> Audit Report No. Elg6*8-09-0188-9100479
TABLE OF CONTENTS
Page
SCOPE AND OBJECTIVES 1
SUMMARY OF FINDINGS 3
ACTION REQUIRED 8
BACKGROUND 9
FINDINGS AND RECOMMENDATIONS
1. ECONOMIC BENEFITS OF NONCOMPLIANCE MUST BE
CONSIDERED 13
2. PROPOSED GRAVITY-BASED PENALTIES SHOULD BE HIGHER.. 24
3. REGIONS ARE EXCESSIVELY MITIGATING PENALTIES 33
4 . DOCUMENTATION NEEDS IMPROVEMENT 45
SCHEDULE A - SCHEDULE OF AVERAGE PENALTIES UNDER SETTLED
RCRA ENFORCEMENT CASES FOR FISCAL YEARS 1985,
1986 AND 1987 51
SCHEDULE B - SCHEDULE OF RCRA CASES SELECTED FOR REVIEW 53
ATTACHMENT 1 - OFFICE OF SOLID WASTE AND EMERGENCY
RESPONSE COMMENTS 54
APPENDIX A - REPORT DISTRIBUTION 57
HEADQUARTERS LIBRARY
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C. 20460
OFFICE OF
THE INSPECTOR GENERAL
September 18, 1989
SUBJECT:
FROM:
TO:
Consolidated Report on Review of EPA's Controls
Over Administrative Penalties under
RCRA Enforcement Program
Audit Report No. Elg6*8-09r0188-91oq479
Ernest E. Bradley
Assistant Inspector
neral for Audits
Jonathan Z. Cannon
Acting Assistant Administrator for
Solid Waste and Emergency Response (WH-562)
Edward E. Reich
Acting Assistant Administrator for
Enforcement and Compliance Monitoring (LE-133)
SCOPE AND OBJECTIVE^?
Reviews have been completed of EPA's administrative controls
over the setting and negotiation of administrative penalties
under the Resource Conservation and Recovery Act (RCRA)
enforcement program. The reviews; performed by the Eastern,
Southern and Western Divisions of the Office of the Inspector
General for Audit (OIGA) included EPA Regions 1, 4, 6, 8 and 9.
The purpose of he reviews was to determine whether the Agency's
administrative controls were adequate to ensure compliance with
existing Agency policies and procedures. The reviews were
performed as part of the OIG's internal audit program which
reviews Agency operations.
determine:
Our specific objectives were to
Whether reasonable controls have been established over
the setting of proposed penalties and the negotiation
of final penalties; and
Whether the Regions were operating within those
established controls.
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The purpose of this consolidated report is to apprise senior
EPA management of the findings identified in our individual
Regional reviews, and to recommend actions or policy changes at
the Headquarters level to alleviate similar findings in the
future. This consolidated report represents a summary of the
findings contained in the final Region 9 audit report and the
results disclosed during our reviews of the other four Regional
offices. Individual Regional audit reports were not prepared
from our follow-on reviews conducted in Regions 1, 4, 6 and 8.
The results of each individual Regional review were transmitted
to the Regions' for comment before inclusion in the consolidated
report. Where appropriate, Regional comments have been incorpo-
rated into this consolidated report. During the preparation of
this consolidated report, we did not perform any additional audit
tests to verify corrective actions taken by the Regions in the
resolution of the individual reviews.
This was the first OIG review of the Agency's administrative
controls over the setting and negotiation of RCRA administrative
penalties. As such, there were no prior outstanding audit
recommendations for inclusion in this review.
To accomplish our objectives we: interviewed personnel in
each Regional program office and each Office of Regional Counsel
(ORC); reviewed EPA Regional enforcement files on selected RCRA
enforcement cases; and interviewed representatives from the
Office of Solid Waste and Emergency Response (OSWER) and the
Office of Enforcement and Compliance Monitoring (OECM).
The review included RCRA administrative enforcement actions
initiated during Fiscal Years 1985 through 1987, that included
proposed administrative penalties. At the time of our review,
the Regions, according to docket files maintained by the Regional
Hearing Clerks, had settled 431 cases with assessed RCRA
administrative penalties. Schedule A to this report shows the
distribution of the 431 settled cases by Region. In the Region 9
pilot audit, four cases were selected for review, two cases were
selected by Region 9 officials and two by our office, to include
a cross section of major regulatory violations. The four cases
reviewed were considered to be generally representative of the
Region's current RCRA enforcement efforts. For the follow-on
reviews conducted in Regions 1, 4, 6 and 8, four (4) cases were
judgmentally selected in each Region. We selected cases which
included significant reductions between proposed and assessed
penalties. The cases were also selected to include a cross
section of major regulatory violations. Thus, a total of 20
cases were reviewed. Schedule B to this report shows the cases
reviewed.
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The review was performed in accordance with the Standards
for Audit of Government Organizations, Programs, Activities, and
Functions, issued by the Comptroller General of the United
States, and accordingly included such tests of records and other
auditing procedures as were considered necessary in the
circumstances. The review included only administrative
enforcement actions against RCRA regulated facilities. Cases
settled by Administrative Law Judges (ALJs), Department of
Justice (DOJ) and states, and their associated controls were not
reviewed. The major internal controls in place relative to
proposing, negotiating and assessing administrative penalties
under the RCRA program are set forth in:
a. The Resource Conservation and Recovery Act, as amended.
b. EPA Uniform Civil Penalty Policy (February 1984).
c. EPA RCRA Civil Penalty Policy (May 1984).
d. 40 CFR Part 22, Consolidated Rules of Practice Governing
the Administrative Assessment of Civil Penalties.
e. EPA Agencywide Compliance and Enforcement Strategy and
Strategy Framework for EPA Compliance Programs (May
1984).
The review did not include an evaluation of the internal
controls associated with the input and processing of information
into automated records systems, although we did use information
contained in these records.
Opportunities for the Agency to improve its performance in
controlling the negotiation of RCRA penalties are included in the
FINDINGS AND RECOMMENDATIONS section of this report. Subject to
the exceptions and qualifications discussed in this report, the
items tested were generally in compliance with applicable laws
and regulations. There was no indication that the items not
tested would disclose any additional weaknesses.
SUMMARY OF FINDINGS
The Agency's program policies and procedures for the
establishment of proposed RCRA administrative penalties and the
negotiation of final assessed penalties could be effective in
achieving the goals of the RCRA enforcement program. However, it
is our opinion the Regional offices have not closely adhered to
the national policies and procedures. As a result, the monetary
penalties against RCRA violators have not eliminated the
violators' economic benefits of noncompliance nor had the maximum
deterrent effect. We determined that the Regions had: (i) not
considered nor negated the economic benefits of violator
noncompliance; (ii) proposed insufficient gravity-based penalties
and excessively mitigated them during negotiations; and (iii) not
properly documented penalty calculations and reductions.
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For the period reviewed, Regional offices settled 431 RCRA
enforcement actions against violating facilities. Consent
agreements and final orders were executed in all of these cases.
This resulted in the negotiation of final assessed penalties of
$6,094,686, or about 37 percent of the initially proposed
penalties ($16,497,130) for the settled cases. Reductions to
proposed penalties ranged up to 100 percent, and $2.0 million as
a result of the negotiations conducted by Regional offices.
Improvements in this aspect of the RCRA enforcement program
may require addressing not only institutional but attitudinal
barriers concerning assessing adequate penalties that punish
violating facilities. We are recommending that the Assistant
Administrators for OSWER and OECM take a number of actions to
strengthen the RCRA enforcement program as it pertains to the
assessment of administrative civil penalties. These include:
1. Re-emphasizing to the Regions the importance of
adhering to the Agency's penalty policies that require
assessing penalties that include the elimination of the
economic benefits of noncompliance and which punish
the violator.
2. Establishing a strong oversight role that includes
holding Regions accountable for implementing Agency
penalty policies.
3. Taking action to assure that Regional offices comply
with documentation requirements included in the RCPP.
The Regional offices included in this review were generally
aware of the conditions discussed in this report. Region 9, the
recipient of our pilot review, acknowledged in a letter, dated
November 6, 1987, to the Office of Waste Programs Enforcement,
that they were not fully complying with the RCRA Civil Penalty
Policy (RCPP). In this letter, the Region requested
reconsideration of several RCPP requirements, including:
calculation of economic benefits, application of multi-day
penalties and the documentation and disclosure of penalty
mitigation factors. The Associate Enforcement Counsel for Waste
responded to Region 9's letter indicating that the policy was in
need of revision. In response to Region 9's letter, OECM formed
a RCRA Civil Penalty Policy Workgroup for the purpose of
reviewing the RCPP and suggesting changes to the policy. As of
the date of this report, the results of the workgroup's efforts
have not resulted in a revised published policy. Accordingly,
the results of our review addressed the RCPP as it currently
exists.
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The conditions disclosed during our reviews are summarized
below and presented in detail in the FINDINGS AND RECOMMENDATIONS
SECTION of this report.
1. ECONOMIC BENEFITS OF NONCOMPLIANCE MUST BE CONSIDERED
Regional offices are not, as a general rule, including the
value of the economic benefits of noncompliance in proposed and
assessed penalties against RCRA violators. As a result,
violators gain financially from noncompliance with RCRA statutory
and regulatory requirements. Of the 20 cases we reviewed where
it appears that a value for the economic benefits of
noncompliance should have been assessed, only one case had a
final assessed penalty that was sufficient to eliminate the
violator's economic benefits. To illustrate the potential
benefits that can be derived, the violator in one of the cases
reviewed had estimated economic benefits of $229,000 because it
did not comply with RCRA requirements. The affected Region,
however, settled that case with a final assessed penalty of only
$45,000, resulting in a net gain to the violator of $184,000.
Regional personnel provided several reasons for not following
Agency penalty policies relating to economic benefits. These
reasons included: (i) such penalties are difficult to calculate
and require too much effort; (ii) the penalty calculations may
not be accepted by Administrative Law Judges (ALJs) if the case
goes to hearing; and (iii) Regional perceptions that some of the
violations are not significant enough to warrant economic benefit
considerations. In our opinion, the cited reasons were neither
supported by the documentation maintained by the Regions nor
consistent with Agency penalty policies. We also noted that the
U.S. General Accounting Office issued an audit report in June
1988 that included similar findings regarding the EPA Regions'
failure to include the economic benefits of noncompliance in
proposed and assessed penalties. We believe that the Agency
needs to re-emphasize to the Regions the importance of adhering
to its penalty policies for this area. We also believe that the
Agency needs to increase its oversight and hold the Regions
accountable for the implementation of penalty policies relating
to proposing and assessing penalties against RCRA violators that
eliminate the economic benefits of noncompliance. (Page 13)
2. PROPOSED GRAVITY-BASED PENALTIES SHOULD BE HIGHER
Regional offices are not consistently proposing sufficient
gravity-based RCRA administrative penalties to reflect the
seriousness of the violations, duration of noncompliance, nor all
of the violations disclosed. This condition, along with our
finding that Regions are excessively mitigating proposed
penalties (See Finding No. 3 titled "Regions are Excessively
Mitigating Penalties), results in penalties we consider
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inadequate to provide an effective deterrent to noncompliance by
the RCRA regulated community. To illustrate, we reviewed cases
where groundwater monitoring violations, improper discharges of
hazardous wastes, and other significant RCRA violations occurring
for periods of up to three years, resulted in proposed gravity-
based penalties as small as $6,500. In one case, the proposed
gravity-based penalty amounted to $29 per day for 34 months of
noncompliance and in another case only $11 per day for a six
month period of noncompliance. These conditions were largely
attributable to the Regions either not considering lengthy
periods of noncompliance in computing gravity-based penalties or
not proposing penalties for all distinguishable violations, as
required by the RCPP. In our opinion, the Agency needs to
emphasize the importance of operating an aggressive enforcement
program for calculating and proposing sufficient gravity-based
penalties consistent with the guidelines contained in the RCPP.
This should be followed by increased oversight over Regional
enforcement programs and holding the Regions accountable for
implementing Agency policies. (Page 24}
3. REGIONS ARE EXCESSIVELY MITIGATING PENALTIES
In our opinion, Regional negotiators are mitigating RCRA
penalties in excess of the parameters contained in existing
Agency policy. Final negotiated RCRA administrative penalties,
for cases settled during the period reviewed ranged from an
average of 14 to 67 percent of proposed penalties in the Regions,
with a national average of only 37 percent. Cases we reviewed
included penalty reductions of as much as $2 million and
reductions for individual violations ranged up to 100 percent.
In addition, as discussed in detail in Finding No. 1 titled
"Economic Benefits of Noncompliance Must be Considered" final
negotiated penalties did not always negate the estimated economic
benefits derived by the violating facilities. We attribute the
excessive penalty mitigations to:
- Negotiators not adhering to established parameters
for conducting negotiations;
- The desire for quick case resolution;
Poor case preparation;
- Negotiators focusing on compliance instead of both
compliance and deterrence through sufficiently
burdensome penalties; and
- A reluctance to pursue cases to ALJ hearing.
In our opinion, none of the above reasons are consistent
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with the Agency's penalty policies or justified by the evidence
we observed during our case reviews. Excessive reductions of
penalties diminish the deterrent effects of the enforcement
program on the regulated community. Reduced fines can also
undermine EPA's efforts to return significant noncompliers to
compliance. In effect, achievement of the Agency's penalty
policy goals, deterrence and fair and equitable treatment of the
regulated community, is questionable. We believe that the Agency
needs to increase its oversight of Regional enforcement programs
to assure that RCRA negotiated penalties fully comply with the
RCPP. (Page 33)
4. DOCUMENTATION NEEDS IMPROVEMENT
Regional offices are not documenting the proposed penalty
calculations or the specific negotiated adjustments to proposed
penalties, or including a statement in the executed consent
agreements (CAs) of the reasons for mitigating the penalties. Of
the 20 cases we reviewed, 19 cases had at least one of these two
conditions. In some instances, significant reductions in
penalties were made without documentation explaining or
justifying the reductions. To illustrate, one case we reviewed
had a proposed penalty that was $6.3 million less than the
recommended maximum penalty calculated by the Region's
enforcement personnel. However, there were no Regional records
explaining or justifying the difference. We attribute the
failure to maintain documentation as required by the RCPP, in
part, to Regional concerns that the availability of detailed
information on penalty adjustments could jeopardize future
negotiations. The RCPP requires such documentation as one of the
controls to assist in precluding excessive or improper penalty
mitigations without Regional management's full understanding.
Such documentation also increases the assurance that the
regulated community is being fairly and equitably treated. In
addition, the documentation is important information to assist
the Agency in issuing press releases to publicize its enforcement
activities. We believe that the Agency needs to take action to
assure that Regional offices comply with the documentation
requirements included in the RCPP by increasing its monitoring.
(Page 45)
Agency Response
A draft audit report was transmitted to Agency officials for
comment on July 24, 1989. OSWER responded to the draft audit
report on September 8, 1989. An exit conference was not held
with OSWER as the office did not indicate a need for or request
one.
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OSWER's response indicated general agreement with the audit
findings relative to those issues that specifically involved
Headquarters activities. While OSWER did not provide adverse
reactions to our recommendations, their response was not always
sufficient to indicate that actions would be taken to fully
implement the recommendations. OSWER's general comments are -
presented below and the complete response is included as
ATTACHMENT 1 to this report. OSWER's comments to individual
findings and recommendations are incorporated into each finding
in the report. Where applicable, additional auditor comments
follow the Agency's comments.
OSWER comments to the draft report are summarized as
follows:
"Your discussion of the nature and intent of the
Uniform Civil Penalty Policy and the RCRA Civil
Penalty Policy are generally accurate, as is the
description of our various office functions."
"Your report focuses on three primary areas of concern:
1) economic benefit of non-compliance is not adequately
factored into many penalty calculations; 2) proposed
gravity-based penalties should be higher and are being
excessively mitigated; and 3) documentation of penalty
calculations is inadequate. We share your concern in these
important program areas and have already initiated several
activities which impact many of these issues."
ACTION REQUIRED
In accordance with Chapter 7 of EPA Directive 2750, the
Action Official is required to provide this office with a written
response to the audit recommendations included in this report
within 90 days of the date of the report. The Directive requires
that responses include specific milestone dates for any
recommendations not yet implemented.
Please refer to the audit report number on any related
correspondence. If you have any questions regarding this audit,
please call Mr. Truman R. Beeler at FTS 454-7084.
BACKGROUND
EPA is responsible for the administration of environmental
statutes mandated by Congress. These responsibilities include:
the establishment of compliance standards and permits; the
monitoring and reporting of compliance; the establishment of
strategies for accomplishing compliance; and the actual methods
of accomplishing compliance. Enforcement can be defined as the
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act or process of executing a law by compelling compliance with
its statutory/ regulatory or program requirements. One essential
element of an enforcement program is the effective use of
monetary penalties which punish the violators and deter future
violations.
The Resource Conservation and Recovery Act (RCRA) was passed
as Public Law 94-580, an amendment to the Solid Waste Disposal
Act, on October 21, 1976. Congress' overriding purpose in
enacting RCRA was to establish the statutory framework for a
national system that would ensure the proper management of
hazardous waste. Regulation of these materials was intended to
prevent future hazardous waste problems and reduce threats to the
public and the environment. RCRA was amended in 1980 and 1984
increasing EPA's enforcement authorities and substantially
increasing the implementing requirements for the regulated
community. Section 3008 of RCRA gives EPA the authority to
assess civil penalties of up to $25,000 per day per violation for
noncompliance with program requirements or with an order.
EPA's policy has been to foster high levels of compliance
through a comprehensive effort to: promote voluntary compliance
by the regulated community as a whole; conduct compliance
monitoring activities to detect violations and identify priority
compliance problems; and take firm but fair enforcement action
when needed to bring individual violators into compliance so as
to maintain a strong enforcement presence.
In February, 1984, EPA issued the Uniform Civil Penalty
Policy. It established a consistent agency-wide approach to the
assessment of civil penalties. Its goals were deterrence, fair
and equitable treatment of the regulated community, and swift
resolution of environmental problems.
On May 8, 1984, EPA issued the RCRA Civil Penalty Policy
(RCPP). This document set forth the Agency's policy for
assessing administrative penalties under RCRA. The purpose of
the RCPP is to assure that persons are deterred from committing
RCRA violations; that penalties are appropriate for the gravity
of the violation committed; that economic incentives for
noncompliance with RCRA are eliminated; that penalties are
assessed in a fair and consistent manner; and that compliance is
achieved. This system of penalty assessment adheres to the
Agency policy by requiring: calculation of a preliminary
deterrence amount consisting of a gravity component; determining
the economic benefits of noncompliance; and applying adjustment
factors within specified boundaries to account for differences
between cases. The proposed penalty, included in the complaint,
would consist of the gravity component, economic benefits of
noncompliance and any adjustments required by the RCPP. The
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proposed penalty may be adjusted during negotiations, resulting
in the final assessed penalty to be included in the Consent
Agreement/Final Order (CA/FO).
The characterization of the effective use of monetary
penalties in the RCRA program depends on the definition of the
term and somewhat on the premises associated with the use of this
enforcement tool. Black's Legal Dictionary defines a penalty as
"a sum of money which the law exacts payment of by way of
punishment for doing some act which is prohibited or for not
doing some act which is required to be done." According to the
Corpus Juris Secundus, "in order to be an effective deterrent to
violations, civil penalties should be large enough to hurt the
offender." Premises pertinent to this review are as follows:
1. Penalties are punitive in nature and intent.
2. In order to be punitive, penalties must be large enough
to punish the wrongdoer and to deter him from committing
the offense again.
3. Penalties that do not negate any economic benefit
derived from violation of program requirements are not
fair to those who comply with the program and do not
deter future violations.
EPA's goal for environmental success is to attain high
levels of compliance with environmental standards. The
effectiveness of an enforcement program is measurable by the rate
of compliance with the program goals. The assessment of
administrative penalties, that are sufficiently burdensome to be
a deterrent to future violations, is a critical tool in reaching
the goal timely.
In reviewing the effectiveness of a program in accomplishing
its goals and objectives, it is important to evaluate it in light
of the established program internal controls. The concept of
internal controls has been defined by the General Accounting
Office (GAO) as:
The plan of organization, methods and procedures
adopted by management to ensure that resource use is
consistent with laws, regulations, and policies; that
resources are safeguarded against waste, loss, and misuse;
and that reliable data are obtained, maintained, and fairly
disclosed in reports.
Internal control standards define the minimum level of
quality acceptable for internal control systems, and constitute
the basis against which systems are to be evaluated. The GAO
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general and specific standards that were applied to this review
include the following:
- Competent personnel that are adequately trained and
assessed on their implementation of necessary internal
controls.
• Internal control objectives that are identified and
developed for each Agency activity; and which are logical,
applicable and reasonably complete.
- Internal control techniques, which include policies,
procedures and plans of organization, that are effective
and.efficient for accomplishing their objectives.
- Internal controls systems, in which all transactions and
events are clearly documented, with the documentation
available and easily accessible for examination.
- Transactions and other significant events are to be
promptly recorded and classified.
- Transactions and other significant events are to be
authorized and executed only by persons acting within the
scope of their authority.
Two Headquarters offices have significant responsibilities
relative to the RCRA enforcement/compliance program. The Office
of Solid Waste and Emergency Response (OSWER) provides Agencywide
policy, guidance and direction for the solid waste and emergency
response program. Some of this Assistant Administrator's (AA)
responsibilities include:
(a) Program policy development and evaluation;
(b) Development of appropriate hazardous waste standards and
regulations;
(c) Ensuring compliance with applicable laws and
regulations;
(d) Program policy guidance and overview, technical support,
and evaluation of Regional activities; and
(e) Development of programs for technical, programmatic, and
compliance assistance to States and local governments.
The Office of Enforcement and Compliance Monitoring (OECH)
serves as the principal advisor to the Administrator in matters
concerning enforcement and compliance; and provides the principal
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direction and review of civil enforcement activities for air,
water, waste, pesticides, toxics and radiation. This AA is also
responsible for reviewing the efforts of each Assistant and
Regional Administrator to assure that EPA develops and conducts a
strong and consistent enforcement and compliance program.
Regional program offices are responsible for implementing
the RCRA enforcement program. These offices are tasked with
conducting all program activities, except enforcement litigation
activities which are cooperatively managed with the Office of
Regional Counsel (ORC). The Regional program offices are also
required to maintain administrative enforcement records and
various logs to insure all appropriate actions are taken by
violators, as well as, by EPA. While the Regions are tasked with
program activities and receive national program policy and
guidance, the Agency's organizational structure affords Regions
opportunities for significant latitude and independence in the
administration of programs.
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FINDINGS AND RECOMMENDATIONS
1. ECONOMIC BENEFITS OF NONCOMPLIANCE MUST BE CONSIDERED
Regional offices are not, as a general rule, including the
value of the economic benefits of noncompliance in proposed and
assessed penalties against RCRA violators. As a result,
violators gain financially from noncompliance with RCRA statutory
and regulatory requirements. Of the 20 cases we reviewed where
it appears that a value for the economic benefits of
noncompliance should have been assessed, only one case had a
final assessed penalty that was sufficient to eliminate the
violator's economic benefits. To illustrate the potential
benefits that can be derived, the violator in one of the cases
reviewed had estimated economic benefits of $229,000 because it
did not comply with RCRA requirements. The affected Region,
however, settled that case with a final assessed penalty of only
$45,000, resulting in a net gain to the violator of $184,000.
Regional personnel provided several reasons for not following
Agency penalty policies relating to economic benefits. These
reasons included: (i) such penalties are difficult to calculate
and require too much effort; (ii) the penalty calculations may
not be accepted by Administrative Law Judges (ALJs) if the case
goes to hearing; and (iii) Regional perceptions that some of the
violations are not significant enough to warrant economic benefit
considerations. In our opinion, the cited reasons were neither
supported by the documentation maintained by the Regions nor
consistent with Agency penalty policies. We also noted that the
U.S. General Accounting Office issued an audit report in June
1988 that included similar findings regarding the EPA Regions'
failure to include the economic benefits of noncompliance in
proposed and assessed penalties. We believe that the Agency
needs to re-emphasize to the Regions the importance of adhering
to its penalty policies for this area. We also believe that the
Agency needs to increase its oversight and hold the Regions
accountable for the implementation of penalty policies relating
to proposing and assessing penalties against RCRA violators that
eliminate the economic benefits of noncompliance.
Background
Both the EPA Uniform Civil Penalty Policy and the RCPP
require the inclusion of the economic benefits of noncompliance
in the calculation of proposed and assessed penalties. Both
policies state that an "economic benefit component" should be
calculated and added to the gravity-based penalty when the
violation results in significant economic benefit to the
violator. The RCPP defines significant economic benefit as
$2,500 or more and provides examples of regulatory requirements;
such as groundwater monitoring, financial assurance requirements,
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closure/post closure, waste determination, waste analysis, and
clean-up of discharges, the violation of which should undergo an
economic benefits analysis.
The significance of including the economic benefits
component in proposed and assessed penalties is evident by the
provisions of both the Civil Penalty Policy and the RCPP. The
Civil Penalty Policy states that the Agency should seek to
recover, at a minimum, a penalty that includes the economic
benefits plus some non-trivial gravity component. Adjustment
factors are to be applied only to the gravity component and not
to the economic benefit portion of the penalty. The provisions
of the RCPP are consistent with the Civil Penalty Policy. The
RCPP provides four exceptions to the general settlement rule as
follows:
- The economics benefits consist of an insignificant
amount (defined as less than $2,500);
- There are compelling public concerns that would not
be served by taking the case to trial;
- It is unlikely that EPA would be able to recover the
economic benefits in litigation; and
- The company has documented an inability to pay the
total proposed penalty.
Agency policy, since the issuance of the February 1984
Uniform Civil Penalty Policy, has been for program offices to
consider economic benefits a key element in the construction of
civil penalties. If a penalty is to achieve deterrence, both the
violator and the general public must be convinced that the
penalties assessed against violators negate any improved economic
position relative to those who have complied in a timely fashion.
Allowing a violator to benefit from noncompliance punishes those
who have complied by placing them at a competitive disadvantage.
This, in effect, creates a disincentive for compliance.
Economic Benefits Not Computed
We found that, as a general rule. Regional offices are not
calculating the economic benefits of noncompliance nor adding
them to the proposed gravity-based penalties as required by the
Civil Penalty Policy and the RCPP. This condition was evident in
14 of the 20 cases we reviewed. As a result, proposed penalties
do not always include the estimated economic benefits of
noncompliance and final penalties being assessed against
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violating facilities do not offset the economic benefits being
derived from the violations. The results of our Regional reviews
are summarized in the following subsections.
Region9. Three of the four cases reviewed in this Region
contained no evidence of any economic benefit calculations. The
three cases that contained no evidence of economic benefit
computations were Reichhold Chemical, IT Westmoreland and IT
Panoche. In the fourth case, Dillingham Corporation/ the Region
did estimate the economic benefits of noncompliance. We
requested information from Region 9 technical personnel and EPA
contractor representatives on whether the economic benefits could
be estimated on specific cases. The results showed that: (i)
the economic benefits could be estimated on the cases; (ii)
potentially significant benefits were derived by the violators;
and (iii) the final assessed penalties were not sufficient to
negate these benefits. Additional comments about two of the
Region 9 cases are provided below to further illustrate the
condition.
Reichhold Chemical. This facility was cited for failure to:
(i) implement an adequate groundwater monitoring program; {ii}
demonstrate adequate financial responsibility; (iii) develop an
adequate closure plan; and (iv) prepare an adequate closure cost
estimate. The Region proposed total gravity-based penalties of
$29,500 for the cited violations. The proposed penalties did not
include any estimated economic benefit the company derived from
any of the violations. Representatives of the EPA Field
Investigation Team Contractor (FIT) indicated that the delayed
and avoided costs associated with the violations could be
reasonably estimated for the violations. Based on information
provided by the FIT representative, a conservative estimate of
the delayed and avoided costs associated with this case was
computed. The computations showed that Reichhold could have
benefited by about $15,900 in delayed costs and $1,500 in avoided
costs for a total of $17,400. Adding the estimated economic
benefits to the proposed gravity based component would have
resulted in a total proposed penalty of $46,900.
IT Westmoreland. This facility was cited for failure to
implement an adequate interim status groundwater monitoring
program and to supply required groundwater monitoring information
in the facility's Part B application. The Region proposed a
total gravity-based penalty of $30,000 for the violations. The
proposed penalty did not include an estimate of the economic
benefits the company may have derived from the violations. The
Region's field inspector for the facility indicated that the
delayed and avoided costs associated with the violations could be
reasonably estimated. Based on the information provided, a
conservative estimate of $44,555 for delayed costs and $10,590
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for avoided costs was computed. If the estimated economic
benefits were added to the proposed gravity-based penalty, the
complaint would have included total estimated penalties of
$85,145.
Region 1. Three of the four cases reviewed in Region 1
contained no evidence that the Region had computed any estimated
economic benefits derived by the violating facilities. The three
cases with no evidence of such computations included United
Parcel Service, Summit Corporation and L & L Heat Treating. In
the fourth case, Whyco Chromium, the Region did estimate the
economic benefits of noncompliance for two of the violations
included in the complaint. Our observations on two of the Region
1 cases are summarized in the following paragraphs.
Summit Corporation. This facility was cited for eleven RCRA
violations including failure to: (i) obtain a valid permit or
interim status; (ii) submit a closure plan; (iii) prepare a waste
analysis plan; (iv) obtain chemical and physical analysis; (v)
perform inspections; (vi) demonstrate adequate financial
responsibility and (vii) train personnel. The violator has
avoided the costs of chemical analyses, insurance or other forms
of financial responsibility and recurring employee training
costs. The avoided and other delayed costs associated with the
cited violations would easily have exceeded the $2,500 RCPP
limitation. As such, the Region should have estimated the
economic benefits of noncompliance and added them to the gravity
based penalty.
L & L Heat Treating. In this case the Region cited the
facility for twelve different RCRA violations and proposed a
gravity-based penalty of $56,749. The violations cited in the
complaint included various operating practices; such as container
violations and storage in excess of 90 days without a permit,
failure to provide site security, failure to prepare various RCRA
required plans, failure to obtain financial assurance for closure
and failure to maintain insurance coverage for accidental
occurrences. A review of the Region's case records disclosed
that the proposed penalty did not include any value for the
estimated economic benefits of noncompliance. Region 1's files
documented a long history of facility violations, dating back
more than two years before the subject complaint was filed.
Considering the facility's history of violations, it is our
opinion that the violator probably realized significant avoided
and delayed costs from the violations. As such, the Region
should have calculated the economic benefits of noncompliance and
added that value to the proposed gravity based penalty.
Region 4. We concluded that Region 4 did not consider an
estimated economic benefit amount in two of the four cases
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reviewed (Huxford Pole & Timber and Owens Electric Steel Corp.).
In the United Metals case, the files indicated that economic
benefits were calculated but were not added to the proposed
gravity-based penalty. In the Synalloy Corporation case, the
Region estimated the economic benefits and added them to the
gravity-based penalty. Our review of the compliance history for
each facility disclosed that significant periods of noncompliance
were evident in the Huxford and Owens cases. Because of the
extended periods of noncompliance, significant economic benefits
from delayed and avoided costs could have accrued to the
violating facilities. Our findings from reviewing the Owens
file illustrates the condition noted in Region 4.
Owens Electric Steel Company. This facility was cited for
failure to comply with RCRA groundwater monitoring requirements
between November 1981 and April 1985, a period of 3 1/2 years.
We found no evidence that the Region had calculated the estimated
economic benefits for the violations even though Regional
personnel were aware that significant benefits had accrued to the
violator. This was evident in a note on the Region's penalty
calculation worksheet that stated that "... the facility saved
considerable funds by late well installation."
Region 6. There was no documentation in Region 6's files
that it had estimated the economic benefits of noncompliance in
three of the four cases we reviewed. The three cases with no
evidence of economic benefit computations included P. T.
Coupling, Nalco Chemical and Oil Recovery. In the fourth case
(Tulsa Chrome), the Region calculated an economic benefit of
$12,311 for the cited groundwater monitoring violations, however,
no economic benefit costs were computed for the other violations
included in the complaint. Examples of our findings in Region 6
are provided in the following paragraphs.
P. T. Coupling. Region 6 filed a complaint against this
company for 17 RCRA violations. The cited violations included a
variety of procedural and filing requirements including: failure
to notify and file a Part A, no written closure plan, failure to
maintain adequate security, waste pile violations, no contingency
plan, no financial assurance for closure and no financial
assurance for sudden accidental occurrences. The types of
violations cited in the complaint would result in the company
benefiting from the avoided costs associated with no security, no
insurance for sudden accidental occurrences and no financial
assurance for facility closure. Based on the criteria contained
in the RCPP, it is our opinion that the Region should have
estimated the economic benefits of noncompliance on this case
because of the types and substantial number of violations cited.
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Nalco Chemical Company. Region 6 filed a complaint against
this facility which included 18 RCRA violations. The complaint
included a variety of RCRA violations including: failure to
notify and file a Part A, ignitable waste operating practice
violations, failure to prepare and submit various plans and
records, no financial assurance for closure or accidental
occurrences, and no groundwater monitoring. As is the P. T.
Coupling case, we found no evidence that the Region had
calculated the estimated economic benefits, nor added them to the
proposed penalties included in the complaint. For the types of
violations cited in the complaint, it is reasonable to expect
that Nalco substantially benefited from avoiding the costs of
compliance with the groundwater monitoring and financial
assurance requirements. It is our opinion that the Region should
have estimated the economic benefits of noncompliance for this
case.
Region 8. Economic benefits of noncompliance were not
calculated in three of the four cases reviewed. The three cases
that included no evidence of economic benefit computations
included FMC Corporation, Metro Shop Supply and Sinclair Oil. In
the fourth case (WR Metals), the Region had calculated a $14,630
estimated economic benefit for one of the counts included in the
complaint. Significant periods of noncompliance were evident in
three of the Region 8 cases. In our opinion, long periods of
noncompliance increase the opportunities for violating facilities
to sustain economic benefits that should be negated during the
enforcement process.
Reasons for Not Calculating Economic Benefits
Regional personnel gave various reasons for not calculating
the economic benefits of noncompliance and adding them to the
proposed gravity-based penalties. These reasons are summarized
as follows:
(1) It is difficult to calculate the economic benefits of
noncompliance because too many assumptions have to be
made;
(2) Such efforts are too resource intensive and time
consuming;
(3) There is a lack of acceptance of the calculations by
Administrative Law Judges (ALJs); and
(4) Some violations are insignificant (paper violations
only).
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Our comments on each of the cited reasons for not calculating or
pursuing economic benefits in RCRA administrative penalties are
provided below.
The Office of Enforcement and Compliance Monitoring
established the BEN system to aid employees in the calculation of
estimated economic benefits. The BEN system, developed after the
Agency published the Civil Penalty Policy of February 1984, is a
computer program that calculates the economic benefits from
delayed compliance with environmental regulations. The system is
capable of calculating both the delayed and avoided costs
attributable to RCRA violations. Using the BEN system could
reduce the difficulties associate with estimating the economic
benefits of noncompliance, as well as making them more
defensible. Without the calculation of estimated economic
benefits, there is no assurance that the final negotiated
penalties are large enough to hurt the offender. Penalties that
do not offset all of the economic benefits derived by violating
program requirements, in effect reward the violating facility by
allowing them to profit from their wrongdoing.
Regional personnel expressed concern about the resources and
time needed to compute the estimated economic benefits. With
access to the BEN system and various contract resources, it
appears to us that the Regional offices should be able to make
economic benefit determinations more efficiently.
Regional personnel often raised the issue that ALJ hearings
do not support the Regions on RCRA enforcement cases as one of
the reasons for not considering the economic benefit additions to
proposed penalties. In an aggressive enforcement program, one
would not expect that there would be total agreement with the
violators on every issue filed in a complaint. These unresolved
issues should be elevated to the ALJ hearing process prescribed
in the regulations. It is also reasonable to expect that some
issues pursued in ALJ hearings would be settled on the side of
the regulated facility. An emphasis on settlement, instead of
pursuing cases to the ALJs, weakens the effectiveness of the RCRA
enforcement program. If the Regions believe they are not being
adequately supported by ALJs in their enforcement actions against
violating facilities, then this issue should be brought to top
management's attention.
Finally, regarding the perception that some violations are
"paper violations only", the RCPP appears to have considered
this. The policy established a minimum level of $2,500 of
economic benefits before their inclusion in proposed penalties.
This minimum level would exclude those types of inconsequential
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violations. Full implementation of the RCPP would require the
calculation of estimated economic benefits to demonstrate
compliance with the recommended threshold.
Economic Benefits Not Sheltered in Negotiations
As discussed earlier in this finding, we found that the
Regions had calculated, in one form or another, the estimated
economic benefits of noncompliance in 6 of the 20 RCRA case
penalties we reviewed. In those cases where the economic
benefits were calculated, we concluded that the final assessed
penalties were usually not sufficient to offset the estimated
economic benefits of noncompliance gained by the violating
facility. As a result, the goals set in the Agency's penalty
policies are not being met. Examples of cases reviewed that
illustrate this condition are discussed below.
Synalloy Corporation. Region 4 calculated and added to the
proposed gravity-based penalty, an estimated economic benefit of
$88,264 for failure to maintain financial responsibility for
nonsudden accidental occurrences. During case settlement
proceedings, the facility disputed the Region's calculations and
submitted a revised benefit figure of $20,239 based on the fact
that it had the required insurance for part of the period cited
by the Region. Region 4 negotiators settled this case for a
final assessed penalty of $10,000, or less than 50 percent of the
violator's own estimated economic benefits derived from the RCRA
noncompliance.
WR Metals. Region 8 calculated an estimated economic
benefit of $14,630 for one of the four counts included in the
complaint. During settlement negotiations on this case, the
Region reduced the proposed penalty for the one count to $0 and
did not provide any justification for not protecting the
estimated economic benefits from mitigation. The final penalty
assessed against WR Metals in this enforcement action was $7,500.
In our opinion, the above information shows that this violator
clearly benefited from its noncompliance with RCRA requirements.
Dillingham Corporation. In this case, the avoided costs
attributed to the violations were an estimated $229,000. Region
9 settled the case for final assessed penalties of $45,000, which
represents approximately 20 percent of the estimated economic
benefits derived from the violations.
IT Westmoreland. Region 9 personnel provided us with a
conservative estimate of $44,555 for delayed costs and $10,590
for avoided costs as the economic benefits associated with the
case violations. Comparing these estimated economic benefits to
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the final assessed penalty of $18,000 shows that the Region's
negotiated penalty did not offset the economic benefits derived
by IT Westmoreland.
U.S. General Accounting Office Review
The U.S. General Accounting Office (GAO) issued a report on
June 8, 1988, entitled Many Enforcement Actions Do Not Meet EPA
Standards. During this review, GAO reviewed 31 high-priority
enforcement cases in Regions II, V and VI. GAO's conclusions
relating to the Agency's failure to include the value of economic
benefits of violator noncompliance in penalties are consistent
with our conclusions. The GAO report concluded that
Existing EPA and state policies and procedures for
calculating penalties are not being properly documented.
Consequently, there is no assurance that EPA and state
penalty policies are being properly implemented and that
the economic benefit of noncompliance is being adequately
calculated and included in the final penalty assessment.
As a result, final penalty assessments may not be large
enough to offset the economic benefit of noncompliance and
thus deter future noncompliance in the regulated
community.
GAO's report included general recommendations for EPA
Headquarters to increase its monitoring of Regional enforcement
actions, including holding Regions accountable for meeting Agency
enforcement criteria. At the request of the Congressional
committee requesting the report, GAO did not obtain official EPA
comments on their report.
Summary Comments
The Agency's intent that the economic benefits of
noncompliance be computed, added to the gravity based penalties,
and considered during the negotiation of final assessed
administrative penalties, is well established in policy. The
Civil Penalty Policy states that "...it is Agency policy that
penalties generally should, at a minimum, remove any significant
economic benefits." Guidance documents explicitly exclude the
economic benefit portion of penalties from adjustment factors
with the intent of "sheltering" that portion of the penalty to
"...ensure that the minimum penalty still fully reflects the
Agency's determination that the violator gain no competitive
advantage from noncompliance with environmental statutes and
regulations."
We do not consider the reasons cited by the Regions for not
negotiating penalties that fully eliminate the economic benefits
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of noncompliance as appropriate per the Agency's policies.
Accordingly, it is our opinion that the Agency should
immediately: (i) reemphasize its policy on inclusion of economic
benefits in proposed and assessed penalties and (ii) establish a
strong oversight role that includes holding the Regions
accountable for implementing Agency policy. By calculating and
proposing the economic benefits of noncompliance and asserting
them in negotiations, the Agency can make significant strides in
promoting an effective enforcement program in the regulated
community.
Recommendations
We recommend that the Assistant Administrator for OECM and
the Assistant Administrator for OSWER:
1. Re-emphasize to the Regions the Agency's policies on the
inclusion of economic benefits in proposed and
assessed penalties. In this regard, Regions should be
advised that the only justification for not proposing
and assessing penalties that include the elimination of
economic benefits are those cited in national policies.
2. Establish a strong oversight role that includes
holding Regions accountable for implementing Agency
policies relating to proposing and assessing penalties
that include economic benefits.
Aaencv Comments and Our Evaluation
Agency Comments. OSWER generally concurred with our findings and
commented as follows:
"As your report indicates, the RCRA Civil Penalty Policy
unequivocally states that an important component to be
considered by the Regions' when calculating penalties is
the economic benefit that may have been realized by the
facility's owner/operator for his continued non-compliance
with RCRA regulations. Given the complex nature of the
variables required to accurately determine a calculation of
economic benefit, it is understandable that many Regions
approach the process with some trepidation.
Regarding the recommendations, OSWER commented on our first
recommendation as follows: "We agree that such a reminder
is appropriate and have already committed to producing a
Regional memorandum to accompany OECM's release of the
revised guidance." OSWER did not comment on the second
recommendation.
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PIG Evaluation. The Agency's comments are considered a positive
response with respect to recommendation No. 1. OSWER's
commitment to produce a Regional memorandum to accompany OECM's
revised guidance should be completed without delay.
OSWER did not specifically comment on recommendation No. 2.
We believe that OSWER and OECM action to establish a strong
oversight role that holds the Regions accountable is critical.
The Agency's organizational structure, that allows for
decentralized operation of the enforcement program, necessitates
strong oversight if policies relating to such areas as proposing
and assessing penalties that include economic benefits are to be
implemented.
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2. PROPOSED GRAVITY-BASED PENALTIES SHOULD BE HIGHER
Regional offices are not consistently proposing sufficient
gravity-based RCRA administrative penalties to reflect the
seriousness of the violations/ duration of noncompliance, nor all
of the violations disclosed. This condition, along with our
finding that Regions are excessively mitigating proposed
penalties (See Finding No. 3 titled "Regions are Excessively
Mitigating Penalties), results in penalties we consider
inadequate to provide an effective deterrent to noncompliance by
the RCRA regulated community. To illustrate, we reviewed cases
where groundwater monitoring violations, improper discharges of
hazardous wastes, and other significant RCRA violations occurring
for periods of up to three years, resulted in proposed gravity-
based penalties as small as $6,500. In one case, the proposed
gravity-based penalty amounted to $29 per day for 34 months of
noncompliance and in another case only $11 per day for a six
month period of noncompliance. These conditions were largely
attributable to the Regions either not considering lengthy
periods of noncompliance in computing gravity-based penalties or
not proposing penalties for all distinguishable violations, as
required by the RCPP. In our opinion, the Agency needs to
emphasize the importance of operating an aggressive enforcement
program for calculating and proposing sufficient gravity-based
penalties consistent with the guidelines contained in the RCPP.
This should be followed by increased oversight over Regional
enforcement programs and holding the Regions accountable for
implementing Agency policies.
Background
Section 3008 of RCRA empowers EPA with the authority to
assess civil penalties of up to $25,000 per day per violation for
noncompliance with RCRA program requirements or with an order
issued under this statutory authority. Section 3008(g) states
that "Each day of such violation shall, for purposes of this
subsection, constitute a separate violation."
To implement these penalty authorities, the Assistant
Administrator (AA) for Enforcement and Compliance Monitoring and
the AA for Solid Waste and Emergency Response issued the RCRA
Civil Penalty Policy, in May 1984, to all Regions and enforcement
and compliance personnel. The RCPP includes a framework for
assessing civil penalties by:
- Calculating a preliminary deterrence amount consisting of
a gravity component;
- Determining any economic benefit of noncompliance; and
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Audit Report No. Elg6*8-09~0188-9100479
- Applying adjustment factors to account for differences
between cases.
The RCPP provides that the gravity component should be based
on the seriousness of the violation. Two factors determine the
violation's seriousness: the "Potential for Harm" and the
"Extent of Deviation" from a statutory or regulatory requirement.
The "Potential for Harm" resulting from a violation is determined
by:
- The likelihood of exposure to hazardous waste posed by
noncompliance or
- The adverse effect noncompliance has on the statutory
or regulatory purposes or procedures for implementing
the RCRA program
The RCPP emphasizes the potential harm posed by a violation
rather than whether harm actually occurred. In this regard, the
RCPP states: "The presence or absence of direct harm in a
noncompliance situation is something over which the violator may
have no control. Such violators should not be rewarded by
assessing lower penalties when the violations do not result in
actual harm."
The second factor in determining the seriousness of the
violation is the "Extent of Deviation." The RCPP discusses the
"Extent of Deviation" as relating to the degree to which the
violation renders inoperative the statutory or regulatory
requirement violated. This ranges in degrees from being in
substantial compliance with the provision or requirement to total
disregard for the requirement.
A penalty matrix, included in the RCPP, is to be used in
determining the amount of the gravity-based penalty to be
proposed. The matrix includes classifications of major, moderate
and minor for both Potential for Harm and Extent of Deviation.
Once a cell selection is made from the matrix, a specific dollar
amount is chosen from the range specified in that cell,
considering the seriousness of the violation.
The Policy also states that enforcement personnel should
propose:
- Separate penalties for distinguishable violations
- Multi-day penalties, generally, in cases of continuing
egregious violations
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Audit Report No. Elg6*8-09-0188-9100479
- Adjustments of upwards of 40 percent each, be
considered, for history of noncompliance, lack of good
faith, and for degree of willfulness in unusual
circumstances.
Inadequate Gravity-Based Penalties
We concluded that, as a general rule, Regional offices are
not proposing adequate gravity-based in accordance with the
guidelines contained in the RCPP. This condition was evident in
15 of the 20 cases we reviewed; Our conclusion is based on the
fact that Regional offices usually propose only single day
penalties, instead of multi-day penalties, against RCRA
violators. In addition, we also noted that proposed penalties
were seldom increased to recognize an extended history of
noncompliance or other adjustment factors specified in the RCPP.
The 20 cases reviewed were evaluated for conformance with
the Agency's penalty policies. This included a review of the
documentation in support of each case violation. We also
reviewed the violating facility's compliance history to identify
any significant periods of noncompliance. As a result of our
case reviews, we concluded that proposed gravity-based penalties
were not sufficient in those cases with significant repeat
violations or for violators with extended histories of
noncompliance. We also concluded that proposed penalties did not
always include separate penalties for each distinguishable
violation. Examples of cases that illustrate these conditions
are discussed below.
Huxford Pole & Timber Company. In this case, Region 4 cited
the facility for nine (9) distinct RCRA violations including
groundwater monitoring violations, closure/post closure plan
deficiencies, financial assurance requirements and operating
standards. The Region proposed gravity-based penalties of
$35,500 against this violator. The proposed penalties did not
include specific penalties for each distinguishable violation,
nor were they adjusted upward for the facilities extensive
history of noncompliance.
Our review of the records on this case showed that the
Region did not propose gravity-based penalties for each of the
distinguishable violations included in the complaint. In its
penalty calculation worksheet, Region 4 combined three violations
for the purpose of computing a single proposed penalty of $8,000.
The three combined violations were:
(1) Failure to fully fund a closure trust fund
(40CFR265.143a);
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(2) Failure to develop a post-closure care cost estimate
(40CFR265.144); and
(3) Failure to demonstrate financial assurance for post-
closure care (40CFR265.145).
The Region classified the above violations as having a moderate
potential for harm, but a major deviation from RCRA requirements.
As such, each violation should have been valued at $8,000
resulting in $24,000 of proposed penalties.
In addition to not proposing penalties for each
distinguishable violation, the Region's records documented 3 and
1/2 years of groundwater monitoring violations at this facility.
From 1983 through 1985, the State of Alabama had cited Huxford
several times for various RCRA violations, including:
groundwater monitoring violations, inadequate closure plan,
inadequate financial assurances and various operating violations.
With this facility's extensive history of noncompliance, the
Region only proposed single-day penalties with no upward
adjustments. Considering the extended period of noncompliance,
the nature of the violations and prior State enforcement actions,
it is our opinion that the calculated penalties should have been
significantly increased in accordance with RCPP guidelines.
L & L Heat Treating. In this case, Region I proposed a
$56,749 penalty consisting of various single day penalties. In
our opinion, the proposed penalty was insufficient to reflect the
facilities extensive history of noncompliance or the egregious
nature of the violations. Evidence in the Region's files
documented this facility's noncompliance history back to November
1983 when a State inspection disclosed various hazardous waste
violations. Another State inspection in 1985 confirmed the
existence of the same violations and additional RCRA violations.
A State order, issued on April 26, 1985, required compliance
within 30 days. A follow-up inspection disclosed that the
facility continued to be in violation. The case was referred to
Region 1 for Federal enforcement. An August 1985 EPA/State
inspection again found the facility in noncompliance. Region 1
issued a complaint against the facility in December 1985. Thus,
the violations continued at least two years after their initial
discovery.
Region 1's proposed gravity-based penalty did not consider
the possible upward adjustments provided for in the RCPP. There
was no evidence in the Region's files that the proposed penalties
were adjusted for the facility's long history of noncompliance,
non-cooperation, or willfulness. These factors could have been
used to increase the proposed gravity-based penalty by as much as
120 percent. Also, these was no evidence that the Region
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considered the assessment of multi-day penalties, even though,
our opinion, the two year history of noncompliance warranted
proposing additional penalties against this violating facility.
in
IT Westmoreland. In this case, Region 9 cited the facility
for failure to implement an adequate interim status groundwater
monitoring system. The Region proposed a $30,000 penalty
consisting of a one day $25,000 penalty increased by 20 percent
($5,000) for the facility's history of noncompliance. When the
proposed penalty is compared to this facility's history of
noncompliance and the egregious nature of the violations, it is
our opinion that the proposed penalty was inadequate.
IT'S history of noncompliance dated back to March 1984, when
an inspection disclosed extensive groundwater monitoring
violations. Subsequent to the inspection, EPA Region 9 called in
the facility's Part B application (August 1984). The application
review confirmed the deficiencies in the facility's groundwater
monitoring system. Region 9 issued a complaint against the
facility in June 1985 for failure to submit an complete Part B
application and cited the groundwater monitoring deficiencies.
Region 9 withdrew the complaint, in February 1986, in order to
avoid a pending ALJ hearing because technical information
submitted by IT had not been evaluated by Regional technical
personnel for acceptability. A joint EPA/State groundwater
evaluation of IT'S groundwater monitoring program, report dated
December 1986, found the same four violations as those previously
reported in March 1984 and June 1985. On January 12, 1987,
Region 9 issued the complaint evaluated as part of this review.
The proposed penalty of $30,000 equates to approximately $29
per day for the almost 34 months of noncompliance. Based on
information contained in the Region's records, IT installed
groundwater monitoring wells were inadequate. Also, after the
Region had issued the June 1985 complaint, IT took no action to
install any additional wells to replace the inadequate wells.
Thus, it appears that IT willfully avoided compliance and
displayed a lack of good faith to correct the violations over an
extended period of time. It is our opinion that this case would
be classifiable as unusual circumstances based on the protracted
period of noncompliance and IT'S unwillingness to correct
deficiencies previously reported. Based on the RCPP, we believe
that the Region could have increased the proposed gravity based
penalty by as much as 120 percent. In addition, the Region
appears to have had adequate justification for the assessment of
multi-day penalties against this violating facility.
FMC Corporation. Region 8 cited this facility, in a
complaint dated March 1985, for two RCRA violations and included
proposed penalties of $27,500 in the complaint. The violations
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cited by the Region included not remedying the malfunction or
deterioration of its dike and failure to file a complete Part B
application. Our review of the Region's records on this case
showed that the Region did not calculate or propose separate
gravity-based penalties for each violation as required by the
RCPP. Individual penalty calculations would have resulted in
higher proposed gravity-based penalties.
In addition to the issue of individual penalty calculations,
our review of the Region's records disclosed that FMC tfad an
extensive history of noncompliance with RCRA requirements.
Regional inspections in 1981 and 1982 disclosed various
violations at the facility's waste treatment pond. The Region 8
Case Development Officer, nine months prior to the issuance of
the subject complaint, documented the bases for issuing a
complaint citing FMC for an inadequate closure plan and improper
closure actions with proposed penalties calculated at $68,915.
These calculated penalties included upward adjustments for FMC's
history of noncompliance, lack of good faith effort and degree of
willfulness. When the subject complaint was issued, the Region
proposed a lump sum $27,500 penalty, instead of two separate
penalties. There was no evidence that the proposed penalties
considered upward adjustments because of the facility's
compliance history. In our opinion, the Region's proposed lump
sum penalty of $27,500 was inadequate because sufficient evidence
existed in the Region's records to support applying upward
adjustment to the gravity based penalties or proposing multi-day
penalties based.
Metro Shop Supply. In this Region 8 case, Metro Shop Supply
was cited for three violations; accepting and transporting waste
without a permit, storing hazardous wastes longer than permitted,
and treatment and disposal of hazardous wastes without a permit.
While Region 8 cited three distinguishable violations, the
complaint included only a lump sum proposed penalty of $21,000.
There was no evidence in the Region's records to support that
specific gravity-based penalties were computed in support of the
complaint. As such, compliance with the RCPP could not be
readily determined.
Sinclair Oil Corporation. In this Region 8 case, the
facility was cited for two groundwater related violations;
improper well placement and failure to follow the sampling and
analysis plan. The Region proposed gravity-based penalties of
$6,500 against this violator. Documentation in the Region's
files indicated that the facility had been cited several times,
between 1981 and 1983, for interim status violations. It was
also noted that the Region had executed a prior Consent
Agreement/Final Order, which included assessed administrative
penalties, with the facility. This noncompliance history would
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have been sufficient basis for increasing the proposed gravity-
based penalties by at least 40 percent as provided for in the
RCPP.
Our review of Regional records showed that the last
inspection conducted at the facility, prior to filing the subject
complaint, reported three interim status violations that were not
included in the enforcement action. These violations included;
inadequate well construction, failure to use manifests and no
identifiable annual training. We found no documentation or
justification for not including these counts in the complaint and
proposing adequate penalties against the violator.
Reasons for Not Proposing Higher Penalties
During the course of our reviews, Regional personnel
provided reasons for not pursuing higher or multi-day penalties
against violating facilities. Some of these reasons included:
(1) The flexibility allowed in the implementation of
the Agency's penalty policies;
(2) The extreme difficulty, from an evidentiary standpoint/
in documenting per day violations;
(3) The primary goal of the enforcement program is to bring
violating facilities into compliance, instead of
penalizing them; and
(4) Headquarters demands that more enforcement actions be
initiated against violating facilities.
In acknowledging the above Regional comments, we recognize
that the Agency's gravity-based penalty policies allow some
flexibility in their implementation. However, we believe that
the application of this flexibility has contributed to a RCRA
enforcement program that could be perceived by the general public
and regulated community as not punishing violators. If so, this
could encourage noncompliance. With regard to comments about the
difficulty associated with documenting per day violations, it
appeared from documentation maintained in Regional case files
that sufficient information was often available to show that many
violating facilities had long histories of violations that would
have supported multi-day penalties.
We agree that the primary goal of an enforcement program
should be facility compliance. However, the Agency's policies
recognize that an effective enforcement program must include
sufficiently severe penalties against violators to promote a
deterrent effect on the balance of the regulated community.
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Compliance, in our opinion, should be only one of the
considerations used in settling enforcement actions against
program violators. Finally, with respect to comments that
Headquarters demanded that more enforcement actions be initiated,
we believe that by failing to follow an aggressive position in
proposing gravity-based penalties, EPA sends a message to the
regulated community that it does not have a strong enforcement
program. When sufficient gravity-based penalties are not
proposed and then these lesser proposed penalties are excessively
mitigated (See Finding No, 3 titles "Regions are Excessively
Mitigating Penalties"), the deterrent effects of an aggressive
enforcement posture are significantly diminished.
Recommendations
We recommend that the Assistant Administrator for OECM and
the Assistant Administrator for OSWER:
1. Re-emphasize to the Regions the intent of the Agency's
penalty policies on the computation of gravity-based
proposed penalties. In this regard, Regions should be
advised that:
A. Penalties should be proposed for each
distinguishable violation;
B. Multi-day penalties should be used for
continuing egregious violations; and
C. Proposed penalties should be adjusted upward to
reflect conditions affecting noncompliance (e.g.,
history of noncompliance, willfulness and
degree of non-cooperation).
2. Establish a strong oversight role that includes holding
Regions accountable for implementing Agency policies
relating to proposing adequate gravity-based penalties.
Agency Comments and Our Evaluation
Agency Comments. OSWER responded that:
"The RCRA Civil Penalty Policy provides guidance to the
Regions on establishing and negotiating appropriate RCRA
penalties. The Policy consciously calls for consideration
of facility-specific mitigation factors such as the
Region's assessment of the strength of their case or a
respondent's ability to pay. Moreover, the Policy
consciously affords the Regions considerable flexibility
in evaluating these factors on a case-by-case basis.
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As you are aware, the Agency's Uniform Civil Penalty Policy
is currently being revised. OECM expects to complete the
revisions later this Fall (1989). OSWER and OECM intend to
use this release as a vehicle for re-focusing Regional
attention on this guidance. In addition, we anticipate that
evaluation of Regional implementation of the provisions of
the Penalty Policy will continue to be a facet of the OSWER
Regional Review process."
PIG Evaluation. In our opinion, OSWER's response to the findings
acknowledged our concerns but it did not include specific
comments to our recommendations which are directed at providing
reasonable assurance that corrective actions will occur. The 016
was advised by several Regional officials that they interpreted
the RCPP as providing flexibility in the application of penalty
adjustment factors. However, the RCPP establishes general
percentage limitations on the application of those adjustment
factors. As discussed in Findings 2 and 3 of this report, our
reviews showed that the Regional offices generally did not follow
the adjustment limitations contained in the RCPP. Proposed
penalties were seldom increased for a violator's history of
noncompliance or other factors provided for in the RCPP. Most
proposed RCRA penalties are based on single event interpretation,
regardless of the period of time associated with the violations.
It remains our opinion that an effective RCRA enforcement program
would be able to substantiate adequate proposed penalties that
would stand up during the settlement process. The current
posture of the Regional offices, to expect substantial reductions
of proposed penalties as the rule instead of the exception, sets
a precedent that does not project a "strong enforcement presence
in the regulated community. We recommend that the Agency
reconsider its position on the considerable flexibility afforded
by the RCPP.
With regard to the OECM's revision of the RCRA Civil Penalty
Policy (cited as the Uniform Civil Penalty Policy in OSWER's
response), the OIG has previously provided comments to OECM on
the proposed revisions. Those comments expressed our concern
that the draft revised policy could dilute the Agency's ability
to propose and assess adequate penalties. We recommended that
the Agency reconsider its proposed revisions to the RCPP before
issuance.
Finally, OSWER's future evaluation of Regional implemen-
tation of the RCPP should aid the Regions in improving their RCRA
enforcement programs. This detailed oversight activity will be
beneficial to the overall RCRA program.
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3. REGIONS ARE EXCESSIVELY MITIGATING PENALTIES
In our opinion, Regional negotiators are mitigating RCRA
penalties in excess of the parameters contained in existing
Agency policy. Final negotiated RCRA administrative penalties,
for cases settled during the period reviewed ranged from an
average of 14 to 67 percent of proposed penalties in the Regions,
with a national average of only 37 percent. Cases we reviewed
included penalty inductions of as much as $2 million and
reductions for individual violations ranged up to 100 percent.
In addition, as discussed in detail in Finding No. 1 titled
"Economic Benefits of Noncompliance Must be Considered" final
negotiated penalties did not always negate the estimated economic
benefits derived by the violating facilities. We attribute the
excessive penalty mitigations to:
Negotiators not adhering to established parameters
for conducting negotiations;
- The desire for quick case resolution;
Poor case preparation;
- Negotiators focusing on compliance instead of both
compliance and deterrence through sufficiently
burdensome penalties; and
- A reluctance to pursue cases to ALJ hearing.
Excessive reductions of penalties diminish the deterrent
effects of the enforcement program on the regulated community.
Reduced fines can also undermine EPA's efforts to return
significant noncompliers to compliance. In effect, achievement
of the Agency's penalty policy goals, deterrence and fair and
equitable treatment of the regulated community, is questionable.
We believe that the Agency needs to increase its oversight of
Regional enforcement programs to assure that RCRA negotiated
penalties fully comply with the RCPP.
Background
EPA's penalty policies allow mitigation (reduction) of
administrative penalties when the following two requisites are
satisfied:
(1) The violator clearly demonstrates that it is entitled
to mitigation; and
(2) The mitigation does not undermine deterrence.
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The RCPP, Section VIII, prescribes boundaries within which
enforcement personnel may mitigate penalties. The normal
adjustment range is 25 percent. The RCPP also states that
adjustments in the 26-40 percent range may be made, but only in
unusual circumstances. The adjustments, in general, apply only
to the gravity-based penalties in the complaint and not to the
economic benefit components. The RCPP also specifies that.
acceptable justifications for mitigating penalties are good faith
efforts to comply; degree of willfulness or negligence; history
of noncompliance; ability to pay; and other unique factors. The
RCPP contains guidance on the application of each mitigation
factor.
One of the RCPP's goals is the swift resolution of
environmental problems. The policy provides two basic approaches
to quick settlements which emphasize swift resolution without
undermining deterrence. The first approach includes providing
incentives to settle with the initiation of prompt remedial
action. This involves reducing the gravity-based penalty when
the violator initiated remedies prior to the initiation of the
enforcement action. The other element includes accepting
additional environmental cleanup, in lieu of penalties, if agreed
to in pre-litigation settlement. The May 1984 Strategy Framework
for EPA Compliance Programs reiterates this policy and states
that EPA should consider "whether the violator made efforts to
identify, report and correct the violation independent of the
enforcement response."
EPA's enforcement actions should also provide disincentives
for delaying compliance. According to the Strategy Framework,
settlement negotiations can only be effective if there is a real
threat of litigation. The Strategy recommends strict adherence
to a negotiation schedule. If an acceptable agreement is not
reached within the schedule, EPA should begin litigation. To
further the incentive for settlement, penalty amounts may be
increased if the Agency is forced to resort to litigation.
As part of our review, we obtained information on RCRA
administrative enforcement actions initiated by each Regional
office during FYs 1985 through 1987 that had been settled as of
the time of our reviews. We identified 431 RCRA cases that had
been settled. The average proposed RCRA penalty for the settled
cases was $38,102 (Regional averages ranged from a low of $14,147
to a high of $165,231) as shown in SCHEDULE A of this report.
The final average assessed penalty for these cases was $14,141,
or 37 percent of the average proposed penalty. The percentage of
proposed penalties sustained by the Regional offices in
negotiations ranged from a low of 14 percent to a high of 67
percent. The following graph shows, by Region, the percentage of
penalties sustained in negotiations for the settled cases.
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PERCENT OF PROPOSED PENALTIES SUSTAINED IN NEGOTIATION
10 Avg.
Penalty Negotiation Parameters Exceeded
In 18 of the 20 cases reviewed, we concluded that Regional
negotiators mitigated proposed penalties in excess of the
parameters prescribed in the Agency's penalty policies. Our
review disclosed that most penalty mitigations were not
attributable to actions of the violators that justified
mitigation in accordance with existing Agency guidance. We
considered most of the negotiated penalties to be arbitrary
settlements. It is noted however/ that the lack of documentation
maintained by the Regions relating to the bases for negotiated
penalties made a final conclusion difficult. Finding No. 4 of
this report, titled "Documentation Needs Improvement" discusses
the deficiencies in documentation in greater detail.
Examples of cases where we considered excessive and improper
penalty mitigations to have occurred are discussed in the
following subsections.
Summit Corporation. Of the cases we reviewed, the largest
penalty mitigation occurred in Region 1's Summit Corporation
case. In this case, negotiators reduced the proposed penalties
of $2,488,775 down to $90,000 or a reduction of 96 percent. The
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proposed penalties included $2,425,000 ($25,000 per day for 97
days) for operating of a hazardous waste surface impoundment
without a permit or interim status (Loss of Interim Status), and
$63,775 for several other counts including inadequate liability
coverage and illegal international shipments of hazardous wastes.
Documentation in the Region's files indicated that from
January 1983 until the complaint date of July 28, 1986, Summit
had a poor record of compliance with RCRA and State of
Connecticut groundwater monitoring regulations. Also, since 1977
Summit had consistently violated its NFDES permit limitations.
Summit: had certified that its two sludge storage areas were in
compliance with the RCRA groundwater monitoring requirements and
that the company had complied with the RCRA financial
responsibility requirements.
On March 10, 1987, seven months after the complaint was
issued, a settlement conference was held. Regional negotiators
offered to reduce the Loss of Interim Status (LOIS) penalty from
$25,000 per day to $9,500 per day based on a reassessment of the
potential for harm. No documentary evidence to support this
reassessment could be found in the Region's records. Also, this
reduction represented 62 percent of the proposed LOIS penalty or
$1,503,500. This exceeded by 22 percent (or $533,500) the
maximum 40 percent reduction allowed by the RCPP for unusual
circumstances adjustment.
As negotiations proceeded, the Region set a target penalty
settlement of $200,000. The basis for the settlement target was
not clearly documented in the Region's records. At this
substantially reduced penalty level, Summit claimed an inability
to pay the proposed settlement penalty as a part of their
defense. In June 1987, the Region contracted with a private
company to perform an independent analysis of Summit's claimed
inability to pay. The financial analysis concluded that:
Payment over a period of time is recommended to attain the
full penalty of 200,000 dollars. A fall back position of
one time lump sum of 80,000 dollars, starting at the 110,000
dollar level and keeping the 80,000 dollar figure as a floor
in negotiations.
Region 1 settled on a final assessed penalty of $90,000 to be
paid in installments over three years. Justification for
settling on $90,000 over three years instead of $200,000, or a
one time assessment of $80,000 was not documented in the Region's
case files.
In our opinion, the company's cited violations, coupled with
their noncompliance history, was egregious in nature.
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Consequently, it does not appear appropriate that the proposed
penalties should have been reduced by 96 percent.
Owens Electric Steel Company. While reducing the proposed
penalty of $500,000 down to $75,000 (an 85 percent reduction),
Region 4 did not document its basis for the reduction. In fact,
Region 4 requested and received an ALJ ruling that held Owens
liable for the complaint facts supporting the proposed penalty.
However, our discussions with Regional program personnel
indicated that they did not expect to pursue the full proposed
penalty during settlement negotiations. In part, they were
concerned that, even with the ruling, the ALJ would not support
the Region's desired penalty and would only allow a penalty of
$10,000. The Region's desired or target penalty was established
at $100,000, or 20 percent of the proposed penalty. The basis
for the desired penalty was not documented in the Region's
records. We found no evidence to substantiate the Region's
concern about the ALJ not supporting them in adjudicating the
case. Also, there was no evidence of self-initiated good faith
efforts by Owens to come into compliance.
Documentation in the Region's files showed that the company
had egregiously violated the RCRA regulations for three and one-
half years. Owens had violated a prior Consent Agreement with
EPA as well as its interim status for failure to adhere to the
Part 265 groundwater monitoring regulations. Violation of a
consent agreement is by itself classifiable as a significant
violation. The Region also documented Owens's lack of good
faith, degree of willfulness and history of noncompliance. We
noted that the Region's proposed penalty of $500,000 was a
reduction from their first penalty calculation of $6,885,000.
The first penalty calculation considered 306 days of violations.
The Region's justification for the reduction to $500,000 was "to
account for any efforts made by Owens and to reflect the civil
penalty policy concerns with deterrence and fair and equitable
treatment of the regulated community". We found little evidence
of self-initiated efforts by Owens to substantiate this
significant pre-complaint reduction.
The final penalty of $75,000 represented only 1 percent of
the original pre-complaint calculated penalty and only 15 percent
of the proposed penalty. The significant reduction in the
proposed penalty appears to substantially exceed the mitigation
guidelines contained the Agency's RCPP.
Nalco Chemical Company. Region 6 filed a complaint against
this company which included 18 counts for various violations at
Nalco's hazardous waste impoundment with total proposed penalties
of $108,350. The final negotiated penalty was $14,000, or a
reduction of 87 percent. While the Region maintained generally
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satisfactory documentation to explain the basis for the
reduction, we concluded that the reductions exceeded the RCPP
parameters.
The Region's $94,350 reduction in proposed penalties was
explained as follows:
(1) $71,100 by withdrawing 13 counts in recognition of
Nalco's immediate actions including closing a hazardous
waste surface impoundment, for "good faith" efforts and
for new information which provided the basis for
reassessing the potential for harm;
(2) $13,200 based on consolidating and recalculating
"certain penalty amounts based on a reassessment of
environmental harm." The specific penalty recalcula-
tions were not documented; and
(3) $10,050 because there was a question of whether Nalco's
surface impoundment was a RCRA regulated unit and
because of litigation risks of going to a hearing.
Compared to the RCPP parameters, it appears that the $71,100
reduction should have been no greater than $35,550 (25 percent
reductions for reduced potential for harm and good faith
efforts). Closing the surface impoundment, in our opinion, was a
required action that would not justify penalty mitigation. With
respect to the $13,200 reduction, this represented a 36 percent
reduction of penalties for "other counts". We did not find any
evidence in the Region's files to substantiate any reduction in
excess of 25 percent. Finally, the Region's files clearly
indicated that the unit was RCRA regulated. In summary, the
Region's $94,350 of penalty reductions appears excessive when
compared to the $44,850 provided for by the RCPP.
WR Metals. In this Region 8 case, negotiators mitigated the
proposed penalty of $77,630 down to $7,500, or a reduction of
over 90 percent. The Region 8 complaint against WR Metals
included the following counts and proposed penalties:
(1) Failure to characterize on-site waste, $9,000;
(2) Accumulating waste on-site for longer than 90 days,
$9000;
(3) Failure to demonstrate adequate liability insurance
coverage, $22,500; and
(4) Failure to make timely payments to the financial
assurance trust fund, $37,130.
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Documentation in the Region's enforcement files indicated
that WR Metals had been violating the RCRA regulations cited in
the complaint for a period of three to five years. WR'3 response
to the complaint attempted to justify reasons why the facility
should not comply instead of talcing positive actions to bring the
facility into compliance. In our opinion, the company clearly
exhibited a reluctance to comply as well as a substantial history
of noncompliance.
Regional negotiators, in settling the case, adjusted the
proposed penalties down to $7,500. Counts (1), (2) and (4), with
proposed penalties totaling $55,130, were reduced to $0. Count
(3), with a proposed penalty of $22,500, was reduced 67 percent
to $7,500. In our discussions with Regional negotiators, they
provided the following reasons for the penalty reductions:
(1) Past cooperation and future corrective actions to be
done by WR Metals;
(2) WR assertions that they had characterized the waste and
had a manifest for transporting the waste;
(3} Questionable applicability of regulations because WR
asserted they were a recycling and reprocessing
facility;
(4) Conflicting information told by Region 8 inspectors on
whether WR was regulated or not;
(5) Avoidance of a complicated trial; and
(6) WR Metals just didn't want to pay the penalties.
Documentation in the Region's case files did not provide
support for several of the above reasons. We found no evidence
that WR had made efforts to correct violations independently of
Region 8's enforcement/inspections. It appeared that the
violator had ignored the Region's prior attempts at encouraging
RCRA compliance. We found no evidence to substantiate the
performance of waste characterization, that the wastes were not
hazardous, or that the shipments had been manifested. The
problem with conflicting information being given to the facility
by permitting personnel versus enforcement personnel, in our
opinion, is not a valid basis for excessively reducing penalties.
The Region's 90 percent reduction of the proposed penalties
appears to have exceeded the guidelines contained in the RCPP and
were not justified based on available documentation.
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Dillinqham Corporation. Region 9 negotiators adjusted the
proposed penalty of $550,000 ($525,000 for not manifesting and
$25,000 for illegal discharges) down to $45,000, or a 92 percent
adjustment. Region 9's explanation for reducing the penalty was
that the case evidence was inadequate to prove that all 85,000
gallons of wastes disposed of were hazardous. According to the
penalty policies, the burden of proof rests with the violator.
Thus, once cited, Dillingham should have had to prove that all
85,000 gallons of waste were not hazardous.
Region 9 had laboratory results from one grab sample which
showed the hazardous waste characteristics of the Dillingham
sample. The EPA inspector indicated that the sample was
representative of the company's waste stream. The inspector also
found that Dillingham had disposed of hazardous wastes for 21
days without the required RCRA manifests, which would be an
egregious violation. Regional records also showed that, just
prior to the subject infractions, Dillingham had violated similar
hazardous waste regulations by failing to analyze generated solid
wastes for hazardous characteristics and failing to prepare
hazardous waste manifests. This was documented in a complaint
issued against the company in June 1983. A consent
agreement/final order (CA/FO) was executed with the company on
August 29, 1983, in which Dillingham agreed to comply with the
RCRA generator regulations and submit waste analyses to the
Regional office. However, Dillingham continued to violate the
RCRA regulations while the terms of the previous CA/FO were still
in effect. Thus the evidence showed Dillingham to be a repeat
violator of RCRA and to have improperly disposed of hazardous
waste for 21 days.
Dillingham, in response to the complaint, did not present
sufficient evidence to show that any of the generated wastes were
not hazardous. Dillingham's behavior could be described as
concealment and compliance avoidance with program regulations.
We believe that the Region had a preponderance of evidence that
strongly supported the proposed penalties. Regional personnel
claimed, however, that the Region's evidence would not hold up
before an ALJ hearing. In our opinion, this conclusion was
speculative and an inadequate basis to reduce the proposed
penalty so extensively.
The $45,000 final assessed penalty appeared to be an
arbitrary settlement for both violations cited in the complaint.
A liberal application of the RCPP's negotiation parameters would
result in a 40 percent reduction of the manifest penalty, or
$210,000; resulting an assessed penalty of $315,000. With regard
to the mitigation of the $25,000 improper disposal penalty for
the second violation, no documentation was found to support the
Region's mitigation of this penalty.
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Using the RCPP guidelines, it does not appear that the
proposed penalties should have been reduced by more than $210,000
in total. The Region, however, reduced the proposed penalties by
a total of $505,000.
Reasons for Mitigating Penalties
In all five of the Regions reviewed, we concluded that
penalties were mitigated in excess of the parameters prescribed
in the Agency's penalty policies. Various reasons were given for
the penalty mitigations. The most common reasons cited included:
(1) Dropped counts or poor evidence;
(2) Inability to pay;
(3) Good faith efforts on the part of the violating
facility;
(4) Reluctance to pursue cases to ALJ hearings; and
(5) Promises of future actions to comply or close facility.
We evaluated each case to determine the validity of the
reasons cited for mitigating the proposed penalties. Our
evaluations showed that, in almost all cases, the Regions'
penalty mitigations exceeded the provisions and authorities
contained in the RCPP. Our conclusions are summarized in the
following subsections.
Dropped Counts. A significant number of proposed penalties
were deleted during negotiations because of Regional decisions
not to pursue specific issues in the enforcement action.
Regional personnel attributed the reduction in charges to either
the lack of clear evidence supporting the violations or
questionable technical guidance. Our reviews of Regional case
records showed that the dropping of charges was generally not
supported. In cases where Regional negotiators dropped counts
because of the Region's "lack of evidence", we also found this
was generally not documented. The preponderance of evidence
accumulated by inspectors and enforcement personnel appeared to
support the penalty counts. Although the RCPP requires that the
burden for mitigating the proposed penalty should be on the
violator (i.e., the violator should be required to produce
tangible, verifiable evidence refuting the violations), the
Regions generally did not adhere to the guidelines when dropping
counts. Substantive evidence from the violators refuting the
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nature and validity of the violations was not found in the files.
Instead, it appeared that Regional negotiators often accepted
verbal explanations as the basis for dropping or reducing counts.
Good Faith Efforts. Regional staff often justified penalty
reductions based on the good faith efforts of the violating
facility. The RCPP provides for penalty mitigation on this
basis, and states that good faith efforts can be manifested when
a violator promptly reports its noncompliance or promptly
corrects the environmental problems. The RCPP goes on to specify
that the lack of good faith efforts can be a basis for increased
penalties. Finally, the RCPP states that no downward adjustment
should be made if the efforts to comply primarily consist of
"coming into compliance." We found that the Regions reduced
counts and penalties for good faith efforts relative to actions
that the violator was required to take. This justification was
also used to reduce the proposed penalties in their entirety as a
trade-off to obtaining future compliance actions, such as closing
a surface impoundment earlier than required.
In our opinion, reductions of the proposed penalty counts
for this reason were not consistent with the RCPP. Based on the
criteria contained in the RCPP and the history of compliance
problems documented in the cases examined during this review, we
concluded that a majority of the cases did not qualify for the
good faith effort mitigations. Significant penalty reductions,
of up to 100 percent, were afforded violators on the basis of
"good faith efforts." Evidence contained in the Regional records
did not support significant actions on the part of the violating
facilities other than to come into compliance with the regulatory
requirements. The RCPP specifies that penalty adjustments for
efforts just to come into compliance are not an acceptable basis
for mitigating penalties. This, however, appeared to be a common
theme across the Regions for mitigating penalties.
Inability to Pav. Regional offices advised that some
penalties were mitigated on the basis that violating facilities'
were unable to pay the penalties. Our reviews disclosed that the
Regions' mitigations on this basis were not in conformance with
the requirements contained in the RCPP. As a result, penalties
have been improperly mitigated, when in fact the violating
facilities should have been assessed substantial penalties.
The RCPP states that "the Agency generally will not request
penalties that are clearly beyond the means of the violator."
The policy goes on the say that "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
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troubled business." In considering the reduction of penalties
for a violator's inability to pay, the RCPP requires the
consideration of certain factors and options.
The burden of proof rests with the violator. If, during
settlement, the violator fails to provide adequate evidence to
substantiate its claim, then the RCPP specifies that the Agency
should disregard this factor in adjusting the penalty. If it is
determined that a violator cannot afford the penalty, the RCFP
provides various options which may be considered in settling the
case. These options include: (i) delayed payment, (ii)
installment payments, and (iii) straight penalty reductions as a
last recourse. Based on our review, the Regions have not
documented consideration of the RCPP specified options resulting
in.unwarranted penalty reductions. We also found that the
Regions' final penalties were generally lower than those
recommended by their own independent financial analysis.
Regional negotiators disregarded some of the qualifications
stated in these analyses that questioned a company's inability to
pay such as one which noted that the recent profit decline "may
be due to its efforts to restructure its business and, therefore,
may not reflect a long-term trend in financial performance." In
one case, we found the data supporting a decision of an inability
to pay was questionable. Based on available documentation, we
concluded that the Regions often used a liberal interpretation of
the inability to pay justification, thus exceeding the RCPP's
negotiating parameters.
ALJ Hearings. In several instances, we were advised that
one of the reasons for settling a case was a reluctance to pursue
cases to hearing before EPA's Administrative Law Judges (ALJs).
It was asserted that ALJ decisions had not been supportive of
Regional enforcement actions and that final assessed penalties by
the ALJs were lower than those negotiated by the Regions. Thus,
negotiators expressed concern about taking cases before the ALJ I
because of the possibility of an adverse ruling. During our I
review, we were not provided any documentation in support of the
Regions' concerns regarding ALJ adverse rulings.
Promises of Future Actions. The RCPP provides that a
violating facility's promise of future actions to come into
compliance is not a basis for mitigating proposed penalties.
This reason, however, has been cited by some Regions as the
justification for penalty reductions. A common future action
encouraged by the Regions was closure of surface impoundments.
In return, Regional negotiators adjusted proposed penalty counts
up to 100 percent. In our opinion, this justification falls into
the same category as good faith efforts as discussed in the RCPP.
Closure of a hazardous waste surface impoundment is an action to
come into compliance. The RCPP states "No downward adjustment
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should be made if the good faith efforts to comply primarily
consist of coming into compliance." As such, the Regions'
utilization of this justification exceeded the negotiating
parameters.
Summary Comments
Regional offices have significantly deviated from RCPP
parameters in their negotiation of RCRA administrative penalties.
This condition is evident by the extent to which Regions are
willing to mitigate proposed penalties. Excessive or unjustified
mitigations of proposed penalties can compromise EPA's
enforcement presence and undermine the programs deterrent effects
on the regulated community. A well-informed regulated community
will come to expect significant reductions in penalties without
having to prove the reductions were justified. Accordingly/
there is little disincentive associated with violating regulatory
requirements. In our opinion, adherence with RCPP penalty
adjustment parameters could significantly improve the RCRA
enforcement program. Final assessed penalties should be more in
line with proposed penalty amounts and reflect the seriousness
and extent of the violations committed. In this way, Regional
enforcement programs will project more consistency, equity and
result in a greater deterrent effect against future violations.
Recommendations
We recommend that the Assistant Administrators for OECM and
OSWER:
1. Increase their oversight of Regional enforcement
personnel to assure that RCRA negotiated penalties
fully comply with the RCPP.
Agency Comments and Our Evaluation
OSWER consolidated their comments to Findings Nos. 2 and 3
of our report because of the close relationship of the issues
discussed. Accordingly, their comments and our evaluation are
presented at the end of Finding No. 2 (see page 31).
44
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Audit Report No. Elg6*8-09-0188-9100479
4. DOCUMENTATION NEEDS IMPROVEMENT
Regional offices are not documenting the proposed penalty
calculations or the specific negotiated adjustments to proposed
penalties, or including a statement in the executed consent
agreements (CAs) of the reasons for mitigating the penalties. Of
the 20 cases we reviewed, 19 cases had at least one of these two
conditions. In some instances, significant reductions in
penalties were made without documentation explaining or
justifying the reductions. To illustrate, one case we reviewed
had a proposed penalty that was $6.3 million less than the
recommended maximum penalty calculated by the Region's
enforcement personnel. However, there were no Regional records
explaining or justifying the difference. We attribute the
failure to maintain documentation as required by the RCPP, in
part, to Regional concerns that the availability of detailed
information on penalty adjustments could jeopardize future
negotiations. The RCPP requires such documentation as one of the
controls to assist in precluding excessive or improper penalty
mitigations without Regional management's full understanding.
Such documentation also increases the assurance that the
regulated community is being fairly and equitably treated. In
addition, the documentation is important information to assist
the Agency in issuing press releases to publicize its enforcement
activities. We believe that the Agency needs to take action to
assure that Regional offices comply with the documentation
requirements included in the RCPP by increasing its monitoring.
Background
The RCPP, Section IV, Administrative Record, states that
"enforcement personnel must include in the case file an
explanation of how the proposed penalty amount was calculated.
The case file must also include a justification of any
adjustments made after the issuance of the complaint." The
policy also states that "the consent agreement must include a
general statement of the reasons for mitigating the proposed
penalty." These requirements are an integral part of the
controls necessary to assure that negotiations achieve the
desired goals of deterrence, fairness, equity and consistency.
The above policies are consistent with the GAO standards for
internal control which require that control objectives be
identified and developed for each Agency activity and that they
should be logical, applicable and reasonably complete. Under the
standards of internal control, management is responsible for
providing reasonable assurance that all significant events are
recorded properly and accurately.
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Audit Report No. Elg6*8-09-0188-9100479
Proposed Penalty Calculations Are Unclear
Regional records did not always contain evidence and
explanations on how the proposed penalty amounts were calculated
or why calculated penalties were adjusted before the complaints
were issued. Section IV of the RCPP requires that a computation
worksheet explaining the basis for each proposed penalty be
included in the enforcement records. Also/ the RCPP requires
that any adjustments to calculated penalties be justified and
documented for the record. Inconsistent compliance with these
requirements were found in our reviews. As a result, it was
difficult to determine the basis for and appropriateness of the
proposed penalty amounts included in some of the issued
complaints. Without proper documentation supporting penalties
included in issued complaints, management's ability to control
the development of this aspect of EPA's enforcement program is
jeopardized.
Pre-complaint documentation deficiencies regarding the bases
for proposed penalty amounts included in the complaints were
found in 9 of the 20 cases we reviewed. The following cases
illustrate the documentation problems encountered during our
reviews.
In Region 4, the Owens Electric Steel Company case files
disclosed that the Region's enforcement personnel calculated and
recommended a total maximum penalty of over $6.8 million.
However, when the complaint was filed against the company, the
formal enforcement action proposed a penalty of only $500,000.
This represented a 93 percent reduction. Regional records
contained no justification for the proposed penalty reduction.
In the P-T Coupling case, Region 6 initially calculated
proposed penalties that significantly differed from the penalty
amounts cited in the issued complaint. In this case, Region 6
enforcement personnel documented penalty calculations for 17
counts against the facility. These calculations included two
counts calculated at $8,000 each. However, when the complaint
was issued, the proposed penalties for each of these two counts
was reduced to $2,250. We found no documentation or
justifications in the Region's records for the 72 percent
reduction in proposed penalties.
Two of the four cases reviewed in Region 8 lacked
documentation on the basis for proposed penalties for
distinguishable violations. In the Metro Shop Supply case, the
complaint included a proposed penalty of $21,000. However, the
Region's files contained no documentation on how the proposed
penalty amount related to the three distinguishable violations
cited against the facility. In the FMC case, no pre-complaint
46
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Audit Report No. Elg6*8-09-0188-9100479
documentation was found to support the proposed penalty of
$27,500 or how that amount related to the two distinguishable
violations cited.
In the IT Panoche case, Region 9 enforcement personnel did
not document or propose a specific penalty amount for the
violation of a prior Consent Agreement provision. Instead, the
complaint included proposed penalties of "up to $25,000 per day."
The RCPP states that "in order to support the penalty proposed in
the complaint, compliance/enforcement personnel must include in
the case file an explanation of how the proposed penalty amount
was calculated." A restatement of the statutory maximum penalty,
in our opinion, does not comply with the RCPP's requirement for
documenting the basis for the specific penalty amounts proposed
in the complaint.
Negotiated Penalty Adjustments Should Be Explained
Specific negotiated adjustments to each proposed penalty,
and their related justifications, are generally not being
documented by the Regional offices. Our review disclosed that in
15 of the 20 cases selected, the Regions' records contained
either no information on specific incremental proposed penalty
adjustments or no information on the justifications for the
negotiated penalty reductions. Section IV of the RCPP states
that the case file "must include a justification of any
adjustment made after issuance of the complaint." This
requirement is reiterated in Section VIII of the RCPP. Only
limited compliance with this RCPP requirement was found during
our reviews. In general, most Regions were not documenting
specific penalty adjustments or their justifications. To
illustrate this condition, an example from Region 4 is provided.
In the Owens Electric Steel Company case, the Region's complaint
filed against this company included a proposed a penalty of
$500,000. In settling the Owens case, the Region agreed to a
final assessed penalty of $75,000. No evidence was found in the
Region's files to support this 85 percent reduction in the
proposed penalty.
Most case settlements were accomplished on a lump sum basis,
and Regional files did not contain information on the specific
penalty adjustments or their justifications. By not documenting
penalty adjustments and their justifications, management does not
have reasonable assurance that the negotiations of final assessed
penalties were conducted in compliance with Agency policy
parameters. Consequently, proposed penalties may be reduced
excessively, resulting in penalties that do not reflect the
gravity of the violations, nor offset any economic benefits the
violator may have derived from his noncompliance. If Agency
management is not apprised of this condition, through available
47
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Audit Report No. Elg6*8-09-0188-9100479
documentation, it cannot take effective action to correct the
deficiency. Deterrence may not be achieved and reasonable
assurance that the assessed penalty is fair, consistent and
equitable is diminished. Adequate documentation of penalty
negotiations will help Regions prevent unjustified, arbitrary or
excessive penalty reductions, thereby reducing the Agency's
vulnerability. Final assessed penalties will be more consistent
and equitable.
Reasons for Not Documenting Penalty Adjustments
Regional enforcement personnel stated that detailed
negotiated penalty adjustments, and their related justifications
as a general rule are intentionally not documented in the
Regional files. Reasons given for not documenting the results of
penalty negotiations include:
(1) Freedom of Information Act (FOIA) concerns that release
of this information may provide an advantage to
companies in future negotiations.
(2) To keep figures confidential so as not to jeopardize
on-going negotiations.
(3) No Headquarters emphasis is placed on documenting how
and why penalties are reduced.
The above reasons are not acceptable justifications in
accordance with existing Agency policy. One of the goals of the
RCPP is the assessment of penalties that are consistent and firm
but fair. Considering that the burden of proof for mitigating
proposed penalties lies with the violator, the types of
information releasable under FOIA should not provide any
significant advantage in future violations. Regarding the
confidentiality of on-going negotiations, the RCPP states that a
FOIA exemption is available to protect information for cases that
have not yet been settled. Finally, the lack of Headquarters
emphasis does not relieve a Region of its responsibility to
comply with Agency policy.
Consent Agreement Provisions are Incomplete
Eighteen of the twenty executed CAs we reviewed did not
include a general statement of the reasons for mitigating the
penalty. The RCPP, Section VIII B, states that "the consent
agreement must include a general statement of the reasons for
mitigating the proposed penalty." This condition was found in
all of the Regions included in our review. Reasons frequently
cited for not including the statements were that it would give an
advantage to companies in future negotiations and Headquarters
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Audit Report No. Elg6*8-09-0188-9100479
had not expressed any interest in this documentation. By not
following the RCPP documentation requirements, there is no
reasonable assurance that the regulated community has been
treated fairly and equitably. EPA's penalty policy goals may
then become compromised.
Publicity on Enforcement Activities Needs to be Expanded
Regional offices included in our review were not publicizing
the settlement of enforcement cases consistent with Agency
guidelines. On August 4, 1987, OECM issued an addendum to GM-46
titled "SPA Policy on Publicizing Enforcement Activities." The
purpose of this policy addendum is to provide guidance to the
Regions on preparing EPA press releases to announce settlement of
enforcement cases in which the final penalty is appreciably less
than the proposed penalty. The policy requires that the press
releases adequately inform the general public of the "analysis
behind the penalty amount, and the reasons justifying the penalty
reduction."
Regional offices are not complying with the above guidance.
In our opinion, one of the reasons for the noncompliance was the
lack of case documentation showing the reasons for penalty
reductions. Without case documentation, it is difficult to
present the reasons for penalty reductions in press releases.
Summary Comments
We believe that the RCPP requirement for documentation is
important and should be adhered to by the Regions. Without
adequate documentation, Agency management has a more difficult
job identifying internal control breakdowns in the negotiation
process that result in excessive or unjustified mitigation of
RCRA administrative penalties. A root cause, in our opinion, for
Regions not documenting the bases for mitigating penalties may be
that negotiators have not followed the RCPP negotiation
parameters and sometimes there is no adequate justification for
mitigating penalties other than expediting settlement of the
case. If the Regional offices are operating within the RCPP's
parameters, the resultant penalties should be supported,
adequately documented, justified, and fair to the violator and
the regulated community.
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Audit Report No. Elg6*8-09-0188-9100479
Recommendations
We recommend that the Assistant Administrator for OECM, in
consultation with the Assistant Administrator for OSWER:
1. Take action to assure that Regional offices comply with
the documentation requirements included in the RCPP,
including increased monitoring.
2. Institute a more aggressive review program to assure
that RCRA CAs contain appropriate language on the
justifications for penalty reductions.
3. Re-emphasize the requirements of the August 4, 1987
addendum to GM-46 regarding the preparation of press
releases on settlement of enforcement cases.
Aaencv Comments and Our Evaluation
Aoencv Comments. OSWER acknowledged our finding and had the
following comments regarding corrective actions:
"On January 24, 1989, a joint OWPE/OECM memorandum was
issued to the Regions discussing the need for Regional
management controls over the setting of proposed penalties
and the subsequent negotiation of final penalties. The
memorandum recommended that the following components be
addressed in the management plan: 1) organizational plans
and functional statements identifying roles and responsi-
bilities; 2) controls ensuring that the plans and functional
statements are followed; 3) appropriate training of
personnel; and 4) documentation of penalty calculations.
The memorandum goes on to recommend the adoption of a
tracking and verification system to assure that assessed
penalties are indeed collected."
OIG Evaluation. The January 24th memorandum referred to in the
OSWER response recommended that the Regions formalize their
management controls over penalty documentation. However, the
memorandum only recommended establishment of, and formalization
of, Regional management controls. It did not require such
action. Also, the memorandum did not address compliance with GM-
46 regarding the preparation of press releases. Accordingly,
OSWER's response to our recommendations is not considered fully
responsive. It remains our opinion that OSWER and OECM need to
take action to assure that the Regions are performing and
appropriately documenting their enforcement actions.
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Audit Report No. Elg6*8-09-0188-9100479
SCHEDULE A
(Page 1 of 2)
CONSOLIDATED REPORT ON REVIEW OF
EPA'3 CONTROLS OVER RCRA ADMINISTRATIVE PENALTIES
SCHEDULE OF AVERAGE PENALTIES UNDER
SETTLED RCRA ENFORCEMENT CASES FOR
FISCAL TEARS 1985, 1986 AND 1987
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Cases
Settled
(Note 1)
20
77
18
71
126
38
27
19
13
22
Averacre
Proposed
$165,231
14,147
37,496
35,234
27,811
44,310
32,469
23,478
90,531
52.983
Penalty
Assessed
$22,987
7,021
10,151
10,724
13,935
15,972
17,353
8,180
29,210
35.626
Percent
Sustained
(Note 2)
14% (Note 3)
50%
27%
30%
50%
36%
53%
35%
32%
67%
Per Case Average
S38.1Q2 S14.141
37%
Note 1. The 431 settled cases include only RCRA administrative
complaints filed in FYs 1985, 1986 and 1987 that were resolved,
as of the dates of our reviews, through Regional negotiations
with violating facilities.
Note 2. Percent Sustained represents the average assessed
penalty divided by the average proposed penalty.
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Audit Report No. Elg6*8-09-0188-9100479
SCHEDULE A
(Page 2 of 2)
Note 3. Region 1 computations include a FY 1986 case with a
proposed penalty of $2,488,775 and an assessed penalty of
$90,000. If this case were excluded from the computations, the
Region 1 average proposed and assessed penalties would be
adjusted to $42,939 and $19,460 respectively, resulting in a 45
percent average sustained rate. Per Case Average proposed and
assessed penalties would also be adjusted to $32,403 and $13,964
respectively, resulting in a 43 percent average sustained rate.
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Audit Report No. Elg6*8-09-0188-9100479
SCHEDULE B
CONSOLIDATED REPORT ON REVIEW OF
EPA'3 CONTROLS OVER RCRA ADMINISTRATIVE PENALTIES
SCHEDULE OF RCRA CASES SELECTED FOR REVIEW
REGION 1:
L&L Heat Treating
Summit Corporation
United Parcel
Whyco Chromium
REGION 4:
Huxford Pole & Timber
Owens Electric Steel
Synalloy Corp.
United Metals
REGION 6:
P-T Coupling
Tulsa Chrome
Nalco Chemical
Oil Recovery
REGION 8:
FMC Corporation
Metro Shop Supply
Sinclair Oil
WR Metals
REGION 9:
Dillingham Corp.
Reichhold Chem.
IT Westmoreland
IT Panoche
Complaint Proposed Final Percent
Date Penalty Penalty Reduced
12/04/85 $56,749
07/28/86 .2,488,775
01/28/87 9,000
09/11/87 120,450
07/15/85
12/06/85
05/30/86
09/26/86
06/18/85
09/10/85
10/01/85
09/26/85
03/26/85
03/28/85
05/02/86
06/15/87
12/28/84
06/13/85
01/13/87
02/17/87
35,500
500,000
99,014
9,400
58,000
119,000
108,350
67,500
27,500
21,000
6,500
77,630
550,000
29,500
30,000
(Note 1)
$10,000
90,000
750
61,127
-0-
75,000
10,000
500
17,500
5,000
14,000
10,000
3,000
-0-
2,000
7,500
82.4%
96.4%
91.7%
49.3%
100.0%
85.0%
89.9%
94.7%
85.0%
95.8%
87.1%
85.2%
89.1%
100.0%
69.2%
90.3%
45,000 91.8%
15,000 49.2%
18,000 40.0%
20,000 (Note 1)
Note 1. No specific penalty amount was proposed in the
complaint, the Region stated the statutory penalty authority of
$25,000 per day.
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Audit Report Nu. E1G6*8-09-0188-9100479
ATTACHMENT 1
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, O.C. 20460
11 "r >.:•;;; 3
.lf-11
SEP
QFPlCE O^
SOCIO WASTE AND 6M£RGeNCY
MEMORANDUM
SUBJECT: Draft Consolidated Report on Review of EPA's Controls
Over Administrative Penalties Under the RCRA
Enforcement Program (Draft Audit Report
Ho. Elg6*8-09-0188).
FROM: I. Jonathan Z. Cannon
Acting Assistant Admini
TO: V Ernest E. Bradley III
Assistant Inspector Ge
ral for Audit (A-109)
My office, in cooperation with the Office of Enforcement and
Compliance Monitoring (OECM), appreciates the opportunity to
provide comments on the above-referenced draft report. The
report examines whether reasonable administrative controls have
been established over the setting and negotiation of proposed
penalties, and whether the Regions are operating within these
established controls. The draft report concludes that while
OSWER and OECM do have policies and procedures in place that
could provide effective controls, the Regional offices have not
closely adhered to these policies.
First, as we have already discussed with your staff, your
cover memorandum requested comments on the "factual accuracy" of
the draft report. Your discussion of the nature and intent of
the Uniform Civil Penalty Policy and the RCRA Civil Penalty
Policy are generally accurate, as is the description of our
various office functions. However, at the heart of this report
is a consolidated summary of specific Regional reviews conducted
over the past year, with primary focus on a Region IX audit. The
factual accuracy of each specific review has already been
addressed by the affected Regional office. Additionally, in a
memorandum dated October 25, 1988, the Office of Waste Programs
Enforcement (OWPE) provided general comments on features of the
Regions VII and IX audit reports. Neither my office, nor OECM,
are in a position to comment further on the status of individual
files and investigations within a Regional office. Therefore, we
have confined our comments to those issues that specifically
involve Headquarters activities.
54
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Audit Report No. E1G6*8-09-0188-9100479
ATTACHMENT 1
Your report focuses on three primary areas of concern: 1)
economic benefit of non-compliance is not adequately factored
into many penalty calculations; 2) proposed gravity-based
penalties should be higher and are being excessively mitigated;
and 3) documentation of penalty calculations is inadequate. We
share your concern in these important program areas and have
already initiated several activities which impact many of these
issues.
Factoring Economic Benefit of Non-Connsliance Into Penalty
Calculations:
As your report indicates, the RCRA Civil Penalty Policy
unequivocally states that an important component to be considered
by the Regions when calculating penalties is the economic benefit
that may have been realized by the facility's owner/operator for
his continued non-compliance with RCRA regulations. Given the
complex nature of the variables required to accurately determine
a calculation of economic benefit, it is understandable that many
Regions approach the process with some trepidation. Through
development of the BEN Computer Model, the Office of Enforcement
and Compliance Monitoring (OECM) has attempted to provide tools
needed by the Regions to assist in the calculation of economic
benefit. OECM is currently revising guidance on the BEN Model to
significantly improve the usefulness of the program. This new
guidance is expected to be available to the Regions in the first
quarter of FY 1990.
Your draft report includes a proposed recommendation that
this office re-emphasize to the Regions the importance of
including economic benefit in penalty calculations, when
appropriate under the terms of Agency policy. We agree that such
a reminder is appropriate and have already committed to producing
a Regional memorandum to accompany OECM's release of the revised
guidance.
Gravity-Based Penalties Should Be Higher and Excessive Mitigation
is Occurring;
Your draft report finds that the Regions are not
consistently meeting the guidelines established in the RCRA Civil
Penalty Policy for calculating gravity-based penalties and that
negotiated settlements often yield penalties far lower than those
proposed. Your follow-up recommendation is that OSWER and OECM
re-emphasize the intent of the policy and the importance in
adhering to its provisions.
The RCRA Civil Penalty Policy provides guidance to the
Regions on establishing and negotiating appropriate RCRA
penalties. The Policy consciously calls for consideration of
55
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Audit Report No. E1G6*8-09-0188-9100479
ATTACHMENT 1
facility-specific mitigation factors such as the Region's
assessment of the strength of their case or a respondent's
ability to pay. Moreover, the Policy consciously affords the
Regions considerable flexibility in evaluating these factors on a
case-by-case basis.
As you are aware, the Agency's Uniform Civil Penalty Policy
is currently being revised. OECM expects to complete the
revisions later this Fall (1989). OSWER and OECM intend to use
this release as a vehicle for re-focusing Regional attention on
this guidance. In addition, we anticipate that evaluation of
Regional implementation of the provisions of the Penalty Policy
will continue to be a facet of the OSWER Regional Review process.
Documentation of Penalty Calculation Needs Improvement
Finally, your report concludes that the Regional Offices are
not documenting the proposed penalty calculations or negotiated
adjustments to proposed penalties, or explaining the reasons for
mitigation. Your proposed recommendation is for OSWER/OECM to
take more aggressive action to assure compliance with the
provisions of the Policy.
On January 24, 1989, a joint OWPE/OECM memorandum was issued
to the Regions discussing the need for Regional management
controls over the setting of proposed penalties and the
subsequent negotiation of final penalties. The memorandum
recommended that the following components be addressed in the
management plan: 1} organizational plans and functional
statements identifying roles and responsibilities; 2) controls
ensuring that the plans and functional statements are followed;
3} appropriate training of personnel (i.e. BEN Model training);
and 4) documentation of penalty calculations. The memorandum
goes on to recommend the adoption of a tracking and verification
system to assure that assessed penalties are indeed collected.
Again, we appreciate the opportunity to provide comments on
this draft report. If you would like further information, please
have your staff contact Debbie Villari at FTS-475-7787.
cc: Edward Reich, Acting Assistant Administrator, OECM
Truman Beeler, Divisional Inspector General, Western Division
56
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Audit Report No. Elg6*8-09-0188-9100479
APPENDIX A
REPORT DISTRIBUTION
Recipient
Action Officials
Assistant Administrator for Solid Waste
and Emergency Response (WH-562)
Assistant Administrator for Enforcement
and Compliance Monitoring (LE-133)
Of f ice of the Inspector General
Inspector General (A-109)
Headquarters Offices
Director Financial Management Division (PM-226)
Comptroller (PM-225)
Agency Followup Official (PM-225); Attn: Director, Resource
Management Division
Agency Followup Official (PM-208)
Associate Administrator for Regional Operations (A-101)
Regional Offices
Regional Administrators (Regions 1-10)
57
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