may find it difficult to show a knowing violation,
but large civil penalties are available. If the defendant stays
within the limits of its allowances but transfers allowances it
does not hold, the available civil relief would be based on a
single reporting violation, but EPA can more likely demonstrate
that the violation was knowing. It is important also to remember
that buyers of large amounts of allowances will be aware of the
financial risk associated with wrongful production or importation
and will purchase only from reputable sellers.
6. CFCs, Inc.'s economic benefit would not be offset by the
amount it paid to Importers International for the purported
allowances. Only those transactions which result in a transfer
of valid consumption allowances to the violator can be counted
against its economic benefit.
-------
* The economic benefit rule of thumb is subject to change.
Regional offices using this guidance should consult with
Headquarters to insure that they use the appropriate number.
-------
APPENDIX IX
CLEAN AIR ACT CIVIL PENALTY POLICY APPLICABLE TO PERSONS WHO
PERFORM SERVICE FOR CONSIDERATION ON A MOTOR VEHICLE AIR
CONDITIONER INVOLVING REFRIGERANT OR WHO SELL SMALL CONTAINERS OF
REFRIGERANT IN VIOLATION OF 40 C.F.R. PART 82, PROTECTION OF THE
STRATOSPHERIC OZONE, SUBPART B: SERVICING
OF MOTOR VEHICLE AIR CONDITIONERS
July 19, 1993
Introduction
This appendix provides guidance for calculating the civil
penalties EPA will require in pre-trial settlement of judicial
enforcement actions, as well as the pleading and settlement of
administrative enforcement actions, pursuant to Sections 113(b)
and (d) and Section 609 of the Clean Air Act ("CAA"), as amended,
and 40 C.F.R. Part 82, Subpart B against persons who perform
service for consideration on motor vehicle air conditioners
involving the refrigerant or who sell small containers of
refrigerant. Settlement of violations of the recordkeeping and
reporting provisions of the regulations should not, for purposes
of penalty assessment, be treated differently from any other CAA
recordkeeping and reporting violation. See Clean Air Act
Stationary Source Civil Penalty Policy, p. 12.
This appendix is to be used for settlement purposes in civil
judicial cases, but EPA retains the discretion to seek the full
statutory maximum penalty in all civil judicial cases which do
not settle. In addition, for administrative penalty cases, the
appendix is to be used in conjunction with the Stationary Source
Civil Penalty Policy to determine an appropriate penalty to be
pled in the administrative complaint, as well as serving as
guidance for settlement amounts in such cases.
To assist EPA in monitoring compliance, the regulations
require persons who perform service for consideration on motor
vehicle air conditioners involving the refrigerant to report one-
time and to keep records; persons who certify technicians must
report once every two years; and persons who sell small cans of
refrigerant must keep~records and post a sign.
The Penalties for Violating regulations
Section 113 of the Clean Air Act allows EPA to seek
-------
penalties of up to $25,000 per day per violation- Each time a
motor vehicle air conditioner is serviced without properly using
approved refrigerant recycling or recovery equipment or is
serviced by an uncertified technician, each container of
refrigerant containing less than 20 pounds is sold to a person
who is not a certified technician or who does not certify to the
retail establishment that the container was purchased for resale,
and each time a technician is certified by a technician training
program which has not been approved by the EPA Administrator
constitutes a separate violation (each with a statutory maximum
of $25,000).
EPA may in appropriate cases accept less than the statutory
maximum in settlement. The penalty assessments contained in this
policy (this appendix read with the Stationary Source Civil
Penalty Policy) reflect reductions from the statutory "maximum
which can be made based on the~statutory penalty assessment.
criteria found in Section 113(e) of the Act. This policy takes
into account the size of the violator's business, the violator's
full compliance history, the economic benefit of noncompliance,
and the seriousness of the violation. The other factors in
Section 113(e) such as the economic impact of the penalty on the
business and any good faith efforts to comply should be taken
into account in determining whether the penalty should be
reduced, but the burden is on the defendant to raise those
factors.
Penalties for violations are based on the particular
regulatory requirements violated. The minimum settlement penalty
amount is the sum of the penalties assigned to each violation of
a requirement.
Calculating a Penalty
In accordance with the general practice EPA follows when
calculating all Clean Air Act civil penalties, penalties assessed
for performing any service for consideration on a motor vehicle
air conditioner involving the refrigerant or selling small
containers of refrigerant will be the sum of an economic benefit
component and a gravity component.
Economic Benefit
This component is a measure of the economic benefit accruing
to the facility as a result of noncompliance with the Act. To
-------
determine the actual economic benefit to a person 1 who performs
service for consideration on motor vehicle air conditioners
involving the refrigerant, EPA will rely on the matrix which
follows to determine the economic benefit from delayed costs
(failure to purchase approved recycling or-recovery equipment)
and avoided costs (failure to properly operate and maintain such
equipment).
Economic Benefit From Servicing Motor Vehicle Air Conditioners
Without Properly Using Approved Refrigerant Recovery Equipment:
Number of Months since August 13,1992/Economic Benefit
#of
Month
Economic
Benefit
#of
Months
Economic
Benefit
#of
Months
Economic
Benefit
1-3
$115
22-24
$1103
43-45
$2494
4-6
$236
25-27
$1274
46-48
$2733
7-9
$363
-------
28-30
$1454
49-51
$2984
10-12
$496
31-33
$1642
52-54
$3247
13-15
$637
34-36
$1840
55-57
$3523
16-18
$785
37-39
$2048
58-60
$3811
19-21
$940
40-42
$2266
The matrix reflects that the service facility should have
purchased one piece of recovery equipment. The matrix was
calculated using August 13,1992 as the date noncompliance began.
The date of compliance (the date equipment is acquired) and the
date that the penalty is paid are the same. Because the matrix
reflects that enforcement actions will be taken against the
service facility and because many technicians will be personally
-------
responsible for the cost of getting trained and certified, the
matrix does not include the cost of technician certification. In
addition, it is difficult to predict how many uncertified
technician a service facility might employ to perform service for
consideration on motor vehicle air conditioners involving the
refrigerant. If the Regions find that service facilities usually
pay for technician training, then they should include the cost
off technician training and certification in their economic
benefit calculations. In any enforcement action against an
individual uncertified technician, the Regions should include the
cost of training and certification in the economic benefit
calculation. The matrix is based on the BEN computer model. If
the litigation team determines that the matrix does not reflect
the defendant's actual economic benefit in a particular
enforcement action, the litigation team may calculate the benefit
using the BEN model with inputs specific to the action.
The economic benefit to the person2 who sells cans of
refrigerant containing less than 20 pounds is the profit on each
can. The profit will vary depending on how much the person paid
to purchase the cans and at what price the cans are sold. The
amount of profit averages $1. 50 per 12 ounce can.
EPA policy requires the removal of the violator's economic
benefit in every enforcement action, unless the factors in
Section 133(e) or litigation risks suggest that a reduction is
appropriate. Although the Stationary Source Civil Penalty Policy
indicates that the litigation team may elect not to assess an
economic benefit component in enforcement actions where the
violator's economic benefit is less than $5,000 (see p. 7),
Regions should assess the economic benefit component in Section
609 enforcement actions. Given that the economic benefit
component in Section 609 enforcement actions will likely always
be small (less than 55,000), if the general rule from the
Stationary Source Civil Penalty Policy were to apply, the
economic benefit component would rarely be included in the
penalty calculation. Therefore, Regions should assess an economic
benefit component in all Section 609 cases.
Gravity
In addition to economic benefit, the violator must pay the
gravity component of the penalty. The gravity component is the
measure of the seriousness of the violation. The seriousness of
the violation has two components: the importance to the
-------
regulatory scheme and the potential environmental harm (ozone-
depleting effect of the violator's actions) resulting from the
violations.
The following violations can defeat the-purpose of Section
609 by permitting the release of substances that degrade the
stratospheric ozone layer. Their importance to the regulatory
scheme, therefore, includes the assessment of the following
penalties:
A penalty of $10,000 against any person who performs
services for consideration an motor vehicle air conditioners
involving the refrigerant without properly using approved
refrigerant recycling or recovery equipment;
A penalty of $15,000 against each person who performs
services for consideration on motor vehicle air conditioners.
involving the refrigerant without properly using approved
refrigerant recycling or recovery equipment and who has
previously been the subject of a Section 609 enforcement response
(e.g. notice of violation, warning letter, administrative order,
field citation, complaint, consent decree, consent agreement, or
administrative or judicial order);
A penalty of $5,000 against any person who performs services
for consideration on motor vehicle air conditioners involving the
refrigerant for each person who performs such service who is not
properly trained and certified by a technician certification
program approved by the EPA Administrator;
A penalty of $2,000 against any person who sells a container
of refrigerant (suitable for use in a motor vehicle air
conditioner) containing less than 20 pounds to a person who is
not a certified technician or who does not certify to the seller
that the container was purchased for resale;
A penalty of $5,000 against any person who sells a container
of refrigerant containing less than 20 pounds to a person who is
not a certified technician or who does not certify to the seller
that the container was purchased for resale and who has
previously been the subject of a Section 609 enforcement response
(e.g. notice of violation, warning letter, administrative order,
field citation, complaint,.consent decree, consent agreement, or
administrative or judicial order);
-------
A penalty of $5,000 for each certificate issued after the
effective date of the regulation against any technician training
program that has not received approval from~the Administrator of
EPA;
A penalty of $1,000 against any retail establishment that
sells or offers for sale the refrigerant suitable for use in a
motor vehicle air conditioner in containers of less than 20
pounds and fails to post a sign that meets the requirements of 40
C.F.R. §82.42(c). This amount should be assessed regardless of
how many (if any) small cans are actually sold after November 15,
1992, as long as they are offered for sale. This amount is in
addition to the $2,000 assessment described above against the
retail establishment for the sale of a container of refrigerant
containing less than 20 pounds to a person who is not a certified
technician or who~does not certify to the retail establishment
that it is purchased for resale;
A penalty of $2,500 against any retail establishment that
sells or offers for sale the refrigerant suitable for use in a
motor vehicle air conditioner in containers of less than 20
pounds and fails to post a sign that meets the requirements of 40
C.F.R. §82.42 and who has previously been the subject of a
Section 609 enforcement response (e.g. notice of violation# -warning letter, administrative order,
field citation, complaint,
consent decree, consent agreement, or administrative or judicial
order);
EPA acknowledges that multiple violations of the Section 609
requirements may significantly increase the potential
environmental harm (ozone-depleting effect of the violator's
actions) resulting from the violations. The Agency, therefore,
will assess the following additional amounts for each separate.
violation to ensure that the total penalty assessed appropriately
reflects the seriousness of the defendant's violations:
EPA will assess $403 against any person for each motor
vehicle air conditioner serviced without properly using approved
refrigerant recycling or recovery equipment, or $50 against any
person who has previously been the subject of a Section 609
enforcement response (e.g. notice of violation, warning letter,
administrative order, field citation, complaint, consent decree,
consent agreement, or administrative or judicial order) for each
motor vehicle air conditioner serviced without properly using
approved refrigerant recycling equipment; and
-------
EPA will assess $184 per pound against any person for each
sale of a container of refrigerant containing less than 20 pounds
to a person who is not a certified technician or who does not
certify to the retail establishment that it is purchased for
resale and $25 against any person that has previously been the
subject of a Section 609 enforcement response (e.g. notice of
violation, warning letter, administrative order, field citation,
complaint, consent decree, consent agreement, or administrative
or judicial order)- for each sale of a container of refrigerant
containing lese than 20 pounds to a person who is not a certified
technician or who does not certify to the retail establishment
that it is purchased for resale.
EPA will assess reporting violations pursuant to the Clean
Air Act Stationary Source Civil Penalty Policy, October 25, 1991,
page 12. However, this assessment shall not include a length of
time violation component.
EPA will assess an additional amount to scale the penalty to
the size oŁ the violator using the following matrix:
Net worth (corporations): or net current assets (partnerships and
sole proprietorships):
Under $100,000
$0
$100,001-$500,000
$1,000
$5001,001-1,000,000
$2,500
$1,000,001-5,000,000
$5,000
$5,000,001-20,000,000
$10,000
-------
$20,000,001-40,000,000
$15,000
$40,000,001 and above
$20,000
Where the size of the violator figure represents over 50% of
the total preliminary deterrence amount, the litigation team may
reduce the size of the violator figure to 50 of the preliminary
deterrence amount.
Adjustments to the gravity component must be made in
accordance with the provisions of the Stationary Source Civil
Penalty Policy, pp. 15-19.
Mitigating Penalty Amounts
Application of this policy significantly compromises the
penalty amount EPA is authorized to pursue under the CAA. Penalty
amounts calculated in accordance with this policy represent the
minimum penalty that EPA can accept in settlement of cases of
this nature. Reductions from this amount are acceptable only on
the basis of the violator's demonstrated inability to pay the
full amount (substantiated in accordance with Agency policy) or
other unique factors. In civil judicial actions, a proposed
penalty reduction from the amount calculated under this policy
must be approved by the Enforcement Counsel for the Air
Enforcement Division. If the litigation team believes that
reduction of the penalty is appropriate, the case file should
contain both a memorandum justifying the reduction and.
documentation that the penalty reduction was approved. In
administrative enforcement actions, Regional Administrators or
their designees must submit penalty justification documentation
within 20 days of assurance or signing of consent agreements to
the Director of the Stationary Source Compliance Division in the
Office of Air Quality Planning and Standards and the Enforcement
Counsel for Air in the Office of Enforcement.
Examples of Penalty Calculations
Following are examples of the application of this policy.
Adjustments to the gravity component are made in accordance with
the Stationary Source Civil Penalty Policy.
-------
Example 1
Ace Automotive Air Conditioning Service, Incorporated (ACE)
services motor vehicle air conditioners. Despite a significant
outreach effort by the Region (acquainting the regulated
community with Section 609's requirements), Ace did not submit
the required owner certification to EPA and failed to purchase
recovery or recycling equipment. A search of Ace's records
indicates that Ace has serviced 60 motor vehicle air conditioners
since the effective date of the rule. The facility performed 150
service jobs in 1990 and 1991. None of the three technicians who
regularly service motor vehicle air conditioners are trained and
certified. EPA inspected the facility on March 13, 1993.
Economic Benefit Component
The economic benefit of delaying
the purchase of equipment for seven
months +.avoided costs of operating equipment $363
Gravity Component
Importance to regulatory scheme (servicing
without equipment
$10,000
60 motor vehicle air conditioners
(at $40 per vehicle)
2,400
Reporting violation
(failure to certify to EPA that person
performing service is using approved recycling
equipment and that such person is property
trained and certified)
(from Stationary Source Civil Penalty Policy,
page 12)
15,000
3 Uncertified technicians performing service
(at $5,000 per technician)
-------
15,000
Size o violator (Net Worth is approx.
$2,000,000)
+5,000
Total Gravity
$47,400
Preliminary deterrence amount
Economic Benefit Component $363
Gravity Component +47,763
Adjustment factors
20% upward adjustment to the gravity
component - Ace should have been aware
of Section 609's requirements +9,552.60
Minimum penalty settlement amount $57,315.60
-------
Example 2
Diamond Auto Parts sells CFCs in canisters containing 14
ounces. On May 16, 1993, an EPA inspector purchased two 14 ounce
cans of refrigerant. He was not asked to show his technician
training certificate which he claimed to have. In addition, the
inspector noted there was no sign in the check out area notifying
customers that the sale of such cans is prohibited unless the
purchaser is a trained technician. The inspector asked the owner
whether the sign was posted on or after November 15,1992. The
owner responded that he never posted the sign.
Economic Benefit Component
2 cans of refrigerant
(at $ 1.50 per 12 ounce can) $3.50
Gravity Component
Importance to regulatory scheme
(Sale of small can of refrigerant $2,000
2-14 ounce cans of refrigerant
(at $18 per pound) 31.50
Importance to regulatory scheme
(Failing to post sign) 1,000
Size of violator (Net Worth is approx.
$6,000,000) +3,031.50
Total Gravity $6,063.00
Preliminary deterrence amount
Economic Benefit Component $3.50
Gravity Component +6,063.00
Minimum Settlement Penalty Amount
$6,066.50
-------
Summary
Type of violation
Penalty amount
Servicing without equipment
1st violation-$10,000
2nd violation-$15,000
$40/per motor vehicle
Failing to certify
$15,000
Uncertified technicians
$5,000/per technician
Sale of Small Cans to Non-Technician
1st violation-$2,000
2nd violation - $5,000
$18/per pound
Uncertified Training Program
$5,000/certificate
Failure to Post sign
-------
1st violation- 1,000
2nd violation - 2,500
-------
FOOTNOTES
1. "Person" includes the technician who actually works on the
motor vehicle air conditioner andthe individual, corporation,
partnership, association, State, municipality, political
subdividion of a State, and any Agency, departmtne, or
instrumentality of the United States who employs the technician.
For the purpose of calculating the penalty under this polic6y, it
was assumed tht Regions would generally take enforcement actions
against service facilities rather than individual technicians.
Both technicians and service facilities, however, are legally
responsible for comploying with 40 C.F.R. Part 82, Subpart B.
2."Person" includes theempoyee who actually sells the small can
and the individual, corporation, partnership, association, state,
municipality, political subdivision of a State, and any Agency,
department, or instrumentality of the United s
tates who employs the mployee. For thepurposeof calculating the
penalty undr this policy, itwas assumed that Regions would
generally take enforcement actions against retail facilities
rather than individual employees. Both employees ahd retail
facilities, however, are legally responsible for complying with
40 C.F.R. Part 82, Subpart B.
3. EPA estimates thatthe benefit to beobtained form avoiding
thereleaseo 1 kilogram of ozone depleting substanceranges from
$13-$53/kg. For the purposes of this penalty policy, the benefit
should be calculated at $40/kg. Se Regulattory Impact Analysis
for Section 608, Chapter 5 (March 25,1993).
4. Seem. 3.
-------
APPENDIX X
CLEAN AIR ACT CIVIL PENALTY POLICY FOR VIOLATIONS
OF 40 C.F.R. 82, SUBPART F: MAINTENANCE, SERVICE,
REPAIR, AND DISPOSAL OF APPLIANCES CONTAINING REFRIGERANT
June 1, 1994
INTRODUCTION
Purpose
This appendix provides guidance for calculating the civil
penalties EPA will require in pre-trial settlement of judicial
enforcement actions, as well as the pleading and settlement of
administrative enforcement actions.
Scope
This appendix is to be used pursuant to Sections 113(b) and
(d) for violations of Section 608 of the Clean Air Act ("Act" or
"CAA"), as amended, and 40 C.F.R. Part 82, Subpart F.
Usage
This appendix should be used in conjunction with the
Stationary Source Civil Penalty Policy to determine a preliminary
deterrence amount, which is the sum of the economic benefit
accruing from noncompliance and the gravity component reflecting
the seriousness of the violation.
This appendix is to be used for settlement purposes in civil
judicial cases involving violations of Section 608, but EPA
retains the discretion to seek the full statutory maximum penalty
in all civil judicial cases that do not settle. In addition, for
administrative penalty cases, the appendix is to be used in
conjunction with the Stationary Source Civil Penalty Policy to
determine an appropriate penalty to be pled in the administrative
complaint, as well as serving as guidance for settlement amounts
in such cases. As the Stationary Source Civil Penalty Policy
indicates, for administrative penalty cases under Section
113(d)(l), the Region should plead the penalty calculated under
this policy, using the most aggressive assumptions supportable,
in
its complaint.
-------
Person Liable
Any "person" as defined in the Act and in the Section 6084
regulations may be held liable for violations of Section 608. For
example, all "persons" owning and/or operating a facility subject
to the provisions of the Act, and any employees of such a
facility, are legally responsible for complying with Section 608
and with 40 C.F.R. Part 82, Subpart F. For the purpose of seeking
penalties for violations, EPA will often bring enforcement
actions against the owners and/or operators of such facilities,
rather than against individual employees. However, for the
purpose of Section 608 violations, "person" includes the
technician who services an appliance and the employee who sells
refrigerant, as well as the individual, corporation, partnership,
association, State, municipality, political subdivision of a
State, and any Agency, department, or instrumentality of the
United States who employs the technician or employee. Person also
includes owners of appliances, disposal facilities, manufacturers
and importers of recycling or recovery equipment, technician
certification programs, reclaimers, and equipment testing
organizations. Matters involving possible criminal behavior by
individuals or organizations should be referred to the Regional
Criminal Enforcement Counsel.
PENALTIES FOR VIOLATING THE ACT AND THE REGULATIONS
Section 113 of the Clean Air Act allows EPA to seek
penalties of up to $25,000 per day for each violation. EPA may in
appropriate cases accept less than this statutory maximum in
settlement. The penalty assessments contained in this policy
(this appendix read with the Stationary Source Civil Penalty
Policy) reflect the statutory penalty assessment criteria found
in Section 113(e) of the Act. This policy takes into account the
size of the violator's business, the violator's full compliance
history, duration of the violation as established by any credible
evidence, the economic benefit of noncompliance, and the
seriousness of the violation. The other penalty assessment
factors in Section 113(e) should be taken into account in
determining an appropriate penalty (the economic impact of the
penalty on the business, good faith efforts to comply, and
payment by the violator of penalties previously assessed for the
same violation). However, reliable information on these factors
is rarely available to EPA when a penalty is proposed.
Accordingly, these factors will be considered if raised and
properly documented during settlement. Respondents have the
-------
burden of persuasion on these factors, which are in the nature of
affirmative defenses.
CALCULATING A PENALTY
In accordance with the general practice EPA follows when
calculating all Clean Air Act civil penalties, penalties assessed
for violations of Section 608 and the implementing regulations, ~
40 C.F.R. Part 82, Subpart F, will be the sum of an economic
benefit component and gravity component.
Economic Benefit
This component is a measure of the economic benefit gained
by the violator as a result of noncompliance with the Act. The
economic benefit gained by a person due to delayed or avoided
costs will be determined in accordance with the Stationary Source
Civil Penalty Policy using, as appropriate, the BEN computer
model. Economic benefit should be calculated from the earliest
provable date of violation until the date that the violation is
corrected.
BEN is not appropriate in addressing the sales restriction
imposed by the regulations. In this case, the economic benefit to
the person who sells class I or II substances for use as a
refrigerant is the profit on each sale. The profit will vary
depending on how much the person paid to purchase the refrigerant
end at what price the refrigerant is sold.
Although the Stationary Source Civil Penalty Policy
indicates that the litigation team may elect not to assess an
economic benefit component in enforcement actions where the
violator's economic benefit is less than $5,000 (see p. 7 of the
general policy), Regions should assess an economic benefit
component for the entire matter in Section 608 enforcement
actions unless it is less than $500. Given that the economic
benefit component in Section 608 enforcement actions will likely
always be small tress than $5,000), if the general rule from the
Stationary Source Civil Penalty Policy were to apply, the
economic benefit component would rarely be included in the
penalty calculation. Since EPA policy requires the removal of the
violator's economic benefit in every enforcement action, except
for very limited circumstances, Regions should assess an economic
benefit component in all Section 608 cases where it is greater
than $500.
-------
Gravity
The gravity component, which is assessed in addition to
economic benefit, is the measure of the seriousness of the
violation. The gravity component should be determined by
examining three factors: the potential environmental harm
(ozone-depleting effect of the violators actions) resulting from
the violations, the extent of deviation from the statutory or
regulatory scheme, and the size of violator.
1. Potential Environmental Harm
The Section 608 regulations were promulgated to prevent harm
to human health and the environment by preventing the release of
substances that degrade the stratospheric ozone layer.
Noncompliance with the requirements of the regulations
therefore, can result in harm to human health or the environment.
Accordingly, the portion of the penalty calculation reflecting
the potential environmental harm of the violation should be based
on two factors:
1) the risk of or actual loss of refrigerant to the
environment
2) the importance of compliance to the statutory or;
regulatory scheme
Risk of or actual loss
The risk of or actual loss presented by a given violation
depends on both the likelihood of loss to the environment and the
seriousness of the loss, which would include both the amount of
refrigerant lost and its ozone depletion potential. A penalty
should reflect the probability that the violation could have
resulted in, or has resulted in, a loss of refrigerant to the
environment. A larger penalty is appropriate for class I
chemicals because of the greater ozone depletion potential than
for class II chemicals. The greater the potential, the more ozone
that may be destroyed in the stratosphere. In most cases, an
actual loss would result in higher penalties than a potential
loss.
One factor enforcement personnel should evaluate hi
determining whether the potential for harm is major, moderate, or
minor in a particular situation is the risk of loss. The degree
-------
of risk of loss represented by each category is defined as:
MAJOR:the violation poses or may pose a substantial risk of
or actual loss of refrigerant to the environment
MODERATE:the violation poses or may pose a significant risk
of or actual loss of refrigerant to the environment
MINOR:the violation poses or may pose a relatively low risk
of or actual loss of refrigerant to the environment
In determining the degree of the risk of loss of refrigerant
to the environment, Regions should consider how much refrigerant
is normally in the system (e.g. 20,000 pounds or 2 pounds) and
how likely was the activity in question to result in a release
(e.g. changing a filter or changing the compressor).
For example, changing the compressor on a system containing
20,000 pounds of CFC-12 without having removed the refrigerant
prior to repair would fall into the category of Substantial risk
of or actual loss. Changing the filter on the same system without
having removed the refrigerant prior to repair would fall into
the category of Significant risk of or actual loss. Changing the
filter on a system containing 2 pounds of HCFC-22 without having
removed the refrigerant prior to repair would fall into the
category, of Relatively Low risk of or actual loss. This assumes
that filter changes can be accomplished quickly and with a
smaller loss of refrigerant.
Importance of compliance to statutory or regulatory scheme
A second factor enforcement personnel should evaluate in
determining whether the potential for harm is major, moderate, or
minor in a particular situation is the importance of compliance
to the statutory or regulatory scheme. The degree of importance
of compliance to the statutory or regulatory scheme represented
by each category is defined as:
MAJOR:the actions have or may have a substantial adverse
effect on the statutory or regulatory scheme
MODERATE:the actions have or may have a significant adverse
effect on the statutory or regulatory scheme
MINOR:the actions have or may have a small adverse effect on
-------
the statutory or regulatory scheme
In determining the importance of compliance to the statutory
or regulatory scheme, Regions should use the categorizations
on the following list unless unusual circumstances suggest
the these categories are inappropriate:
Major
1. Knowing Venting
2. Not using recycling/recovery equipment
3. Not repairing leaks (for equipment 50 Ibs and over)
4. Accepting signed statement pursuant to §82.156(f)(2) if he
person knew or had reason to know that such a signed
statement is false
5. Failure to follow required practices in §82.156
Moderate
1. Technicians not properly trained and certified
2. Recovery Recycling equipment not properly maintained/does
not pull specified vacuum
3. Not using equipment certified for the type of appliance
4. Manufacture or import of recycling or recovery equipment
that is not certified
5. Altering design of certified refrigerant recycling or
recovery equipment
6. Unapproved technician training or testing programs issuing
certificates
7. Sale and distribution of refrigerants to persons who are not
certified technicians after November 1994, unless for resale
Minor
1. Recordkeeping requirements not properly followed
2. Training certificate not available on request
3. Sale of unreclaimed refrigerant
4. Sale of refrigerant reclaimed by uncertified reclaimer
5. Release of more than 1.5% by reclaimer
6. Sale of equipment that does not have servicing aperture or
process stub
7. Failure of owner or reclaimer to certify
If, in the Region's analysis, the two factors constituting
potential for harm result in two different designations,
-------
the more serious designation should be used. For example, the
actions have or may have a substantial adverse effect on the
statutory or regulatory scheme, but the violation poses or may
pose a relatively low risk of loss of refrigerant to the
environment. In this example, the potential for harm would be
designated major.
2. Extent of Deviation
The extent of deviation from Section 608 and the
implementing regulations relates to the degree to which the
violation defeats the requirement violated. In any situation, a
range of potential noncompliance with each requirement exists. In
other words, a violator may be substantially in compliance with
the provisions of a requirement or it may have totally
disregarded a requirement. In determining the extent of
deviation, the following categories should be used:
MAJOR:the violator deviates from requirements of the
regulation or statute to such an extent that most (or important
aspects) of the requirements are not met resulting in substantial
noncompliance. For example, the owner certification; is not
submitted.
MODERATE:the violator significantly deviates from the
requirements of the regulation or statute, but some of the
requirements are implemented as intended. For example the owner
certification is submitted six months late and includes only the
name and address of the purchaser and the name and address of the
establishment where each piece of equipment is located.
MINOR:the violator deviates somewhat from the regulation or
statutory requirements but most, if not all important aspects of
the requirements are met. For example, the owner certification is
submitted one month late and does not include the number of
service trucks used.
Each of the above factors, potential for harm and extent of
deviation from a requirement, forms one of the axes of the
penalty assessment matrix. The specific cell is chosen after
determining which category (major, moderate, minor) is
appropriate for the potential for harm factor and which category
is appropriate for the extent of deviation factor. The complete
matrix is:
-------
EXTENT OF DEVIATION FROM REQUIREMENT
POTENTIALFOR HARM
Major
Moderate
Minor
Major
$15,000
$12,000
$10,000
Moderate
$9,000
$7,000
$4,000
Minor
$3,000
$1,500
$750
For violations by a person who has previously been the
subject of a Section 608 enforcement response (e.g. notice of
violation, warning letter, or administrative or judicial order),
the amounts in Matrix 1 should be increased by a minimum of 30%
for the first violation after an enforcement response and by a
minimum of 50% for the first violation after the second to
subsequent enforcement responses. These percentages may be
increased at the
Regions discretion.
Multiple Violations
EPA acknowledges that multiple violations or the same
requirement by the same company of the Section 608 requirements
may significantly increase the actual or potential environmental
harm resulting from the violations. The Agency, therefore, will
-------
assess additional amounts against a company for each repeated
violation of the same requirement to ensure that the total
penalty assessed appropriately reflects the seriousness of time
defendant's violations after the base gravity component has been
determined from Matrix 1 for the violation of a particular
requirement, the multi incident component of the settlement
penalty is calculated as follows:
1) Using the same gravity-based designations for the
violations as were used in Matrix 1, locate the
corresponding cell in Matrix 2. If the potential for
harm of the initial violation (e.g., venting 20 pounds
of HCFC-22) is significantly different than the
subsequent violations (e.g., venting 20 pounds of CFC-
12), Regions may use a different potential for harm
cell in Matrix 2 that he one used in Matrix 1.
2) Multiply the dollar amount selected from the
appropriate cell in Matrix 2 by the number of
violations (e.g., number of additional appliances
serviced).
Matrix 2:
EXTENT OF DEVIATION FROM REQUIREMENT
POTENTIAL FOR HARM
Major
Moderate
Minor
Major
$3,000
$2,500
$2,000
Moderate
$1,800
-------
$1,200
$800
Minor
$600
$300
$100
For violations by a person who has previously been the
subject of a Section 608 enforcement response (e.g., notice of
violation, warning letter, or administrative or judicial order),
Regions should also assess an aggravated amount from Matrix 2
(i.e., increased by the same percentage as Matrix 1). The
aggravated amount should be multiplied by the number of repeat
violations of the same requirement. If the Region believes that
this penalty amount is insufficient for deterrent effect, it may
apply Matrix 1 to all repeat violations.
3. Size of violator
EPA will scale the penalty to the size of the Violator
(calculate only once per violator) Size of violator is determined
from an individual's or company's net worth. In the case of a
company with more than one facility, the size of the violator
figure is determined based on the company's entire operation, not
just the violating facility. With regard to parent and
subsidiary corporations only the size of the entity sued should
be considered. If the Region is unable to determine net worth, it
may determine size of violator based on gross revenues from all
revenue sources during the prior calendar year. If the revenue
data for the previous year appears to be unrepresentative of the
general performance of the business or the income of the
individual, an average of the gross revenues for the prior three
years may be used. The gravity component will be scaled for size
of violator using a multiplier. If a business has a net worth of
$300,000 (or gross revenues of $1,000,000), the appropriate,
amount from the matrix (or matrices above should be multiplied by
1. For businesses with net worth of less than or more than
$300,000 (or gross revenues of less than or more than
$1,000,000), Regions should divide the net worth by $300,000 (or
the gross revenues by $1,000,000) to determine the multiplier.
Generally, the size of violator component should not be more then
50% of the penalty (i.e., no multiplier greater than 2 would be
-------
used). The penalty for environmental harm/importance to the
regulatory scheme multiplied by the size of violator factor,
becomes the adjusted gravity component. If EPA is unable to
obtain information about either net worth or gross revenues, than
the Region should use an aggressive assumption for the size of
violator, and adjust it downward if proof of a lower number is
presented during negotiations.
Mitigating Penalty Amounts
The penalty amount calculated in accordance with this policy
represents the minimum penalty that EPA can accept in settlement
of cases of this nature, unless reductions from this amount are
made in accordance with the provisions of the Stationary Source
Civil Penalty Policy, pp. 15-19 (dated October 25,1991). In
civil judicial actions, a proposed penalty reduction from the
amount calculated under this policy must be approved by the Air
Enforcement Division. If the litigation team believes that
reduction of the penalty is appropriate, the case file should
contain both a memorandum justifying the reduction and
documentation that the penalty reduction was approved. In,
administrative enforcement actions Regional Administrators or
their designees must submit penalty justification documentation
within 20 days of issuance or signing of consent agreements
to the Director of the Stationary Source Compliance Division
in the Office of Air Quality Planning and Standards and the
Enforcement Counsel for Air in the Office of Enforcement.
Examples of Penalty Calculations
Following are examples of the application of this policy.
Adjustments to the gravity component are made in accordance
with the Stationary Source Civil Penalty Policy.
Example 1
Grady's Heating and Air-conditioning Service services home
and office air conditioning, systems. Hotel A, located in Miami,
Florida, is having problems with its air conditioning system. It
does not seem to be cooling properly. In October 1993, Hotel
hires Grady's to fix the system. One of Hotel A's employees,
Grace, notices that the service person is not carrying recovery
or recycling equipment. She follows him to where the chiller is
located. The unit contains 230 kilograms of CFC-12. She observes
-------
him vent the entire charge from the system. Grace reports her
observation to EPA. An inspection by EPA of Grady's facility
reveals that the company owns recovery equipment and has
apparently properly serviced all other appliances using the
equipment. Grady's net worth is $330,000.
Economic Benefit Component
The economic benefit of not using
the equipment for this job and
avoided labor cost
(less than $500)$0
Gravity Component
Knowing venting$15,000
(from major-major cell)
Analysis: The violator's actions resulted in Major potential for
harm because there was an actual less of a substantial
amount of CFC-12, which is relatively more ozone
depleting than HCFCs, and because a knowing release is
prohibited during servicing unless it is deminimis.
The violator's actions were a Major deviation from the
requirement that persons not knowingly release
refrigerant.
Size of violator (Business1 net worth
is approximately $330,000)
(330,000/300,000 = * 1.1
$16,500
Preliminary deterrence amount
Economic Benefit ComponentO
Gravity Component+16,500
Minimum penalty settlement amount$ 16,500
One year later, the Agency receives a tip that Grady's has
hired a new certified technician who is not always using recovery
equipment when it is needed. After investigating the tip, the
Agency concludes that one three occasions, Grady's has violated
the venting prohibition.
-------
Economic Benefit Component
The economic benefit of not using
the equipment for this job and
avoided labor cost
(less than $500)$0
Gravity Component
Knowing venting$15,000
(from major-major cell)
aggravated by 30% (15,000 *.30)
because violation occurred after
an enforcement response+ 4,500
19,500
19,500
Analysis: The violator's actions resulted in Major potential for
harm because there was an actual loss of a substantial
amount of CFC-2, which is relatively more ozone
depleting than HCFCs, and because a knowing release is
prohibited during servicing unless it is de minimis.
The violator's actions were a Major deviation from the
requirement because the company did not comply at all
with the requirement that persons mot knowingly release
refrigerant.
Multi-incident assessment
(# of additional violations multiplied
by major-major cell amount)
2 *$30006,000
aggravated by 30% (6,000 *.30)
because violations occurred after
an enforcement response+1,800
7,800
+ 7,800
27,300
Size of violator (Business1 net worth
is approximately $330,000)
(330,000/300,000=* 1.1
$30,030
-------
Preliminary deterrence amount
Economic Benefit ComponentO
Gravity Component+30.030
Minimum penalty settlement amount$30,030
Example 2
Joe, owner of Joe's Repair, has been manufacturing
refrigerant recovery devices for small appliances in his spare
time. Joe has not had the devices tested or certified by an
approved equipment testing organization. Since November 15,
1993, Joe has manufactured seven units and is using them at
his shop. When EPA tested the units, it determined that the
equipment could recover 50% of the refrigerant in a small
appliance. Joe's net worth is $180,000.
Economic Benefit Component
The economic benefit of delaying
the cost of testing + cost of building
equipment that meets standards or
purchasing approved equipments amount
from BEN
Gravity Component
4
Manufacturing uncertified equipment $7,000
(from moderate-moderate cell)
Analysis: The violator's actions resulted in a Moderate potential
for harm because there was an actual loss of a
significant amount of refrigerant (the equipment can
only recover 50%) and because his equipment does not
meet the minimum standard for recovery. The violator's
actions involve a Moderate deviation from the
requirements because although Joe is using some
equipment, i.e, he is not simply venting, he did not
have his equipment tested and certified.
Multi-incident assessment
(# of additional violations multiplied
by moderate-moderate cell amount)
6 * $1200 =$7,200
$14,200 A
-------
Size of violator (Business1 net worth
is approximately $180,000)
180,000/300,000* .6
$ 8,520
Preliminary deterrence amount
Economic Benefit Component??
Gravity Component+ 8,520
Minimum penalty settlement amounts
Example 3
Dave, a building manager for an office complex in Tacoma,
Washington, uses passive recovery equipment when he or his crew
(two people) work o the rooftop chiller that contains 30 pounds
of R-22. Dave decided not to purchase the appropriate (and more
expensive) recovery equipment for the building or get himself or
his crew trained and certified. During a routine inspection in
January 1994, and EPA inspector discovers that the building does
not have the required recovery equipment, nor did Dave or the
building owner ever submit a certification indicating that
certified equipment had been acquired. The inspector also
reviews the building's repair log which shows 5 repairs when the
passive equipment was used. The building owner's net worth is
$1,500,000.
Economic Benefit Component
The economic benefit of delaying
the purchase of equipment + cost
of operation and maintenance +$ amount
cost of certifying techniciansfrom BEN
Gravity Component
Servicing without using
certified equipment$7,000
(from moderate-moderate cell)
Analysis: The violator's actions resulted in a Moderate potential
for harm because there was an actual loss of a
significant amount of refrigerant (passive equipment
can only recover a small percentage of the actual
charge) and because Dave is not using equipment that is
-------
appropriate for the appliance serviced. The violator's
actions involve a Moderate deviation from the
requirements because although Dave is using some
equipment, i.e., he is not simply venting, he is not
using the equipment required by the regulations for
this type of appliance.
Multi-incident
(# of additional violations multiplied
by major-moderate cell amount)4,800
(4 * $1200)
9,000
Technicians not certified
(from moderate-major cell)
Analysis: The violator's actions resulted in a Moderate potential
for harm because the risk of loss due to untrained
technicians improperly using recovery equipment is
significant. The violator's actions involve a Major
deviation from the requirements because the technicians
did not comply with any of the technician certification
requirements.
Multi-incident
(# of additional violations multiplied
by moderate-moderate cell amount)2,400
(2 * $1200)
Failure to submit certifications ,000
(from minor-major cell)
Analysis: The violator's actions resulted in a Minor potential
for environmental harm because failure of an owner to
certify undermines the Agency's ability to determine
compliance with the regulations. The violator's
actions involve a Major deviation from the requirements
because the owner did not comply with any of the
certification requirements.
Size of violator (Business; net worth26,200
is approximately $1,500,000)
(1,500,000/300,000 = 5)
-------
Because generally the size of violator
should be no more than 50% of the
preliminary deterrence amount, the
multiplier is reduced to 2)* 2
$52,400
Preliminary deterrence amount
Economic Benefit Component ??
Gravity Component+52,400
Minimum penalty settlement amount $
------- |