Clean Water Act
       Compliance Enforcement Policy Compendium
           Civil Litigation Guidance Interpreting


"Professional Obligations of Government Attorneys", dated April"19, 1976.
See GM-2.

"General Operating Procedures for EPA's Civil Enforcement Program", dated
July 6, 1982.  See GM-12.

"Clearance of Significant Enforcement Pleadings",  dated January 25, 1983

,,« SI*,,
                        WASHINGTON DC 20460
                          2 5 JAN 1983
                                                        OFFICE OF
                                                 UEGAl, AMD ENFORCEMENT COUNSEL


           Clearance  of  Significant  Enforcement  Pleadings
           Robert M. Perry
           Associate  Administrator  and  Genera lCounsel

           All Regional Counsels

           All Attorneys
           Office of  Enforcement Counsel
     Attached are copies of memoranda dated December 2 and
October 27,  1982, setting forth procedures for clearance of25
significant  pleadings  in defensive cases.  These procedures'*0
ensure that  the Deputy General Counsel and I have an       *"
opportunity  to review  all such pleadings before they are

     The Office of Legal and Enforcement Counsel must speak
with one legal '"voice.  Accordingly, I have decided  to extend
similar review procedures to significant enforcement pleadings
A revised concurrence request form is attached which will be
used for all pleadings, whether filed in defensive  or
enforcement  cases.  Please follow the procedures outlined

     1.  Michael Brown's October 27 memorandum describes
defensive pleadings which require review.  The same pleadings
require review in enforcement cases.

     2.  The time deadlines in paragraph 2, and the procedures
in paragraph 3, of the October 27 memorandum apply  to
enforcement pleadings.  However, a copy of the draft pleading
and the concurrence request form should be forwarded to the
Senior Litigator through the appropriate Associate  Enforcement
Counsel rather than through the Associate General Counsel.
The Senior Litigator will submit the pleadings to me through
the Enforcement Counsel.
                                                               \ _.


     3.  As with defensive pleadings, these procedures apply
to significant enforcement pleadings drafted in regional'
offices as well as in headquarters.  The December 2 memorandum
applies, except that Regional Counsels will deal with the
appropriate Associate Enforcement Counsel rather than the
Associate General Counsel.  Complaints need not be cleared
under this system, because they are already subject to review
as part of the referral process.

"Regional Counsel Reporting Relationship", dated August 3, 1983.  See GM-

"Implementing Nationally Managed or Coordinated Enforcement Actions", dated
December 26, 1984.  See GM-35.

                                                                  IV.A.6. -
IV.A.6. "Guidance on Choosing Among Clean Water Act Administrative, Civil
          and Criminal Enforcement Remedies", distributed August 28, 1987.
          This document is reproduced at III.B.4., this compendium.

IV.A.7. "Guidance on State Action Preemption Civil Penalty Actions under
          the Federal Clean Water Act", distributed August 28, 1987. This
          document is reproduced at III.B.5., this compendium.

IV.A.8. "Guidance on "Claim-Splitting" in Enforcement Actions under the
v          Clean Water Act", distributed August 28, 1987.  This document is
          reproduced at III.B.6., this compendium.

IV.A.9. "Guidance on Retroactive Application of New Penalty Authorities
          under the Clean Water Act", distributed August 28, 1987.  This
          document is reproduced at III.B.7., this compendium.

IV.A.10. "Guidance on Effect of Clean Water Amendment Civil Penalty
          Assessment Language", distributed August 28, 1987.  This document
          is reproduced at III.B.8., this compendium.

"Issuance of Guidance Interpreting 'Single Operational upset'", dated
September 27, 1989.

                        WASHINGTON, 0 C  20460
                           SEP 2 7 1989
                                                       3FF.Ce CF
                                                     ENFORCE ME STAND
                                                   COMPLIANCE MONITORING

Issuance  of Guidance  Interpreting "Single  Operational

Robert G. Heiss  &&&£,% tku*-
Associate Enforcement  Counsel
  for Water
           Keith A. Onsdorff
           Associate Enforcement' Counsel'
             for Criminal
James R. Elder.
Office of Ha^er Enforcement
  and Permits

      Attached  is  the  final  guidance  document presenting the
 Agency's interpretation  of the  "Single  Operational Upset"  (SOU)
 provisions that were added to the Clean Water Act by Congress via
 the  Water Quality Act of 1987,  now codified as CWA §§  309(c)(5),
 (d),  and 
     The Guidance set out in the attached document represents '
Agency's authoritative  interpretation of the  Single Operations-
Upset provisions contained  in the Water  Quality Act of 1987.  It
is intended primarily for the use of government personnel.  It is
not intended,  and cannot be relied upon,  to  create any rights,
substantive or procedural, enforceable by any party  in litigation
with the United States.   The Agency reserves the right to change
this guidance at any time without public notice.

     We encourage all Regions to discuss  any  instance in which SOU
arises  in  an enforcement  context with  us.    Please call either
Daniel Palmer, OECM-Water, (LE-134W),  FTS 382-2849,  Richard Kinch,
OWEP,  (EN-338),  FTS 475-8319,  or,  for potential criminal cases,
call Bette Ojala, OCEC,  (LE-134X),  FTS 475-9663.

Regional Counsels, Regions I-X
Water Division Directors, Regions I-X
ORC Water Branch Chiefs, Regions I-X
Regional Water Management  Compliance Branch Chiefs,
  Regions I-X
Ed Reich, OECM
Paul Thomson, OECM
Enforcement Director, KEIC
Edmund J. Struzeski, NEIC
Susan Lepow, OGC
Ruth Bell, OGC
Richard Kozlowski, OWEP
Bette Ojala, OCEC
Ivy Main, OGC
David Buente, DOJ
Assistant Chiefs, DOJ Environmental Enforcement
OECM Water Attorneys
Philip Yeany, ORC, Region XII
David Rankin, Region V
Hugh Barrel, Region IX

                      GUIDANCE INTERPRETING

    CLEAN WATER ACT SECTIONS  309(eH5K  309fd). and  309fchm«.

                     SINGLE ^OPERATIONAL  UPSET

I.  Introduction , and. .Summary of Contents

     Congress, in amending the Clean Water Act in 1987 (via the
Water Quality Act of 1987), qualified the administrative, civil,
and criminal enforcement sections of the statute with the
following language:

     For purposes of this subsection, a single operational upset
     which leads to simultaneous violations of more than one
     pollutant parameter shall be treated as a single violation.

Clean Water Act §§ 309(c)(5), 309(3), and 309{g)(3), 33 U.S.C, §§
1319(c)(5), 1319(d), and 1319(g)(3).  The effect of this language
is to limit, under certain circumstances, the penalty liability
of violators of the Clean Water Act.  "Simultaneous" violations
of multiple pollutant parameters, established by an NPDES permit,
categorical standards, or local limits, each of which is
attributable to the same "single operational upset," are to be
counted as only one violation.

     The term "upset" has been defined by regulation, 40 C.F.R.
§ 122.41(n), as an affirmative defense which, if affirmatively
raised and proved, completely relieves a regulatee of liability.
However, the term "single operational upset" ("SOU") has
absolutely no history predating its use in the Water Quality Act.
It is therefore the purpose of this guidance to interpret single
operational upset  (SOU) for purposes of application by the
Environmental Protection Agency in pursuing penalties under
Sections 309(c),  (d) and (g) of the CWA.

     Following are the chief conclusions reached in this

     1.  A "single operational upset" is defined in this guidance
           An exceptional  incident which causes simultaneous,
           unintentional,  unknowing  (not the result of a Jcnowing
           act or omission), temporary noncompliance with more
           than one Clean  Water Act  effluent discharge pollutant
           parameter.  Single operational upset does not include
           Clean Water Act violations involving discharge without
           an NPDES or locally issued permit or noncompliance to
           the extent caused by improperly designed or inadequate
           treatment facilities.

2.  At the sentencing stage in a criminal prosecution,  or at
the remedy stage in a civil enforcement proceeding (judicial
or administrative), violations of multiple pollutant
parameters, resulting from a single operational upset,  will
be taken together in the aggregate in determining the
maximum criminal fine, the maximum term of imprisonment, or
the maximum civil penalty, which may be imposed or assessed,
for each day during which the defendant has been found
guilty of a criminal offense, or during which the defendant
(or respondent) has been found liable for civil violations.

3.  This definition of Single Operational Upset applies
equally in the civil judicial, administrative, and criminal
contexts.  Nonetheless, the extent of the availability of
SOU to limit penalty liability is less extensive in the
criminal context due to the requirement that the exceedance
must have been unintentional and unknowing.  This
requirement eliminates the availability of SOU for "knowing11
criminal violations, CWA $ 309(c)(2), (3), and (4).

4.  Unintentional and unknowing operator error that results
in the occurrence of an SOU event may justify a limitation
on liability.  SOU differs in this regard from the upset
defense, which does not recognize operator error as a basis
for raising the defense.  The availability of SOU for
exceedances caused by unintentional operator error and fo
negligent acts or omissions is necessary in order to give
SOU any practical application in the criminal enforcement

5.  "Simultaneous" is defined in this guidance as all
pollutant parameter exceedances attributable to a specific
single operational upset that occur during a single day.
Each day that such exceedances continue is considered to be
an additional day of violation subject to additional

6.  "Pollutant parameter" is defined as all effluent
limitation* and non-numeric limitations regulating the
content or amount of a regulatee's direct or indirect
discharge.  These parameters may be contained in an NPDES
permit, a locally issued permit or other control mechanism
established in accordance with the pretreataent regulations,
40 C.F.R. Part 403, categorical pretreatment standards, etc.
The basis upon which the pollutant parameter is established
is irrelevant, i.e.,  one may claim SOU to limit liability
for exceedances of water quality-baaed, technology-based, or
otherwise derived pollutant parameters.

7.  SOU serves to limit a CWA regulatee's potential
liability for exceedances of multiple pollutant parameters

      in  situations where a regulatee who usually complies with
      applicable  effluent limits experiences an extraordinary,
      temporary,  and unintended "upset" event, i.e., some kind of
      unusual  interference with the industrial or municipal
      treatment system, that results in noncompliance with more
      than one effluent limitation.  Under these circumstances,
      EPA enforcement personnel, in calculating the maximum
      allowable statutory penalty, will treat violations of
      multiple pollutant parameters on a single day, attributable
      to  a specific SOU event, as one violation.  It must be
      stressed that an event will not constitute an upset for
      purposes of the SOU limitation on liability unless the
      regulatee can demonstrate a norm of compliance with his
      permit effluent limitations.
      8.  In order to claim SOU, the "upset" event must be
      exceptional, i.e. a non-routine, unusual malfunction of a
      facility's  usual proper and adequate operation.  The event
      must not be business as usual.

      9.  sou  is  not available to limit liability where pollutant
      parameter exceedances result from the installation of
      inadequate  treatment facilities or faulty design of the
      treatment facilities.  SOU is also not available to limit
      liability of those who violate the CWA by discharging
      without  a permit, where a permit is legally required.

      10.  SOU is not available to limit the liability of any
      regulated entity who, personally or by its agents or any
      persons  in  any way associated with the regulated entity,
      intentionally or knowingly causes violations of pollutant
      effluent parameters.

      11.  The regulatee subject to a CWA enforcement action bears
      the burden  of coming forward with the claim that an SOU
      event occurred causing the exceedances in question.  The
      regulatee also bears the burden of proving, by a
      preponderance of the evidence, the occurrence of the SOU
      event and its relationship to the effluent limitation
      exceedances in question.

      12.  A regulatee may not claim SOU if he/she fails to take
      timely corrective and/or mitigative action where possible or
     practicable to reduce the effect of the upset event.

II.   Deriving a  Definition of "Single Operational Upset"

     The term "single operational upset11 has no history prior to
its use in the Water Quality Act of 1987.  It has no history as a
statutory or  regulatory term of art, nor does the term have a
single, precise, or authoritative common meaning.  Therefore, in

                                4                            -~

interpreting the meaning of SOU, EPA looks to three sources: .
legislative history of the Water Quality Act, the regulatory
definition of "upset," and the plain meaning of the words in the
SOU provisions,  we will look first to the legislative history.

     A.  The Legislative History of the Water Quality Act of  1987

     Although the Clean Water Act was not amended until February
4, 1987, in the 100th Congress, the evolution of the water
Quality Act to its final form took place primarily in the 99th
Congress. Representative Howard introduced H.R. 8, the Water
Quality Renewal Act of 1985, on January 3, 1985.  The Senate
bill, s. 1128, was introduced Hay 14, 1985.  Neither the House
nor the Senate bill as originally presented contained a provision
similar to the single operational upset provision.  However,  the
amended H.R. 8 reported out of the House Committee on Public
Works and Transportation contained the following language in its
administrative penalties provision:

     The Administrator or the Secretary may not assess a
     civil penalty under this subsection against any person
     with respect to a violation if the Administrator or the
     Secretary, as the case may be, has assessed a civil
     penalty under this subsection against such person with
     respect to the same violation or a violation having
     substantially the same cause or arising out of
     substantially the same conditions.

The Committee report on H.R. 8 contained the following

     If a series of closely related violations occurs due to
     a single operational upset which leads to simultaneous
     violations of several pollutant parameters over a
     period of several days, EPA may bring one enforcement
     action, subject to the $125,000 maximum.  EPA may not
     seek to evade the $125,000 maximum by, for example,
     bringing separate enforcement actions for each of these
     simultaneous violations.  However, EPA is free to bring
     separate actions for individual violations  (or groups
     of violations) which are not of this nature.  H.R. Rep.
     No. 189 at 33, 99th Cong., 1st Sess.  (July 2, 1985)

     However, the House committee bill and report are not,
strictly speaking, part of the  legislative history of the water
Quality Act, because the 100th  Congress, which actually passed

 the legislation,  did not incorporate  them by  reference, as xt did
 various other bills,  reports,  and debates.

      On September 4,  1985,  Congress passed a  motion to agree to a
 conference.   The  conference report was  filed  on October 15, 1986.
 The bill reported out of committee contained  the  single
 operational  upset provisions,  affecting civil, administrative and
 criminal penalty  assessment,  as  they  appear in the Water Quality
 Act as finally passed.   The Conference  report provides the
 following discussion:

      The [House]  amendment  provides that a civil  penalty may
      not be  assessed with respect to  a  violation  if a
      penalty has  been assessed with respect to the same
      violation or a  violation having  substantially the same
      cause,   (bracketed  word inserted)  H.R. Rep.  No. 1004,
      99th Cong.,  2d  Sess.,  132 Cong.  Rec.  H10569  (Oct. 15,
      1986)....  For  all  three classes of penalties covered
      by the  conference substitute—criminal,  judicial civil,
      and administrative  civil -  the conference substitute
      provides that a  single operational upset which leads to
      simultaneous violations  of  more  than one pollutant
      parameter in an  NPDES  permit shall be treated as a
      single  violation.   H.R.  Rep.  No. 1004, 99th  Cong., 2d
      Sess.,  132 Cong.  Rec.  H10570 (Oct.  15, 1986).

      Representative Snyder,  a ranking minority member of the
 House Committee on Public Works  and Transportation, referring to
 the  SOU provisions,  stated,  "Under these penalty  provision [sic],
 multiple violations which stem from a single  cause should be
 considered as one 'violation1  for penalty assessment purposes."
 H.R.  Rep.  No.  1004,  99th Cong.,  2d Sess.,  132 Cong. Rec. H10932
 (October 15,  1986).   Rep. Snyder did  not identify the nature of
 the  "single  cause" in this  statement  but from the plain language
 of the  statute  it is  clear  that  it must be an "operational
       S««  "Guidance on 'Claim-Splitting1 in Enforcement Actions
Under the Clean Water Act," August 28, 1987, for a discussion of
the application of the  $125,000  statutory cap on administrative
(class II) penalties  in  the context of a  series of violations.

     2 Rep.  Snyder  could  not have  meant that  anv  single  cause
that results  in multiple  violations  is  to  be considered as one
violation for penalty assessment purposes.    If  any. cause  would
suffice  to  limit penalty  liability,  then  failure  to install
necessary  wastewater treatment   equipment  would  constitute  a
single  cause  for  which  penalty  liability  could   be  limited.
Failure  to  install  treatment equipment  is not  an  "operational

     Subsequently, S. 1128 was signed in both the House and the
Senate on October 23, 1986.  The bill was vetoed by President
Reagan on November 6, 1986.  In the 100th Congress, the identical
bill, redesignated K.R. 1, was again passed by both houses of
Congress and was again vetoed by the President, on January 30,
1987.  However, five days later, on February 4, 1987, Congress
voted to over-ride the President's veto and the Water Quality Act
of 1987 became law.

     Since H.R. 1 was identical to the conference bill placed
before the President in the 99th Congress, the legislative
history pertaining to that legislation was incorporated by
reference. Sen. Chafee stated:

     Therefore, the statement of managers on that bill [S.
     1128], which is found in Report No. 99-1004, contains
     the primary legislative history on this bill. That
     statement of managers, as explained by conferees on the
     floor of the House and Senate last October, should be
     viewed by courts as the most authoritative statement of
     congressional intent.  133 Cong. Rec. S746 (daily ed.
     Jan. 14, 1987)  (statement of Sen. Chafee).

Specifically, the legislative history includes the conference
report, and the Senate debate on the conference report, as well  -
as the report of the Environment Committee on the committee bil
S.1128 and the Senate debate on the committee bill.  133 Cong.
Rec. S734-735  (daily ed. Jan. 14, 1987) (statement of Sen.

     The legislative history is thus largely a restatement of the
single operational upset provision.  No discussion is found in
Congressional debate.  At most, the discussion in the conference
report shows that the Conference Committee restated the previous
House concept of penalty limitation as a single operational upset
concept.  Congress deleted the term "substantially the same
cause" at the same time.  The change indicates that it was
Congress's intent that only a cause related to a single
operational upset could operate to limit liability.  The
Conference Committee also incorporated the concept of
simultaneity, which operates to further limit the violations
which may be treated as a single violation.

     The new wording added by the Conference Committee indicates
the importance of the term "single operational upset" and of the
upset," nor  is  it at all likely that Congress would have desired
to limit  a polluter's liability  in  this situation.   The statute
must be construed as written, limiting liability where the cause
of multiple violations was  single "operational upset."

 simultaneity concept.   Nonetheless,  Congress provided no guidance
 on what it meant by these  terms.   It is therefore, primarily, the
 regulatory definition  of upset  and the plain statutory language
 that form the basis for EPA's interpretation of the SOU

     B.  Regulatory Definition of Unset and the Upset Defense

      The term "upset"  has  been  defined by  regulations promulgated
 by the Environmental Protection Agency.  40 C.F.R. § 122.41(n).
 These regulations were developed  in  response to the Federal
 Circuit Court decision in  Marathon Oil v.  Environmental
 Protection Agency.  564 F.2d  1253  (9th Cir. 1977).  In Marathon
 Oil,  the court held that EPA was  required  to insert a special
 "upset" provision into the permit of each  of the defendants  in
 the case.   The court concluded  that  a facility using proper
 technology operated in an  exemplary  fashion would not necessarily
 be able to comply with its technology-based effluent limitations
 one hundred percent of the time.   Further, the Act only required
 dischargers to meet effluent limitations by application of "best
 available technology." Therefore, lack of a mechanism providing
 an excuse from liability for those rare circumstances when a
 violation occurs that  the  discharger could not avoid set a
 standard higher than that  set by  the Clean Water Act.

         Based on the decision in  Marathon  Oil. EPA elected to
 require by regulation  that all  federally-issued NPDES permits!
 afford dischargers who have  violated technology-based effluent
 limitations in their permit  a limited "upset defense."  The
 regulation defining upset  states;

      "Upset" means an  exceptional incident in which there is
      unintentional and temporary  noncompliance with
      technology based  permit effluent limitations [or
      categorical Pretreatment Standards] because of
      factors beyond the reasonable control of the permittee
      [or Industrial User].   An  upset does  not include
      noncompliance to  the  extent  caused by operational
      error,  improperly designed treatment  facilities,
     3  States are not required  to  include an upset provision  in
state-iaaued  pollution discharge elimination  system permits under
§ 510  of the Act, 33 U.S.C.  §1370,  which allows states to adopt
or  enforce more stringent  standards.   sierra  Club  v. Union oil
Co. . 813 F.2d 1480  (9th Cir. 1987),   5SS also  U.S.  v.  BP Oil.
Inc..   No.   86-0792  (E.D.Pa.   July  29,  1988)(order  granting
government's   motion  for   partial   summary  judgment)("Absent
incorporation by  either [defendant's  federal or  state issued]
permit of the upset defense .  .  .  ,  the defense is unavailable  to

      inadequate treatment  facilities, lack of preventive
      maintenance, or careless or improper operation.

 40  C.F.R.  §§  I22.41(n) and 403.16(a).

        The intent of the  upset defense, as defined in the
 regulations,  is to provide those who violate technology-based
 effluent limitations (contained in a federally-issued NPDES
 permit or  categorical pretreatment standards) with an affirmative
 defense to allegations of  permit noncompliance, if the exceedance
 results from  an exceptional, unintentional incident which is
 beyond the control of the  party who discharges in violation of
 his permit.   A party who successfully claims upset is not legally
 liable for the exceedances at issue, and has not violated the
 CWA,  his NPDES permit, or  categorical pretreatment standards.

        An analysis of the sou provisions in the Water Quality
 Act and their application  to the various enforcement sections to
 which they were appended,  makes it doubtful that Congress
 intended single operational upset to have exactly the same
 definition as regulatory upset.  If SOU and regulatory upset are
 given the  same definition, two major problems arise.  First, the
 regulatory upset defense would render SOU almost meaningless,
 providing  a complete defense in the same situations where SOU
 would serve only to limit  a violator's liability.  Second, the
 regulatory definition of upset is inapplicable in the criminal
 context.   Criminal liability is predicated on proving certain
 levels of  culpability, either negligent or knowing.  The
 regulatory upset defense,  by definition, is unavailable in those
 situations where the event causing the violations is attributable
 to negligence or greater culpability on the part of the
 regulatee.  Therefore, if  one applies the regulatory definition
 of upset to SOU in the 309(c) criminal context, no criminal
 defendant  will ever be able to avail himself of the SOU
 limitation on liability.

      Because  the regulatory definition of upset cannot
 effectively apply to SOU,  it is necessary to interpret this
 statutory  provision based  primarily upon the plain meaning of the
 words in the  provision and a determination of how the provision
 can effectively be interpreted to limit the extent of statutory
 liability  for certain violations of the CWA.

      C.Plajn  Meaning of, the Words iq the Single Operational Upset

        1.  The phrase "single operational upset," simply con-
 strued, refers to a singular event, arising from some kind of
 operational failure, that  results in an "upset.*1  An upset, in
 industry terms, is an unusual event that temporarily disrupts the
usually satisfactory operation of a system.  In the context of
SOU, an event, to constitute an upset, must disrupt the system in

 such a way that it results in violation  of multiple pollutant

         2.  "Simultaneous violations," resulting  from  an sou, are
 violations that occur at precisely (or nearly)  the same time, ard
 result from the same cause,  i.e.,  the same upset  event.

         3.  "Pollutant parameters" are the effluent limitations
 established in an NPDES or state-issued  pollutant discharge
 permit or categorical standards or other standards  (i.e. local
 limits)  applying to indirect dischargers (industrial users).

 III.   Definitions

      A.  "Single Operational  Upset"

      Following is the definition of Single Operational
 Upset which EPA enforcement  personnel should use  in the Civil
 Judicial and Administrative,  and Criminal contexts  (CWA §§
 309(d),  309(g)(3),  and 309 (c)(5)):

      An  exceptional incident which causes simultaneous,
      unintentional,  unknowing (not the result of  a knowing
      act or omission),  temporary noncompliance  with more
      than one Clean Water Act effluent discharge  pollutant
      parameter.   Single operational upset does  not include
      Clean Water Act violations involving discharge without
      an  NPDES or locally issued permit or noncompliance to
      the extent caused by improperly designed or  inadequate
      treatment facilities.

      B.  "Exceptional"

      In  order to qualify as  an SOU event, an incident must be
 "exceptional," i.e.,  the incident  must not be business as usual,
but must be  a non-routine malfunctioning of an  otherwise
generally compliant facility.   The regulatee must normally be in
compliance with applicable effluent limitations.  See Section
 IV. D. below.

      C.  "Simultaneous";   Counting  Violations Where a single
         Operational  Upset is  Jnvolved

      The statutory  language  refers to "simultaneous violations"
of more  than one pollutant parameter.  For purposes of the SOU
provisions,  violations  of more than one  pollutant parameter shall
be considered to be  simultaneous if they occur  during  a single
day,  and result  from the same operational upset event. In other
words, all violations attributable to a  specific  SOU that occur
during a  single  day  will be  counted as only one violation for
purposes  of  determining the  maximum penalty allowed under the


CWA.  Therefore, if an SOU results in the exceedance of more t
one permit pollutant parameter, and these exceedances continue
for only one day, only one violation will be counted.  If a
violation attributable to one SOU continues for two days, two
violations will be counted, and so on.

     Congress, in establishing statutory penalty limits, set
those limits on a per day, per violation basis.  See CWA §§
309(c)  (1)(B) and (2)(B), 309(d), and 309(g)(2).  Under the CWA,
each day that an effluent limitation exceedance or other CWA
violation continues is a new day of violation, for which the
regulatee way be assessed an additional day's statutory maximum
penalty.  The SOU provisions do not breach this "per day, per
violation" rule.  SOU does not seek to limit the counting of
violations so that multiple days of violation caused by an SOU
event is counted as only one violation, but rather, that the
violation of multiple parameters is counted as only one violation
for the purpose of determining the maximum allowable penalty.
Therefore, in defining "simultaneous," it is correct and in
compliance with Congress's desire that each day of violation
caused by an SOU event be counted as a separate violation.

     D. "Unintentional"

     The requirement that the noncompliance with effluent
parameters have been "unknowing and unintentional" restricts th
availability of the SOU limitation on liability to upset event.
other than those caused by the regulatee or his agents or othe
associated with the regulatee who knowingly intend to commit che
act that caused or led to violations of the CWA.  For the purpose
of defining SOU, there is no distinction drawn between a
violation "intentionally" caused and a violation "knowingly"
caused.  See IV.c. below.

     E. "Temporary"

     The requirement that noncompliance with effluent limitations
be "temporary" concerns the requirement that the regulatee takes
corrective and/or mitigative action on an expedited basis
following the SOU event.  See IV.B. below.

     F. "Pollutant Parameter"

     For purposes of the SOU provisions, the term "pollutant
parameter11 shall include all pollutant4 numerical effluent
limitations and non-numerical limitations regulating the content
or amount of a regulatee's discharge, such as flow limitations,
visible solids, etc.  The term does not include permit or
     4  "Pollutant"  is defined  at  § 502(6) of  the Act,  33 U.S.C


 regulatory conditions  not  directly relating to pollutant
 regulation,  such  as  requirements to report, monitor, perform
 studies,  complete tasks  on schedule, pretreatment program
 implementation, etc.

      The  statute  itself  restricts the application of SOU to
 violations of  pollutant  parameters.  Therefore, liability for
 violations involving discharge without a permit may not be
 limited by a claim of  SOU.

      SOU,  unlike  the regulatory upset defense, is not limited to
 violations of  technology-based effluent parameters and applies
 equally to water  quality-based effluent parameters.  Congress, in
 enacting  the three SOU provisions, did not make any distinction
 between the bases upon which effluent limitations are formulated,
 and there appears to be  no basis upon which to make this
 distinction in this  guidance.

 IV.   Application  of  Single Operational Upset to Limit Liability

      A. To Claim  SOU,  the  Incident Must be Exceptional

      To qualify for  the  SOU limitation, the "upset" incident must
 be exceptional:   a non-routine, unusual malfunction, breakdown or
 disruption of  a facility's usual proper and adequate operations.
 It follows from Congress's use of the words "single" and "upset"
 that  a single  operational  upset cannot be business as usual.  (The
 concept of single operational upset is similar to that of
 regulatory upset  in  this regard.)

      B. To Claim  SOU,  a  Discharger Must Normally Achieve its
        Effluent  Limitations

      Several exceedances stemming from the same cause may
 constitute evidence  that the underlying cause or event was not an
 "upset,"  i.e.  an  unusual or exceptional malfunction of an
 ordinarily well functioning operation.  Such a series of
 exceedances indicates  that proper equipment may not have been
 installed,  that the  facility might be, as a matter of course,
 improperly operated, or  that the design of the facility is
 deficient.  It would also  indicate that the discharger/violator
 had notice that there  was  a problem with its treatment facility
 and failed to  take action  to mitigate and avoid further
 breakdowns leading to  exceedances.  Therefore, violations of  the
 CWA by dischargers who are frequently, repeatedly, ordinarily or
predictably not in compliance are not due to an "upset" within
the meaning of "single operational upset," even if associated
with an equipment breakdown or operational failure.


     C. To Claim SOU, the Exceedanee off Effluent Parameters M
        Have Been Unintentional and Unknowing

     Only noncompliance with pollutant effluent parameters that
were unintended and unknowing are subject to the SOU limitation
on liability.  This conclusion has a limiting effect on the
availability of SOU to limit liability, particularly in the
criminal context.

     CWA § 309(c)(l) makes certain "negligent" violations
criminal misdemeanor offenses.  CWA § 309(c){2), (3), and  (4)
make certain "knowing" violations criminal felony offenses.

     The position of the Agency is that the state of mind a
defendant must have had in order to be convicted of a felony is
"general intent," not "specific intent."  This means that the
United States need not prove that a defendant specifically
intended by his acts or omissions to violate the law, but that he
must have consciously or knowingly committed (or omitted) an act
that caused or led to the violation.  (Of course, intentional
violations committed by one who has "specific intent" are also
punishable under the Clean Water Act penalty provisions.)

     congress could not have intended that knowing violations
could be mitigated at sentencing through use of the single
operational upset provision.  In addition, it is contrary to th
ordinary meaning of the word "upset" to include events which ar
intentionally or knowingly caused.  Finally, in cases in which
the felony provisions apply, it is the "knowing" acts or
omissions which "cause" or "lead to" the violations, not any
equipment breakdown which may have been associated with such
illegal acts.  Thus, the SOU provision does not apply to mitigate
sentencing of felony violations of the Clean Water Act, although
it may apply to sentencing for misdemeanor violations

     D. An Upae,^_JSYentLrCaused by UnintentipnaiL Operational Ijrror
        or Careless or Improper Operation is Subject to the SOU

 of culpability.   CWA §  309(c)(l)  and  (2).  If any exceedance that
 is either intentional or knowing  or caused by "error," or
 "careless" or "improper" operation were to be excluded from the
 definition of SOU,  no situation in which one could be both
 criminally culpable (minimally  negligent} and able to raise the
 SOU limitation on liability (less than negligent) would exist.
 In order to give SOU meaning in the CWA criminal context as set
 forth in the Act,  its application has been expanded to cover
 effluent parameter exceedances  that are caused by negligence
 attributable to the regulatee.

      E.  To Claim SOU, the Facility Must be Properly Designed and
         Provide Adequate Treatment

      Violations which occur because adequate treatment technology
 has not  been installed  is not an  upset as defined in the
 regulations,  particularly because poor design and inadequate
 treatment do not constitute the type of exceptional circumstances
 that qualify an event as an SOU or upset.  EPA enforcement
 personnel should take the same  approach to interpreting the SOU
 provisions.   Any other  result improperly limits the penalty
 liability of those who  have not installed proper treatment
 equipment and indirectly penalizes those who have done so.
 Therefore,  to successfully claim  SOU, a violator must demonstrate
 that a facility is properly designed and that it provides
 adequate treatment.

      F.  SOU May Not Be  Claimed  Where the Clean Water Act
         Violation is Djsgharqe  without * Permit^

      Because it is a prerequisite to claiming the SOU limitation
 on  liability that violations of multiple pollutant parameters
 have been exceeded,  SOU can not be available to a respondent or
 defendant in an enforcement action brought for discharge without
 a permit.   Absent a permit (or  some other similar control
 mechanism) ,  there are no pollutant parameters established for the
 respondent  or defendant to have exceeded.

      G.  Requirement That the Violator Take Tjmelv Corrective
         and/ or Mitiaative Measures Where Ppssifrle or Practicable
         in  Order to Claa  SOU
     The regulatory upset defense  is  not available where  a
noncompliance situation  exists  or  is  allowed to  continue  to
exist, when corrective or mitigative  measures were possible  or
practicable but were not taken.  40 C.F.R.  § I22.4l(n) (3)

if the violator has not taken whatever corrective or mitigativ
actions are necessary to prevent the continuing violations.  See
40 C.F.R § 122.41(d) (duty to mitigate).  This requirement is
necessary to compel regulatees who experience an upset event to
immediately correct the problem and not allow the violations to
continue for an entire day (a day during which no additional
penalties will accrue, if additional violations are attributable
to the upset event).  Congress certainly did not intend to
establish a limitation on liability that grants a regulatee the
right to violate at will, even for a single day.  Implying such
an intent on Congress is contrary to the logic and purpose of the
Clean Water Act and would make a mockery of Congress's carefully
devised regulatory scheme.

     H. Procedural Requirements

        1. The Nature of Single Operational Upset

     The SOU provisions create a) a sentencing factor, in the
criminal context, to be considered by the sentencing judge; <*nd
b) an equitable factor pertaining to appropriate relief, in tne
civil (judicial or administrative) context, to be considered by
the ]udge or presiding officer.  As such, the issue of whether an
SOU provision applies is not a matter which should be presented
to or considered by a jury in a criminal or civil }udicial case,
and it need not be addressed in a charging document or civil

        2.  Establishing the Elements of SOU

     If a respondent or defendant in an administrative, civil or
criminal enforcement action believes that certain simultaneous
violations of more than one pollutant parameter were caused by a
single operational upset, respondent or defendant is responsible
for asserting this claim.  Respondents and defendants are in the
best position to produce information relating to whether given
violations resulted from an SOU event.  A claim of occurrence of
an SOU is relevant to the size of the penalty imposed, not the
liability of an alleged violator, therefore SOU need not be
raised until the assessment of the penalty or sentencing phase of
the proceeding.

     The respondent or defendant, to successfully assert the SOU
limitation on liability, must demonstrate, through properly
signed, contemporaneous operating logs, or other relevant
evidence, that:

           a)    A  single operational upset occurred;

           b)    The permittee or violator has taken,  in a timely
                 fashion, all corrective and/or mitigative


                  measures where possible or practicable.  (See
                  Section IV(G) above.)

         Where a respondent or  defendant has provided EPA with
 prior notice of an SOU condition  (e.g., in accordance with the 24
 hour notice requirements of 40 C.F.R.  122.41(1)(6)) presumably
 administrative and judicial decision-makers will give appropriate
 weight to such prior notice in determining whether the occurrence
 of an SOU has been proved.

         3.   Burden of Proof on Respondent/Defendant

      Where a respondent or defendant desires to claim the
 protection of a statutory exception or exemption, such as SOU, it
 is fair,  reasonable,  and within the Constitutional Due Process
 Clause to require the claimant to  come forward with some evidence
 of its applicability,  and to require the defendant to bear the
 burden of proof.   Although the "burden of persuasion" is not
 often placed on defendants or  respondents, particularly in
 criminal  cases,  it does not offend nations of fundamental
 fairness  to place such a burden on defendants in this context, to
 prove "by a preponderance of the evidence11 that SOU should apply.
 The information required to establish  the occurrence of an SOU
 event is  within the possession and control of the claimant.
 Further,  the NPDES regulations already require reporting of many
 noncompliance incidents.   To require that the Agency determine
 whether a single operational upset has occurred, and whether the
 prerequisites to its  assertion have been met would be quite
 burdensome  and would  be contrary to the intent of Congress that
 enforcement actions should not be  bogged down in administrative
 determinations or showing of fault.  See A Legislative History of
 the Clean Water Act of 1977, 95th  Cong., 2d Sess. (1978) at

      I. Counting Violations Where  a Single Operational Upset is

     When an SOU  results in the exceedance of multiple daily
maximum pollutant parameters,  only one violation will be counted
 for  each day that the  exceedance attributable to the sou
 continues.  Thus,  an SOU that results in three days of
 noncompliance with one or more permit  effluent parameters will be
 counted as  three  violations in determining the statutory maximum

     The counting of violations becomes more complicated when,
 for  example,  a permit  contains both daily maximum effluent
discharge limits  and monthly (or weekly) average discharge
limits.  The violation of a monthly average limitation  is counted
as one day  of violation for each day in the month, e.g. 30 days
of violation in a 30 day month.  See Gwa^tnev of Smithfield v.
Chesapeake  Bav Foundation.  791 F.2d 304, 314-15  (4th Cir.


1986), vacated on  other grounds. 484 U.S. 49 (1987).    The ^ >
question therefore arises about how to count the number of
violations where an SOU event causes exceedance of multiple
monthly averages or a combination of daily maximums and monthly

     In counting monthly average violations in the SOU context,
EPA enforcement personnel should abide by these rules:

     1)  If a monthly average limitation would not have been
     exceeded bu£ for the effluent limitation exceedances caused
     by a specific SOU event, then that monthly average violation
     merges with violations of any other pollutant parameter
     exceedances caused by the same SOU event.  This rule applies
     to daily maximum parameter exceedances that are caused by
     the SOU and to each day of each monthly average parameter
     exceedance that would not have occurred but for the
     exceedances caused by the SOU event.  For example, if
     monthly average parameters for pollutants A and B are
     exceeded during the same month, as a result of the same SOU
     event, and neither parameter would have been exceeded but
     for discharges resulting from that SOU event, then only one
     violation per day will be counted during that entire month
     (assuming no other violations occurred during the month).
     Further, if daily maximum violations are also attributable
     to the same SOU event, stiy, only one violation per day i
     counted for each day in the month; and

     2)  If the monthly average pollutant parameters in the above
     example would have been exceeded regardless of discharges
     caused by an SOU event, the number of violations are counted
     differently because multiple monthly average exceedances do
     not merge, and multiple violations per day are still to be
     counted for purposes of calculating the statutory penalty.
     This is true of both daily maximum parameter exceedances and
     days of monthly average exceedance.  For example, if monthly
     average parameters for pollutants A and B are exceeded
     during the sane month, and these monthly average exceedances
     would have occurred regardless of any SOU event that
     occurred during that month, two violations will be counted
     for each day during that month.  If daily maximum
     exceedances occur during that month and are attributable to
     the SOU event, they do not merge with the corresponding days
     of monthly average violation either.

     For further examples of counting violations on the context
of an SOU, see Appendices 1 and 2, below.


 V.   Single Operational Upset ^ersus Se^jLatorv L'pse*;  How *he
     Two Concepts Differ

         Because the regulatory upset defense and single
 operational upset are similar concepts,  it  is helpful to compare
 them and to examine the ways in which  they  substantively and
 procedurally differ.  Following is  a comparison of the two
 concepts focusing on their differences:

      A.   The purpose and effect of single operational upset
 differs from the purpose and effect of the  regulatory upset
 defense.   SOU provides that EPA,  in determining the maximum
 penalty liability of a regulatee,  is to  count as one violation
 all  those violations of multiple  pollutant  parameters stemming
 from a single operational upset.   The  result is that a
 regulatee's liability is limited  to $25,000 per day  ($10,000 per
 day  administratively),  regardless  of the number of pollutant
 parameters violated.

      Regulatory upset (as defined in EPA regulations, 40 C.F.R. §
 122.41(n))  differs in that its successful assertion constitutes a
 complete affirmative defense (rather than a mere limitation on
 total liability)  to noncompliance  with effluent limitations.

      B.   Single operational upset  is available as a limitation on
 liability for noncompliance with  both  technology-based and water
 quality-based effluent limitations. This is not true of the
 regulatory upset defense,  which applies  only to violations of
 technology-based effluent discharge limitations.

      C.   Single Operational Upset  need not  be mentioned in an
 NPDES permit,  either federal or state  issued, for a violator to
 claim this limitation.on liability in  a  federal enforcement
 action for penalties.    The regulatory upset defense, on the
                Natural Re sources pe fense Cqune i1 v.EPA. 859 F.2d
156  (C.A.D.C.  1988).    In  this  decision the circuit  court has
compelled EPA to  conduct further proceedings  to determine whether
to extend the upset defense to violations of water-quality based
effluent  limitations.   Id., 210.   The  court  explicitly states
that  EPA n««d not  extend  the  upset  defense  to  violations  of
water-quality based effluent limitations if it chooses not to  do
so.  Id., 209.  Whila EPA is making this determination, the upset
regulations,  as  they  apply to violations  of  technology-based
standards, remain in effect.  Id.,  210.

     6 In a  state enforcement action, brought in accordance with
a state water protection statute,  an upset defense will only  be
available if  provided for by state  law,  regulation,  or  as a NPDES
permit provision.   Similarly,   the SOU  limitation  on liability
does not apply  to enforcement actions brought in accordance with


 contrary,  must  be  expressly  included  in a state issued permit tc
 be raised  as  an affirmative  defense in a federal enforcement
 action.  This limitation  on  raising the regulatory upset defense
 does  not apply  to  a holder of a  federally issued permit.7

      D.  The  regulatory upset defense is not available where the
 noncompliance is caused by operational error, improperly designed
 or inadequate treatment facilities, lack of preventative
 maintenance,  or careless  or  improper  operation.  The upset
 regulation also requires  that the  incident or event leading to
 the exceedances be exceptional and that the resultant
 noncompliance be both unintentional and temporary.

      "Upset," in the context of  single operational upset, picks
 up some of these limitations based on the common understanding of
 the type of event  that constitutes an industrial operational
 upset.  The event  must be exceptional or unusual, and it must be
 unintentional and  unknowing.  Further, pollutant parameter
 exceedances caused by failure to properly design and failure to
 install adequate treatment facilities can not constitute an SOU.
 Unlike the upset defense, in the SOU  context operator error mav
 be the basis  of an SOU claim.  See IV.D, infra.

      E.  To assert the regulatory  upset defense, a regulatee must
 give  prior notice  to EPA  or  the  state in accordance with 40
 C.F.R. §§  122.41(n)(3)(iii)  and  122.41(1)(6).  A regulatee is
 required to give prior notice of the  SOU event in order to lat
 assert the SOU  limitation on liability.

      F. Respondents and defendants may claim, in the same
 judicial or administrative action, both regulatory upset and
 single operational upset.  If the  upset defense is successfully
 claimed, single operational  upset  is  not applicable to those
 violations since the respondent  or defendant would be absolved of
 liability  for the  violations at  issue.
state  law,  unless  the  state  law  contains  an  SOU provision.
States may provide  for  more  strict enforcement,  including greater
penalty liability,  than is provided by  federal law.

     On  the  contrary,  the  federal  government,   even  when  it
enforces against violations of state  issued KPDES permits, must
allow  an  SOU  claim because  the  federal government  always sues
under the Clean Water Act which contains the SOU provision.

     7 See  Marathon Oil  v.  EPA.  564 F.2d  1253  (9th Cir.   1977);
but  see  U.S.  v.  BP Oil.  Inc..  No.   86-0792  (E.D.Pa.  July 27,
1988)(order  granting  government's  motion  for partial summary
judgment)   ("Absent  incorporation ... of the upset defense  [into
either  an EPA or  state issued  NPDES permit], the  defense  is
unavailable to defendant").


VIII.  Conclusion

     Single Operational upset operates to limit the statutory
liability of Clean Water Act regulatees under a strictly defined
set of circumstances.  If a regulatee's usually well functioning
process is somehow "upset" resulting in exceedances of multiple
pollutant parameters, the statutory liability for those
exceedances will be calculated as if only one pollutant parameter
had been exceeded.  The "upset" must be an extraordinary event,
not routine or if any way usual,  it must not have been an
intended result of the regulatee's action or inaction, and it
must not be attributable to inadequate treatment facilities or
faulty design of those facilities.

     The regulatee who chooses to assert SOU in order to limit
his potential CWA liability has the burden of raising this claim.
In so doing, the regulatee must demonstrate that he/she took
timely corrective and/or mitigative measures if possible or
practicable to limit the environmental effect of the SOU event.

IX.  Effect of Guidance

     This guidance establishes the Agency's authoritative
interpretation of the Single Operational Upset provisions set
forth in the Water Quality Act of 1987.  it is primarily intended
for the use of government personnel.  It is not intended, and
cannot be relied upon, to create  any rights, substantive or
procedural, enforceable by any party in litigation with the
United States.  The Agency reserves the right to change this
guidance at any time without public notice.

     In addition, the Agency's application of this guidance in
formulating an appropriate Clean  Water Act penalty, done in
anticipation of litigation, is likely to be exempt from
disclosure under the Freedom of Information Act.  As a matter of
public interest, the Agency may release this information in some

X.  Cpn^act

     For further information, please contact Daniel Palmer,
Attorney/Advisor in the Office of Enforcement and Compliance
Monitoring - Water Division (FTS  382-2849).

                            APPENDIX I

                       CALCULATING  PENALTIES

            A metal  finisher encounters an operational problem—a
 chelating  agent  is  released to the wastewater in excess of
 enforceable effluent  limitations.  The release of the pollutants
 was an exceptional  and unintended  event and was not attributable
 to faulty  design or inadequate treatment facilities, and the
 violator took timely  corrective action.  Consequently, the
 violator in this case may claim SOU to limit his liability.
 Because the wastewater contains significant concentrations of
 chelated chromium,  copper, and nickel, effluent parameters for
 all three  pollutants  are violated.  These violations continue for
 3 days.  Assume  that  EPA is seeking civil penalties at $25,000
 per day for each violation.

     A.  Daily Maximum Violations

     No SOU Limitation on Liability

     The above example displays 3  violations (one for each
 pollutant  parameter violated), each violation continuing for 3
 days.  The statutory  maximum  penalty  is calculated by multiplying
 3 violations x 3 days x $25,000 per day for each violation—for a
 total of $225,000.

     SOU Limitation on Liability

     Where the SOU  limitation on liability applies, the three
 pollutant  parameter violations are counted as one violation for
 purposes of calculating statutory  penalties.  This would not
 impact "per day" penalties.   The statutory maximum penalty in
 this context is  therefore calculated  by multiplying 1 violation
 (due to the single  operational upset) x 3 days x $25,000 per day
 for each violation—a total of $75,000.

     B.  Monthly Average Violations

     In addition to the daily maximum violations, monthly average
 violations nay also be counted.  Assume the exceedances
 attributable to  the SOU also  resulted in the violation of the
 monthly average  discharge limitation  for each of the three

     No SOU Limitation on Liability

            Where no SOU is involved,  the penalty for monthly
 average violations  is  calculated by multiplying the number of
parameters  violated (3) x 30  days  per month x $25,000 per day—a
total of $2,250,000.   To this number  is added the penalty

calculated for the daily maximum violations ($225,000), for a
grand total of $2,475,000.

     Single Operational Upset Limitation

     Application of SOU to limit liability for monthly average
violations turns on the question of whether the monthly average
pollutant parameter would not have been violated but for the
daily maximum exceedances that resulted from the sou event.  If
all of the monthly average parameters would not have been
violated but for the exceedances resulting from the sou event,
then only one violation is counted for each day during the month
that the monthly averages were violated, e.g. 30 days x 1
violation/day x $25,000/violation = $750,000 penalty.  The daily
maximum violations that resulted from the SOU are not counted

     If the monthly average pollutant parameter exceedances would
have occurred regardless of the SOU event, then the violations of
the monthly average parameters do not merge.  Rather than
counting one violation per day for each day in the month for the
monthly average exceedances, three violations are counted.  The
penalty for the daily maximum parameter exceedances, still
limited by the SOU, is added to the penalty calculated for the
monthly average violations.  Therefore, in this example, the
statutory maximum penalty equals 30 days x 3 monthly average
violations/day x $25,000/violation + 3 days x 1 daily maximum  '
violation/day x $25,000, for a total penalty of $2,325,000.

     c.  changes in parameters violated

     Modify the example by having the "single operational upset"
cause the following:  one chromium violation on day 1, one
chromium and one copper violation on day 2, and one nickel
violation on day 3, as well as a violation of the monthly average
for chromium.

     No Single Operational Upset Limitation on Liability

     To calculate this penalty, the penalties for daily maximum
and average violations for each parameter are added together. For
chromium there is 1 daily maximum violation x two days x $25,000
per day for each violation—a total of $50,000.  In addition, for
chromium there is 1 monthly average violation x 30 days x $25,ooo
per day for each violation—a total of $750,000. For copper there
is 1 daily maximum violation x 1 day x $25,000 per violation for
each day—a total of $25,000.  Likewise, for nickel there is 1
daily maximum violation x 1 day x $25,000 per violation for each
day—a total of $25,000.  This results in a grand total of

     Sinale Operational Unset Limitation

     Again, the calculation of the penalty where an sou is
involved depends on whether the monthly average violation would
not have been violated but for the exceedance attributable to the
SOU event.  If this violation would not have occurred but for the
SOU related exceedances, all of the days of daily maximum
exceedance merge with the days of monthly average exceedance,
therefore the penalty is equal to 30 days x l violation per day x
$25,000, for a penalty of $750,000.

        If the monthly average violation would have occurred
regardless of the SOU related exceedance, then the days of daily
maximum exceedances do not merge with the days of monthly average
exceedance. In this example, the penalty, in this instance, is
computed by adding to the 30 days of monthly average violation
the three daily maximum violations (the two violations on day two
counted as one due to the SOU limitation) for a total penalty of
$750,000 + $75,000 * $825,000.

     D.  Violations not Associated With a Single Operational

     Assume that an SOU occurs resulting in violations as
described in part A, above.  In addition to the violations
described above, on day 2 the cyanide treatment system fails, due
to some cause other than a single operational upset, resulting in
a one day violation of the cyanide limit.

     In this situation, the cyanide exceedance would not merge
with any other exceedance, either daily maximum or monthly
average, and would be counted as an additional $25,000 to be
added to the penalty.

                            APPENDIX 2

    More Examples of Calculating Penalties in the Context of a
                            Oerational Upset
         Consider the  following  scenario:  during a single month/
 Regulatee X,  who owns and  operates  Facility X, and who possesses
 an NPDES permit  regulating discharges  from Facility X,
 experiences  five separate  and distinct SOU events.  These events
 occur on days 1-2,  10,  17,  23, and 29.   The SOU events cause all
 of the permit effluent limitation exceedances that take place
 during this  month.  All the procedural preconditions for claiming
 SOU have been satisfied including efforts to mitigate.

         Regulatee X's NPDES permit  controls discharges for two
 pollutants,  but  establishes two parameters for each pollutant, a
 daily maximum and a monthly average.   The sampling for pollutant
 A  is  taken daily, but for  pollutant fi  samples are taken weekly.

          On  day  1,  SOU Event I  causes  two days of violation of
 the daily maximum effluent limitation  for pollutant A, but not
 pollutant B.   (Pollutant B was  sampled on these days.  The
 quantity of  the  discharge  on both days was 77 Ibs/day) .  Although
 Regulatee X  takes all feasible  mitigative steps the violation
 continues for two days.  On each of these days the daily maximum
 limitation for pollutant A is violated.  On day one the
 concentration of the  discharge  is 40 mg/1; on day two it is 35
 mg/1.   These violations are so  severe  that, at month's end,
 averaging the 30 pollutant A samples taken during the month, it
 is  determined that  the monthly  average would not have been
 exceeded BUT FOR these two days of  exceedance, caused by this SOU

      It is also  determined at month's  end that the monthly
 average limit for pollutant B has been exceeded but, in this
 case,  the monthly average  would have been exceeded regardless of
 the exceedances  caused by  the SOU event that occurred on days one
 and two.

         On day 10,  SOU Event II causes a violation of the daily
 maximum effluent limitation for pollutant B (105 Ibs/day) .  This
 is  known because a  sample  was taken on this day.  At month's end,
 it  is determined that the  monthly average limitation for
 pollutant B  would not have been exceeded but for the exceedance
 of  Pollutant B caused by this SOU event.

         On day 17,  SOU Event III occurs.  It does not cause an
 exceedance of either  the daily  maximum or monthly average
 limitations  for  pollutant  A.  It is unknown whether the daily
maximum or monthly  average limitations for pollutant B are
 exceeded because no sample of Pollutant B was taken on this day.

         On day 23,  SOU Event IV causes violations of the daily
maximum limitations for both pollutants A  (5.0 mg/1) and B  (115

     Ibs/day), both of which were sampled.   At month's end it is
     determined that the monthly averages for both of these pollu
     would not have been violated but for the exceedances caused b
     this SOU event.

             On day 29, SOU Event V occurs.  It does not cause a
     violation of the daily maximum effluent limitation for either
     pollutant A or B but the levels of the pollutants exceed the
     monthly average limitation.  As determined at month's end, the
     monthly average limitation for Pollutant A would have been
     violated regardless of this exceedance, as a result of the
     exceedances caused by SOU event I.  The monthly average
     limitation for Pollutant B was exceeded by an amount such that
     the average for the month would not have been violated but for
     this discharge.
sou Event










Pollutant   Limit(Dailv/Mthlvi    Discharge Level




2.0/1.5 mg/1
2.0/1.5 mg/1
100/75 Ibs/day
100/75 Iba/day

2.0/1.5 mg/1
100/75 Ibs/day

2.0/1.5 mg/1
100/75 Ibs/day

2.0/1.5 mg/1
100/75 Ibs/day

2.0/1.5 mg/1
100/75 Ibs/day
 40 mg/1
 35 mg/1
 77 Ibs/day
 77 Ibs/day

1.2 mg/1
105 Ibs/day

1.0 mg/1
5.0 mg/1
115 Ibs/day

1.6 mg/1
 98 Ibs/day
     Counting fche Violation*

     SOU Event IJ  The only pollutant parameter violated is for
     Pollutant A.  Therefore, there is one dally maximum violation on
     each of days one and two.  In addition, the monthly average for
     Pollutant A is exceeded and would not have been exceeded but for
     the discharges related to SOU event I.  In this case, for
     Pollutant A, the monthly average violation on days one and two
     merge with the daily maximum violation on those two days.  The
     total number of days of violation of Pollutant A, for both the
     daily maximum and monthly average violations, is 30.

          The daily maximum limitation for Pollutant B is NOT violated
     on either day that SOU Event I is ongoing.  Further, the monthly

 average violation  for Pollutant B would have been violated
 regardless  of  the  violations attributable to SOU Event I.
 Consequently,  these days of monthly average violation do not
 merge with  the days of violation of Pollutant A.

 SOU Event II:  The daily maximum and monthly average parameters
 for Pollutant  B are violated as a result of this SOU event.  The
 monthly average parameter for Pollutant B would not have been
 violated BUT FOR the exceedance caused by SOU Event II.
 Therefore,  the daily maximum violation on day 10 (the date of SOU
 Event II) and  the  day of monthly average violation for this date
 merge, leaving a grand total of 30 days of violation attributable
 to SOU event II.   These days of monthly average violation do not
 merge with  the days of monthly average violation of Pollutant A,
 caused by SOU  Event 1, because the exceedances were caused by
 different SOU  events.
 SOU Event III:  The only issue presented by SOU Event III is what
 effect, if  any, does an SOU event whose consequences are unknown,
 have on the determination of which pollutant parameter
 exceedances merge.  The answer is that without sampling data, a
 regulatee will not be able to limit its liability based on the
 occurrence  of  an SOU event.

 SOU Event IV:  The daily maximum and monthly average parameters
 for both Pollutants A and B are exceeded.  Both monthly averages
would not have been exceeded but for this SOU Event.  As a
 result, all of these violations merge, for a total of 30 days of
violation attributable to this SOU event.  (Of course, the
 greatest number of days of monthly average violation that may
 occur in a  given month is equal to the number of days in the
 month.  Therefore, as is the case here, because the monthly
 average was already determined to have been violated for both
pollutant*, no additional days of monthly average violation
actually accrue, although one more day of daily average violation
 is tallied  for this month.

SOU Event V:   The  discharges caused by SOU Event V result  in
exceedance  of  the  monthly average parameters for Pollutants A and
 B.  As determined  at month's end, the monthly average parameter
 for Pollutant  A would have been violated regardless of the
exceedance  caused  by this SOU event.  The monthly average
parameter for  Pollutant B would not have been violated BUT FOR
the exceedance caused by SOU Event V.  Consequently, no days of
violation for  pollutant A and B merge as a result of SOU Event V.

                           APPENDIX 3

EFFECT:  In calculation of
   penalty liability, certain
   violations are counted as
   one violation.

Available by statute, no permit
   permit provision necessary
   in either state or federally
   issued permit.

Available where violations are
   of either vater quality or
   technology-based effluent

Proper pollution controls must
   be in place (including proper
   design and adequate treatment) .

Available where permit limita-
   tions are based on water
   quality standards.

Prior notice not an explicit
   requirement of proof.

Incident must be exceptional
   and unintentional (unknowing),
   but not necessarily unavoidable.

Condition oust be temporary  (i.e.
   necessity to taJce timely
   corrective and/or aitigative
   measures vhere possible or
   practical) .

Lack of preventative maintenance
   may not be the basis for  a
   claia of SOU.

Unless "knowing" or "intentional",
   contributing operator error and
   careless or improper operation
   may be the cause of a single
   operational upset.
EFFECT:  Certain exceedances
   not considered to be
Must be present as provision
   in state issued permit.
Available only where

   are of technology-based
   effluent limitations.
Not available where permit
   limitations are based
   water quality standard .

Prior notice is explicitly

Incident must be excep-
   tional, unintentional,
   and unavoidable.

 Contributing operator  error,
    and careless  or improper
    operation may ns£ be a
    cause  of a single
    operational upset.



ENVIRONMENTAL PROTECTION AGENCY", dated June 15, 1977.  See GM-3. (Amended
by iv.B.29)

"Memorandum of understanding Between the U.S. Coast Guard and the
Environmental Protection Agency" dated August 14, 1979.  outdated (See this
index, Section VI.C.5.).

"Allocation of Litigation Responsibilities Between Regional and
Headquarters Components of office of General Counsel", dated December 14,

                     WASHINGTON DC. 20460

                     December  14,  1975
.MEMORANDUM                                        «*«,«.

SU3JZCT:  Allocation of Lirigaticn  Responsibilities
          Between Regional and Headcuarters  Cc~icor.er.ts
          of Office of General Ccur.se!          ~R E C E I V
                          "~  *
FRCM:     David 0.
          Deputy General Counsel                    £££ , 0 ,c-

TO:       Regional Counsels
          Associate General Counsels                 REGIQZH*
          Deputy Associate General Counsels     OFFiC! OF
     Allocation of litigating responsibility  raises
difficult issues of management and professional price,
both wi--hin the Office of General Counsel^/ and between
our office and the Justice Department.  Our experience  "
during  the past two years of operating under  our
Memorandum of Understanding witn Justice convinced ne
that those issues are resolved better by discussions
asong peers wno have a good deal of rsspecr for eac.i
others  abilities than by scriptural citation.   Before
I sez our what L believe is the appropriate approach "to
this issue, I want to emphasise a manner of .factors that
I have  considered.

     1.  I expect all atto'rnevs-in ;tKis.vaffice .to  be
technically equipped to write rfilesble" briefs. in. the
Federal Courts. ~By "fileable", r'rae an- brief's, that mee*
nsy standards of professional co-oetenee* "and." those- of
the Assistant Attorney General. "'Ijv headquarters /_  the
Associates and their Deputies "are" responsible , for  assuring
that the standard is met^ in' the regions the  Regional
Counsels have that responsibility.
     2.  Regional Counsel staffs should be involved in
any litigation arising out of decisions made in their
   The Office of General Counsel includes the Regional
   Counsels and their sf*ffs.

     3.  Legal positions taken in the Courts roust be
consistent from region to region, and must be consistent
with, the Agency's overall legal position.  The Associate
General Counsels must be aware of, and must have an ade-
quate opportunity to consider, what arguments we will be
presenting to the Courts.

     4.  Determinations about the proper presentation
and staffing of litigation matters are to be made after
consultation between the relevant Regional Counsel and
the relevant Associate (or a designee who has authority
to speak for the Associate).  I will resolve any unresolvable
disputes, but 1 expect these to be kept to a nu.nin-.usa.

     With these factors in mind, I believe the following
procedures and principles should govern the allocation of
litigation responsibility between our regional and head-
quarters components.

     1.  When EPA receives a complaint or petition for
review in an action arising out of a regional action, the
office served (i.e.. r regional or headquarters office) will
within 24 hours transmit the pleadings to the other office
and the Justice Department.

     2.  The Regional Counsel will telephone the Associate
General Counsel in the affected Division (or vice versa)
and will discuss wno will be assigned to the case and the
general allocation of responsibilities for its presentation.

     3.  As a general rule, regional personnel should
ordinarily take the lead on issues concerning the propriety
of the manner in which discretion was exercised in a parti-
cular instance.   Headquarters attorneys should ordinarily
take the lead on legal and policy issues that have a broad
impact on the nationwide administration of EPA's programs.
I expect that in the many cases where both elements are
present, attorneys from both offices will be writing
different sections of the brief.

     4.  The "general rule" will undoubtedly have many
exceptions.  I expect these to be developed on a case-by- -
case basis between the Associate General Counsel and the
Regional Counseljin a common-sense manner.   In particular.

I expect the Associates to be open-minded about asserting
territorial rignts on an issue merely because it is arguaoly
"national".  I will not look favorably upon appeals by
Associates that a matter be handled out of headquarters,
if the Associates can't demonstrate that a headquarters
attorney, by familiarity with similar cases cr by superior
access to headquarters program people, will add signifi-
cantly to the thoroughness with whicn our position will be
presented to the Court.

     5.  Headquarters attorneys are net forbidden to
contact regional program people directly.  There are many
occasions where this may be the most efficient means of
gathering information.  However, headquarters attorneys
should recognize that regional counsel attorneys will
frequently have a better feel for who the most knowledgeable
or authoritative person is in the region.  If the headquarters
attorney has any doubt about who the best regional source of
information is, he should call the Regional Counsel.  In
any event, when both headquarters and regional attorneys
are assigned to a case, the regional attorney should know
who has been contacted.

"Contacts with Defendants and Potential Defendants in Enforcement
Litigation", dated October 7, 1981.  See GM-6.

"Quantico Guidelines for Enforcement Litigation", dated April 8, 1982.  See

"Section Directives Concerning 60 Day Report and Processing New Referrals",
dated June 22, 1982.


 Section Directives  Concerning  60-Day
 Report and Processing lieu Referrals'
              June 22,  1932
All EES/SDS Attc.-neys
fron    ' /   ^( \'\l
   S t?S i {•)'.IL*. '* T^j- sey

          Ky recent review of  selected  ".azardc-s  waste erforce-ert
cases, the feO-day^report and attorney  tine  records  for tne last o-
montr, period has been  ccroleted.  My review nas yielded aucii useful
information anc given  ze a better understating of  now attorneys are
spending  tneir tine.   It his also causec tne serious concern abOw.t the
nucoer of cases \*hich  aopear not to be  proceeding in an organized.
fasruon to any foreseeaole conclusion.  For example,  I was shccK^o
to learn  tnat in a hazardous waste case which  was filed sore than 2
years ago anc in whicn & partial settlement was obtained several
months ago, that no anenoed complaint has been filed against nor>-
settling parties nor has any discovery  been conducted in tne exist:r~
case.  In another case, despite beirg aware of the  existence anc
identity of generators for more than a  year, no arenaed cc-"olai-*t
has been prepared nor  has ar.y sealing!ul discovery  been cc:icuctt-
agairst defencsnts or  potertial defendants.

          I have also  become increasingly concerned that cases
referred  lo the Department by  EPA have  in sonie instances languisncci
for no identifiable reason.  It is incuabent on each attorney to
manage his/her case docket so  that cases are analyzed crcziptly and
litigation is moved forward aggressively to an expeditious conclusion,
Accordingly, I atn instituting  the following procedures which are to
be followed in all enforcement cases.

Handling Cases on the  60-Day Report

          My review of tha 60-day report and a random check of tne
accuracy of the entries leads me to the conclusion  that the disparity
wnich exists between our version and E?A's  version  of which cases
are being held at EPA's request, for litigation strategy reasons
or pending the receipt of additional information  from EPA will not
withstand close scrutiny.  In a recent  meeting, Mrs.  Dinkins
directec me to insure  that all cases on tne 60-day  report should
be filed or declined as soon as nossiole.   She expressed her
displeasure witn our delay in filin3 anc prosecuting -?A's cases

                            - 2 -

anc! instructed me to determine whethar ne^bers of  our  staff  have
f-ailed to prepare ere necessary pleadings or pi:t forth the nece;>
effort to conduct ErA's~enforcement litigation in  a  ti~ely fr.sr.ic-

          In short, it aopears that de^oite ny requests  so-e
staff attorneys have failed to siana»e their dockets  or prosecute
ex.stir.g cases in r timely nanner.  Accordingly, tnc following
general direct oraer is effective rarcdiately for  cases  listea
by category on the 60-cay report as unfilsd

          1.  Cases urcer review .r Eivisio") anc in  Untec States
                         Orzices - rne">e cases  are  to  oe rarerrsa
              to on.tec states Attorneys  ^itnin  30  days  of tnis
              'Taeticranc-t anJ exoecitiouslv  filed  in district court.
              Th2i*?sfter, fiej are to DC  vigoroxisly prosecuted.
              Staff attorneys are responsible  for notifying tne
              Chie'f, of th3 Environner/tal  Enforcement Section in
              writing of the date of filing; the  identity of the
              government attorney primarily responsible  for hanclir^
              tre case, tne relief the £overr.re-it seeks,  the amount
              of section attorney dire x.nich will be recuired for
              the next one year.

              Cases held at request or agreement  of £?Afor settle-
              -insnL c iscu-ssionsor rca so n s o f i 111 z a 11 v e  s t r a t e {i*.f -
              Tnesa cases are to oe reierrea  to  ur.itea  States
              Attorneys uithin 30 days and  expediteously filed
              in district court anc tie  sane  iniorration r>rcvir.eu
              as required in ites 1 aoove or  a r-eroranjuz: snail
              be provided to the Ciiief of tre Envirornar.tal
              Eniorcerenr Section witnin 30 days  from the date
              of Lhis ^e-oranduni indicating (a)  the  litigative
              /strategy reasons that the case has  not been filed,
              (b) the identity of the EPA attorney who  reauested/
              agrees with non-filing; (c) the date sach request/
              agreement was made; (d) written approval  irons EPA
              that this course continue, including the  stated
              reason therefor; (e) the progress  which is being
              made which in your view justifies  continuing to
              withhold the case froii filing.

              Cases in which additional  factual  or legal information
              has bee" requested or £?.^  - within  2 wee :s rrom the
              date 01 t his n er o r a n d UTJ , a written  memorandum shall
              be provided to the Chief of the Environmental Enforce-
              ment Section which shall contain (a) the  information
              and a discussion of its necessity  for  the case; (b)
              the dates on which it has been  requested,  (c) copies
              of all vntten correspondence which  has been sent/
              receivac auring the cast >ear requesting  arc-'or
              reiusi:?- to src'*ic:c tha information, (r)  ^e icertit"
              of tne I?.-, attorney.

Harclir: "ev Referrals.

          EPA has set referral of new cases as one  of  its  hig-est
priorities.  Since y.arcn 30, 1982, £?-. hjss referred  20  new cases  fo
filing and expects to senc an accitional 103 cases  for  fili~s ssf-r
tne end of this fiscal year.  Denart-ent attorneys  shoulc  give srio
to expeditious hanal.r.g of nev referrals.  Tr.e following proceaures
are effective irTi
          1.  Uoon receipt cf the inforr?ticncl  co^;*  cf  a  rsfsrr-L
              package, a CCJ attorney will oe  ass 13-120  to  the cast
              anc EPA vili be irfcrsed of tne  attorney's icentity.

          2.  The DOJ attorney sro'.lc contact  the  EPA rational attorre
             . assigned to tne case with*-"1 7 days  to determine the
              status of the case ar.d a iv important factual or legal
              issues in me case.
          3.  VJithi'n 30 calendar days after DOJ  receives the  forrcal
              referral letter from £PA, the DOJ  attorney is responsiol
              for analyzing tne ccse, ?re7>ard tecnnical personnel vitn carbon COO.G?
              of sucr correspondence prcvidod  to  the  aoproiiriatQ £.-•  v
              headcuariers attorney and tecnnical  personnel.

          4.  Pvecoiraendaticns wnicn will require norc than 30 days to
              prepare should be brought to the attention of the
              appropriate Assistant Section Chief  inediatel y.  EPA
              should be inforneJ in writing of the reason  for the delay
              and given a dace by which a recorc-senaation will be aace.

          5.  Wherever possible, complaints should be accompanied by
              appropriate discovery documents.   The propriety of see ;-
              ing a preliminary injunction should  be  considered in
              each case.

Filed Cases;

          Cases which have been or will be filed are  to  be vigorously
prosecuted.  The goal in our cases is an exoeditious  settlement whic.n
is favoracle to the 'united States consistent with  EPA's  policies and
applicable law or a trial where resolution by  settlement* is not
possible._  Attorneys sho-ld re-^-'sar that the  United  States is a
plaintiff in tneca cas23 ?nc snould sus i cases for* arc to

                            _ 4 -

Attcrr.evs shoulc assure that \ nen a case is referred to tne  D-jocrt-
rant oy EPA, attempts at settlement have essentially failed  ana  £?•
mtencs tnr.t tne case oe filed promptly and actively litigates.
Tr.is does nor rcean we will refuse to negotiate vith oefencsnts.
I: ~sans tlint we will al .ays prepare our cases for trial  even
vh le negotiations are oroceecing.
          One can-ot proceed cs a plai^tifl without  a  case
plan and strategy.  Attorrcys are responsible for  the  ceveloo-
ncrr of a case olan ard strategy and for assignment  of c-gc.~;
responsibilities to litigation tec- ~e™jcrs to assure  trat  tne
litigation strategy is fcllowcc.  Attorneys are  responsible for
idertifyirg and request.r.g all necessary assistance  frcir.  ~.?\.
If tnat assistance 13 not fortaccning, attorneys are resoonsisls
for Drirgirg this tc tne attention cf the Cnief  or Assistant
Cr.ief for ei.peaitious resol^'.icn v.'ith I.?'..  Sir.il?rl/, attorneys
are responsiole fqr fanil-arizing themselves witn  relevant  statute:
and regulatory provisions, understanding the technical issues
vnicn are presented, identifying policy or legal questions  wnic.i
arise in litigation ard seeding early advice on  tr>e  appropriate
litigative/policy position fron: £?A and tne section  isana^e^ent.

          Section attorneys rust undertake and follow  through
on case preparation.  Tnere is no acceotaole reason  for failing
to conduct necessary discovery or perform other  chases of case
preparation.  Any request by EPA or a United States  Attorney
to stay trial preparation for any reason must be made  in  writing
and be oersonally approved cy the Cnief of the Environmental
Enforcement Section.  Attorneys are responsible  for  laentifying
and requesting neeaec litigatior support.

          Attorneys are responsible for m^ ing rnavi^urj use  of
the Department's training and litigation support resources. Th3
Chief and Assistant Chiefs are available for consultation and
advice on all phases of case preparation and strategy. The
Section possesses substantial form files, technical  information
and an expert witness file.  The Department proviccs extensive
training tarough the Attorney General's* Advocacy Institute  for
trial preparation and tecnniques.  EPA ana other federal  agencies
have vast quantities of technical material whicn nay be easily
obtained and utilized in our cases.  Attorneys should  familiarize
themselves with sources of irforoation and utilize them.

          In the future, Carol, Lloyd and I will undertake
regular, periodic review of our docket to evaluate the progress
of our litigation.  This periodic review is not, however, a
substitute for seeking our consultation on case  specific  or
generic issues wnich arise in your cases.

          It is 'ay  intention that this ^enorandu*?.  serve as  a
reminder tc eacn soc~icr attorney tp=t our oricary obligation
is tne e\pea~tious, satisfactory r£.ncli"S of EPA's enforcement

                             .  5  -
Irrigation.  In nose of our  cases,  section atco — *eys are dc.-'s
gooc work.  In others, 5-Dstantj.al  in ore e"er>t is nc-cessar'  to
cest acceptable stansrrcs.   I  as-:  eacr. of you zo e\a-:i*^e cx e
ascuit and quality of * our effort  exoencec. on vpjr cases c.nc
to clace increased eraonasis  on noving ocr cases* forward for
resolution DV rrial or sectle^ent,   Ary questions aaour trie
                  be acorsssed to  ae.

          I a- provj.s.-«g EPA ra^a^eTent v itr s. ccp> cf  tr._
        _-2 ar.d c^.e .sost recent  60-cav rcoort.
cc   Mrs. Carol £. D11.ins
     Mr. Art~cny C. L.otta
     Ms. Karv L. Walter

"Request to Department of Justice to Withhold Action in Referred Cases",
dated September 3, 1982.

                       V/ASHIi C. rQU DC 201C
                                                LCCA.I. Af
"Case Referrals for Civil Litigation", dated September 7,  1982. See GM-13.

"Procedure for Withholding filing of Referred Cases", dated September 8,

     Procedure for Witlihol din>;
     of Referred Gates
    All  Attorneys
    Etn ironnieptal
    En v i ron. len c 2 L I)e rons e
                                          Step' .M '
                                          Chjcf ,  ",i"
                                            SccL Lori
                                                 Sej.tc.iber  3,  lOa
           In a roccit meeting \>ith rtob Porry,  Mike Tirnvn ,  Mar/
Walker,  >'rs. DinkiiTi and  mysell the tubjo^L  of c.i^es which have
been  referred by £1JA bvit  not lilcd by  the  Di%parfunr wai,  iji
We have  been instructed by  bub Per/y,  ' lui  -Xisocuce /.j^iius
for Legal  and Enforce,n<-nt COUP- ^1 th.i'. instruction0 frc^  i\cj icr- L
attorneys  to tne t>'jp,jrtr(pnt to t-bcL«iu iron  iLlr.i^ rof rt.in, -t ->3 iror
or taking  otner ac'.ion on referred c?.s<--7 nay not r>r followed ab-joT
concurrenro in wrvtinf, by He^r,' -ters, IP/,   t'r. I » i ry  h.'«; SU.-IL tie
   i»ched meiroranduiii on Lhii su^j^cc to .ill regional
and  l
be re
to be
not u
to do

     Accordingly, in e 'ch  referrcJ c« st  in  vhii'i ynu Jive  i*
     by  the 1 PA Hf^icnol .Ltoriuy to wich'it'ld nlin<, o"  Liu
c,inr or  withhold orhor C.ALZ  .'•ctivit', ),J 2J« f contact i~c
rtl atto-rney,  infonv hii.i/hc'r oi  i>'r.  .'e»ry's  i.'» -Lruciio ,
equest th.'t tl.v. l\e^,.oiji -iL'-ornc"  i"iuiaf  J: J ojtaii uriLL
rn-atic^n  of  an>? in^t.rucrioii '  not Lo file  ~i  rc» erred c.. ;e bo<.
the Region  and fren Ueddqi  ar'.e^s .   ALLorneys i*l.oui.d , of co.:
asonable and provide a reasonable ti'ic tor  those insf uc i. iv^
 transmitted.   However, I-creaftci , Pepii. trrtvnc actorne>s ncy
iLhhold  film" of relcrrcu  Ll'\ c
"Clearance of Briefs and Significant Pleadings",  dated October 27,  1982.

                          WASHINGTON, DC 20460~
                           27 OCT1982
                                                   LECAI. AND ENTOnCEMCNT
SUBJECT:   Clearance  of Bniefs  and Significant  Pleadi-gs
                         \I)U(| O/
FROM:      Michael A. Browrr^l><>*-*-\J
           Deputy General Counsel  (A-130)
All Attorneys
Office of General Counsel
     Attached  is a  form  that OGC will use for clearance of
briefs  and significant pleadings.  It is designed to provide
the  background information which Mr. Perry and I need  in order
to review the  pleadings.  This memorandum sets out  instructions
for  its use.

     1.  What  pleadings  require review by the General  Counsel
or Deputy General Counsel?

     .All significant pleadings nust be submitted for review by
jne or the General Counsel.  .These include all dispositive
pleadings, such as  appellate briefs, motions to dismiss,
motions for summary judgment, and the like.  Other  significant
pleadings include appellate reply briefs and reply  memoranda
in district courts.  In  cases involving potential  court-ordered
deadlines for  EPA action, answers, motions for amendment or
extension of deadline orders, and any accompanying  affidavits,
should  be forwarded for  review.

     Examples  of matters ordinarily not requiring review include
motions for extensions of time, motions to supplement  (or opposi-
tions to motions to supplement) the administrative  record, notices
of appearance, and other pleadings not directly related to the

     2.  When  should pleadings be submitted?

     Whenever  possible, pleadings must be submitted seven days
before  th«y are due to be filed.  Sometimes, because of litigation
deadlines or when a draft is prepared at the Department of
Justice, less  time is available.  In that case, suonit the pleading

                            - 2 -

as soon as possible.  Do not delay submitting a pleading until it
is letter-perfect.  If a reasonably cenplete draft is availaole
at the seven-day deadline, submit it, but note under "Ccnunents"
any changes which will be made.  Reviewers can deal with hand-
written inserts/ cut-and-paste drafts, and the like, if necessary
to assure early review.

     3.  How are pleadings submitted?

     Fill out the attached fonn, have the Associate General
Counsel initial it, and give the fora and draft pleading to tne
Senior Litigator.  The Associate's initials signify that he has
read the draft and has approved it for filing, or that the draft
will be acceptable for filing after the changes noted on the fcrr
under "Conraents," or on the draft itself, are made.  Please initial
any conunents.

     Under "Draft Prepared by," be sure to note whether the draft
was entirely prepared by the EPA attorney or at the Departnent of
Justice, or/ if drafting was shared,  what portions were drafted
by the EPA attorney.

     When the fonn is returned following review, it should be
retained permanently in the litigation file.


"Civil Litigation Referral Packages", dated December 2, 1982.

                       WASHINGTON DC 20460
                        DEC   2 1932
                                                       OFFICE OF
                                                LEGAL AND ENFORCEMENT COUNSEL
SUBJECT:  Civil Litigation Refe'rraPN Packages

FROM    :  Louise D. Jacobs  ,
         . Associate Enforcement Counsel
            for Water

TO      :  All Water Enforcement Attorneys
     At the staff meeting on November  23,  Mike Brown
requested that we add a new paragraph  to  each cover memo
accompanying proposed civil referrals.  The new paragraph
should state when we received  the  litigation report in
our division, and, if our review has exceeded 30 days,
explain the reason for the extended review.

     Please include such a paragraph in the cover memo for
any new referral packages you  may  prepare.

"Headquarters Review of Pleadings", dated December 2, 1982.

 **  ^ ••»
f &^ \
                         WASHINGTON. OC 20460
                            2 DEC 1982
                                                  LEGAL AND ENFORCEMENT COLrx
 SUBJECT:  Headquarters Review of Pleadings

          Robert M. Perry    ~*~  "**  v
          Associate Administrator and General Counsel

          All Regional Counsels
     Attached is a copy of a memorandum recently distributed
to attorneys in tne Office of General Counsel regarding
the requirement that I review and concur in all significant
pleadings filed on Behalf of the Agency in defensive cases.
This memorandum sets out procedures for review of defensive
pleadings filed in cases in which an Office of Regional
Counsel has lead responsibility.

     The attached memorandum describes which pleadings
require review.   Please folio// the procedures it describes,
ensuring that I  have an opportunity to review and concur
in all sucn pleadings before tney ars filed.  You should
work with the appropriate Associate General Counsel to
make sure that a draft is ready for my review not less
tnan seven days  prior to the date on which a pleading must
be forwarded for filing.  If the brief must be filed by
mail, be sure that the draft is submittec seven days before
it must be mailed.  You have met this obligation only if a
draft satisfactory to both the Regional Counsel and the
appropriate Associate General Counsel is available for my
review within the seven day deadline.  Regional Counsels
must personally  review and concur in all significant
pleadings submitted for my review.  Obviously, you will
need to coordinate with the Associate General Counsel well
before the deadline to assure that a satisfactory draft
will be available on time.

     The Associate General Counsel will be responsible for
preparing a Concurrence Request fori (attached) and submitting
the pleaaings for review.  For pleadings submitted after the
deadline, I have instructed the Associate General Counsels
to indicate on the font tne reasons for the delav.

     The Administrator has affirmed that I urge OLEC staff at
Headquarters and in the Regions to caution their "client" pr/^rar
offices and others within the Agency about the sensitivity (  j
contacts with persons or firms that are involved in cases
referred to DOJ for filing.  There are' many matters unrelated
to a specific enforcement action—e_.g. , processing of grants,
development of rules—in which a party may be interested and
which way be discussed without counsel present.  Care should be
taken, however* to determine the purpose(s) for which meetings
are sought by defendants and potential defendants so that appro-
priate arrangements can be made.  ,If natters related to a pendi-g
case are raised by such persons during the course of a meeting
arranged for other purposes, any discussion of the case should
be interrupted and continued only after consultation with an
Agency attorney assigned to the case.

XIII.  Enforcing Consent Decrees and^ Fin^l Orders

     Following the entry of a consent decree or final order,
compliance assessment is the responsibility of the Regional
Administrator, in the same way that the Regional Administrator
assesses compliance with statutory or regulatory requirements.

     In the event that a source violates a consent decree or order,
a motion for contempt or modification of the decree may be appro-
priate.  The decision to file for conterpt or to negotiate a"
modification will normally be the Regional Administrator's,
based upon the advice of the Regional Counsel and subject to  /  ^
national guidance issued by the responsible Assistant Administ^  J
or OLEC.  Since the violation would concern a filed case and a
consent decree modification would involve a court order, DOJ and
the U.S. Attorney's Office should be given the opportunity to
take part in any of those discussions.   Negotiations with affected
parties should be conducted in the manner described previously
in this document (with an opportunity for Assistant Administrator
participation).  All modifications to consent decrees must be
approved in the same manner as the original consent decrees.

XIV.  Appeals

     General Counsel attorneys serve as the Agency's principal
defense lawyers and are responsible for any matter before Courts of
Appeals, including appeals of decisions relating to enforcement
actions.  In such cases, the lead General Counsel attorney will
continue to be determined in accordance with a memorandum of
December 14, 1979 on the subject from the Deputy General Counsel.
The lead Agency attorney on the appeal will be responsible for


 working  closely with  the lead Agency attorney appointed to the
'original enforcement  case, as well as the appropriate Regional and
 Headquarters  program  office personnel.  The lead Agency attorney
 originally  appointed  to an administrative enforcement action
 which  is subsequently appealed normally will serve as co-counsel
 with the General Counsel attorney in the Court of Appeals.

     With regard to hearings before an administrative law judge
 or appeals  of administrative actions to the Administrator, the
 Regional Counsel will nomally provide legal representation for the
 Agency on matters arising in the Regions, including perr.it conditicrs
 and administrative civil penalty decisions.  However, in accordance
 with the OLSC memorandum of Hay 7, 1982, on regional reorganization,
 when issues of overriding national significance exist, or when
 Headquarters  initiates the administrative action, the lead may be
 assigned to a Headquarters attorney, upon the agreement of the
 Regional Counsel and  the appropriate supervisor in the Enforcement
 Counsel's office.

 XV. Commun1eations/Press Pelatjons

     Throughout the enforcement process, the Regional Administrator
 is responsible for ensuring that the appropriate information
 flows  openly  and smoothly to all parties with a legitimate interest
 in the final  outcome.  Once a matter is referred to DOJ, however,
 all Agency  personnel  should exercise care in releasing any in-for-  ~
 nation or statement,  including press releases, in connection with
 the matter  without previously consulting DOJ.  The lead Agency
 attorney is responsible for the smooth and complete flow of
 information to supporting attorneys within the Agency and in DCJ.

     The Regional Administrator and the Regional program managers
 are responsible for communicating with States, except if a State
 is a party  to a filed judicial action.  In that case, the U.S.
 Attorney and  DOJ should participate in or be consulted about any
 such communications.

     Likewise, the Regional Administrator will normally be
 responsible for handling any press inquiries or releases concerning
 an enforcement action.  The Regional Counsel is available to provide
 legal  advice  on the handling of those matters.  Upon occasion,
 such inquiries or press releases may be handled best by the Enforce-
 ment Counsel  or the appropriate Assistant Administrator, but only
 when all parties and  the press office agree that this procedure is
 the best course of action.  For filed actions, DOJ or the U.S.
 Attorney's  office shcv 1 d be consulted before interacting with the


Operating Procedures" memorandum therefore also stressed the
need for OGC attorneys to work closely with OEC and Regional
attorneys in developing an enforcement action on appeal.
Today's memorandum provides greater detail on tns respective
roles for each of these OLEC offices.

     Regional Counsels generally have the lead on advisirg
program clients on contemplatec enforcement actions,  IP de-
veloping an enforcement case for litigation, and for  ssr.»i**g
as  in-hcuse Agency legal representative in settlement  cis-
cussions or litigation activities associated witn tnat  case.
As  a result, Regional Counsels are usually tne OLEC officials
most familiar ^ith tre facts anc prcceeaings associatec rfitK.
a given action on appeal, as -fell as at the action's  initial

     Associate Enforcenent Counsels are responsible for
ensuring that enforcement actions follow and promote  Agency
policy on a nationwide basis.  Appeals of enforcement  actions,
even actions on which a Regional Counsel had initial  lead
responsibility, often involve fundamental enforcement  program
questions of national significance.  Thus, OEC Associates
have an important role to play in enforcement appeals.

     Finally, the fundamental questions often at stake  in
enforcement appeals, whether or not initiated by EPA,  typicall_
relate to appropriate interpretations of EPA's legal  authority,
The OGC Associates possess the best expertise for addressing
these issues of legal interpretation and for ensuring  t*at t-p
EPA position is consistent with and supportive of the  pcsit-oij
£PA has assumec in other legal proceedings.

     In light of these respective areas of responsibility and
expertise, I believe it is important that each of these OLEC
officials make appropriate contributions to EPA's activities
in  an appeal of an enforcement action.  This means that all
three OLEC officials should confer once EPA learns that a
defendant has filed an appeal, or once EPA begins considering
whether to pursue an appeal, to determine their respective
roles and responsibilities on matters related to that  appeal.
Each of the OLEC officials must be involved from the  start
of  the appeal process (including the decision on whether to
file an appeal) to ensure that each can provide a meaningful
contribution and to ensure that any issues are raised  and
resolved as early as possible.

     For example, the OGC Associate as a general rule  nust
participate in any Agency decision to file an appeal,  since
that decision and associated filings generally involve the
development of legal theories whicn may affect other  areas


of EPA's programs.  Similarly, the OGC Associate normally must
participate in the development of any briefs to ensure that
they appropriately articulate EPVs legal position wit-out
undermining the legal positions EPA may have adopted in
other matters.  In any case, the OGC Senior Litigator should
have the opportunity to review any significant pleadings.*

     OEC Associates and Regional Counsels also as a rule must
participate in the area relating to their respective respon-
sibilities ana expertise.  Thus, OEC Associates noriallv nust
participate in aspects of the appeal whicn significantly
affect national enforcement' policy or estaolisr* irportart
precedents.  Regional Counsels normally must participate on
issues concerning the propriety of EPA's actions in tne
context of the particular case at issue.

     Appropriate exceptions to these rules undoubtedly will
arise on a case-by-case basis as the Regional Counsel, OEC
Associate, and OGC Associate take a common sense approach to
distributing responsibilities for appeal-related activities.
In many instances, for example, different officials will be
responsible for preparing different sections of the brief.
I will be available to resolve any matters on which a
consensus cannot be reached.

     In any action on appeal, there must be a clear under-
standing among participants as to who holds lead responsibil-
ity.  Consistent with the "General Operating Procedures"
memorandum, the OGC Associate will have leaa responsibility
for the action as a whole unless the participants nake other
arrangements.  If appropriate, the participants may agree to
shift the lead on an action once it reacnes a certain stage.

     Let me conclude by emphasizing that each of the respon-
sible OLEC officials must ensure that he or she is promoting
coordinated OLEC participation on an enforcement appeal by
keeping other appropriate OLEC officials involved and by
making appropriate contributions to the group effort involved
in that appeal.  These measures are important to enable OLEC
to provide the best legal counsel possible as the Agency
pursues or defends appeals of enforcement actions.
*Even before an enforcement case reacnes the appeal stage.
the appropriate OGC Associate should have at least an
opportunity to review and comment on any dispositive
pleadings whicn the Federal government plans to file in
which the government lays out Complete legal theories which
are likely to for"n "^^ oasis of a ju^-nent.

"Responsibility for Handling Judicial Appeals Arising Under EPA's Civil
Enforcement Program", dated December 14, 1982.

                        WASHINGTON, DC 20460
                                                     AND ENFORCEMENT CO'J
SUBJECT    Resoonsibi 1ities for Handling Judicial Appeals
           Arising unaejE^A' s Civil Enfo^cenent
FROM:      Robert M. Perryx/"ASSoci ate Adnmstrator
             and General Counsel

TO         Associate Enforcement  Counsels
           Associate General Counsels
           Regional Counsels
           OLEC Office Directors

     This memorandum describes the distribution of responsi-
bilities within OLEC for handling appeals which arise fron
EPA civil enforcement actions and in which a reviewing court
bases its decision on the record  of an earlier proceeding
(judicial or administrative).  The basic concept underlying
this guidance is that enforcement appeals require the coor-
dinated participation of the appropriate Regional Counsel,
Associate Enforcement Counsel, and Associate General Counsel
in order for EPA to receive proper lega. advice and represen-

     This guidance specifically is intended to clarify
discussion of this matter in my July 6,  1982, memorandum on
"General Operating Procedures for EPA's  Civil Enforcement
Program".  In that document, I stated,

      "General  Counsel  attorneys  serve as the
      Agency's  principal defense  lawyers and are
      responsible for any matter  before  Courts of
      Appeals,  including appeals  of decisions
      relating  to enforcement actions".

Of course, appeals of enforcement actions clearly involve
matters relevant to the responsibilities of the relevant
Associate Enforcement Counsel and the Regional  Counsel,
as well as the  Associate General  Counsel!  The "General

"Deferral in Filing Cases at the Request of EPA Attorneys",  dated January
31, 1983.

    Deferral in Filing Cases at
    the Request of EPA Attorneys
January 31, 19 SZ
    All Ervironnental Enforcement
      Section Attorneys
          In some recent instances EPA headauarters has  complained ,
that section attorneys were accedeing to reauests  from regional
attorneys that cases not be processed or referred  or  filed.
Attorneys are reirinded that any request to defer the  referral or
filing of a case must corae from headauarters and must be in
writing.  (See my memo of June 22, 1982.)  If you  receive a  request
from a regional staff attorney to defer a referral or filing of
a case please communicate that reauest to the EPA  staff  attorney
and to your Assistant Chief, however, you may not  defer  process
of the case until such time that EPA has communicated that deferral
in writing at the headquarter level.
cc   Michael Brown
     Associate Enforcement Counsels
     Regional Counsels

"Case Management Procedures for Civil Water Referrals", dated March 28,

                          WASHINGTON DC 20460
                           MAR 281983
                                                          office, or
                                                  L.EGAL AND ENFORCEMENT COUNSI

SUBJECT:  Case Management Procedures for Civil Water  Referrals

FROM:     Louise D. Jacobs         ^^
          Associate Enforcement Counsel
            for Water             V

TO:       Regional Counsels, Region I - X

     As we approach the midpoint of Fiscal Year 83, I am sending
you our March 5, 1983, status report for active water referrals
and active cases.  This report charts our current total active
case load of 118 cases* under the Clean Water Act and the Safe
Drinking Water Act.  The chart is prepared on a Regional basis
to allow you to check your records against ours, and  to compare
your enforcement status with that of other Regions.

     I also want to take this opportunity to reemphasize the
importance of Michael Brown's memorandum on case referrals dated
September 7, 1982 (copy attached).  In addition, I wish to discuss
several matters specifically affecting water referrals.

1.   EarlyNotice of Planned Referrals

     Page 2 of the September 7 memorandum stresses the importance
of informing Headquarters "of new cases which are under develp-
ment as soon as sufficient information is acquired about the
cases to enable a determination to be made that they  have
potential for referral."  Early notice to this Division allows
for better coordination between Regional and Headquarters staff
attorneys.  It also helps to project this Division's  upcoming
workload and to plan accordingly.  Proper planning should(
facilitate the processing of referrals when they are  received.
* Cases in which a consent decree has been filed are
  not included.

     I am asking my staff to emphasize the importance of notice
of planned referrals in contacts with their Regional counterpart   ~
I will also attempt to visit as many Regions as possible daring
the remainder of this fiscal year in oraer better to understand
how this Division can work with each Region to develop high
quality referrals and expedite processing.  Staff attorneys will
be available as needed to participate in individual cases.  I
urge that my attorneys be given the opportunity to work with you
and the Regional program office on case development, especially
where non-routine questions arise.
2.   Program Office Coordination
     This Division is working closely with its Headquarters
program counterparts in processing referrals.  We obtain concurrence
from the Office of Water (OW) for all Clean Water Act and Safe
Drinking Water Act referrals and consent decrees before forwarding
them to the Associate Administrator, OLEC for final Agency

     We have found OW's technical review a valuable part of the
referral process and encourage you to make full use of the Region's
program office also in developing the referral package.  I
specifically urge that your office consult on referrals with the
Regional water program office (1) to confirm existing permit
requirements, if any, (2) to describe technically the precise
nature of the violations and some specific methods for solving
them, (3) to develop "first-cut" information about the ability
of a  municipality to pay for the Agency's proposed solution and
(4) to provide information about other significant technical
problems or issues.

3»   Settlement Negotiations with the Defendant

     Frankly, I have felt that too much time has been expended in
profiling negotiations with potential defendants.  The matter
breaks down into two areas (1) when to negotiate and (2) how long
to negotiate.

     A.   When to Negotiate

          Prior to referral, it is entirely up to you whether a
Region should conduct negotiations with a potential defendant in
an effort to seek compliance or compliance through warning letters
or administrative orders.  However, once you decide that court
action is needed, this Division and DOJ should be, to some degree,
involved in all subsequent actions on the case, including any
efforts to negotiate a consent decree.  Involvement by this  •
Division- and by DOJ is essential to facilitat3 approval of a-ny
consent decree, and to avoid embarrassement which may result
from rejection of decrees nagotiated by the Region alone.  The-

 involvement will probably not require HeadquartPrs attendance at
 negotiation sessions.  However, an attorney  in this Division
 should be  familiar with the general negotiation strategy and
 should review draft negotiation documents prior to transmittal
 to counsel for the potential defendant.

          Once a referral has been made by the Region to
 Headquarters, negotiations should cont.r.je only with the cc"CL.r-
 rence (and usually with the participation) of this Division arc
 DOJ.  Negotiations after referral should not delay the  filing of
 a complaint.  Negotiations may continue of course after fil.'-g.
 They should (1) be extremely focussec, and (2) De coordinated
 with my Division and with DOJ.

     B.   How Long to Negotiate

          Prior to referral of a case by the Region to  Headquarters,
 the Region may negotiate for as long as seems appropriate  to the
 Region.  However, this Division may wish to consult with the Region
 if pre-referral negotiations are unnecessarily prolonged or if
 there is a serious environnental problem which requires
 immediate action.

     Once a case has been formally referred by the Region  to
 Headquarters, negotiations may continue, but it should  be  clearly
 understood (1) that the case is on a track to litigation and (2)
 that the filing of the complaint should not be delayed  while
 negotiations continue.  Obviously a consent decree can  be  filed
 subsequent to the filing of a complaint.  If real progress is
 being made in the negotiations, the Court still will later be
 able to accept the consent decree.  This is consistent  with the
 Enforcement Counsel's memorandum of September 3, 1982,  which
 requires prompt filing of cases.  I have attached this  memorandum
 and Stephen Ramsey's related memorandum of September 8, 1982,
 for your reference.

 4.   Transmittal of Case Litigation Report

     The Regions have followed varying policies concerning
 transraittal of the case litigation report to Headquarters.  We
 recommend that you send the original and one copy of the litigation
 report and attachments to the Associate Administrator, OLEC, and
 another copy to me.  Immediately upon receipt, we coordinate
with the wacer program office so that it may also begin its
 review of the referral.  After OW concurrence on the referral
package and the Associate Administrator's concurrence, OW  returns
 its copy, of the litigation report to us tor transmittal to DOJ.
Some Regions are already following this procedure, and  it  is
working well.

"Program concurrence on Civil Referrals", dated July 20, 1983,

  ~  \
$ &b
«._.     »f                  WASHINGTON DC 20460

^t WO*11
                             Jil  2 Q ;ss:
                                                          OFFICE OF
                                                  L6CAL. ANO C

SUBJECT:  Program Concurrence an Civil Referrals

                             "- ^   '^-
FROM-     Louise D.  Jacobs   , "/^'^
          Associate  Enforc—errt Counsel
             for Water

TO        Robert W.  Zeller,  Director
          Office of  Water Enforcement

     I appreciated the  opportunity  to ireet with you  on  July 11,
concerning  OWEP concurrences on civil case referrals  to the Depart-
ment of Justice.  As we agreed, it  is essential that  cases  submitrec
by the Regions be promptly referred to DOJ or rejected  by Head-
quarters  if inadequate.  A recent delay  in this process has sug-
gested the  desirability of putting  an understanding  in  writing.

     Accordingly, this  memorandum confirms that the  tine for OVZP
case concurrence is  five d^ys after suo^ission to O'vH?  of the
final referral package  as prepared  by rry Division.  We  would ^c-^e  to
have your concurrence in less than  that  tize, esoeciallv bince 0' Z?
has the Region's referral package one to two weeks in advance of
the forwarding of it to you  by my Division.  In the  absence of
concurrence or comment  at the close of five days, I will assume
that OWEP has no comment on  the referral.  I will send  the  referral
forward at  that time for final approval  by the Special  Counsel for

     I look forward  to  continuing to work with your  office  on the
case referral process.

"Program Review of Civil Water Cases", dated July 20,  1983.


                             .--  20 IS33

SUBJECT:  Program  Review of Civil Water Cases

FROM:     Bruce R. Barrett, Director
          Office of Water  Enforcement and Permits

TO:       Louise D. Jacobs
          Associate Enforcement counsel for Water

     During the past several months my office has been reviewing
and concurring in  the referral of civil Clean Water Act (Cl*A) and
Sate Drinking Water Act (SDfeA) cases to the Department of justice
(DOJ), modifications to consent decrees arising from such
referrals, proposed settlements and the withdrawal of cases which
no longer merit prosecution.

     in light of completion of the OVOU2C Flow Chart describing
Compliance/Enforcement procedures for the NPDES program and the
Acting Administrator's recent decisions regarding delegation of
enforcement authority, 1 wish to formalize the concurrence process
between our two offices regarding the pre-referral review ot
cases/ consent decreesr settlement proposals and case withdrawals
by OW.

     Based on the Office of waters' responsioility as national
program manager for the Agency's water activities, pro-referral
review of cases performed by ny Office will focus on the following
subject areasi

     1*  Does the case Involve complex technical issues that
         would require resources and/or technical expertise
         beyond that available in the Region?

     2*  Does the case involve national policy issues important
         to the uffice of Water?

     3*  will the case set a precedent which may impact on
         national programs managed by the office of Hater?

     4.  Does the case conform to existing Office of Water
         policies and guidance with respect to the initiation
         oc  juui.t-.Ul "


     Reviews which conform each of the four areas to be reviewed
will be concurred on by the Director of the enforcement Division.
The enforcement Division Director will also concur on those cases
involving issues in one or nore of the four specified areas of
interest if the Enforcement Division Director is able to resolve
the key issues after consultation with Enforcement Counsel and the
initiating Region.  If the Division Director is unable to resolve
the problem(s), such cases will be escalated to the Office
Director and to the Assistant Administrator, if necessary* for
resolution of key issues and for concurrence or non-concurrence.

     I have assigned overall responsibility for program review of
pre-referral packages to Robert W. Zeller,  Ph.D., Director,
Enforcement Division.  Reviews involving violations of sections
301 and 402 (NPDES) of the CWA will be assigned to David Lyons and
his staff.  Reviews involving sections 311  and 404 of the CWA,
the SOW A, and the Marino Protection Research and Sanctuaries Act
(MPRSA) will DO assigned to Don Olson and his staff.  The person
assigned to review each case will conplete  a review check sheet
(copy atached) which will document for the  file the reviewer's
rationale for recommending concurrence/non-concurrence with the
request for referral.

     I have instituted two procedural changes in my office which
will help to ensure timely responses to your requests for
concurrence*  First, I have requested that  the Mater Division
Directors send copies of all referral requests to my Office.
several Regions are currently following this procedure,  with this
procedure in place, program reviews will proceed simultaneously
with legal reviews, and in most instances,  be completed prior to
the drafting of the referral memorandum to  DOJ.  This procedure
has the advantage that O* can provide technical input into the
referral memo if requested by your statf.  Second, I have
instituted an internal tracking system which will allow my staff
to pin-point exactly where any case is in the review and
concurrence process.  Copies of the pre-referral packages and OL£C
requests for concurrence will be logged in  and out through the
Division Secretary, Judy Howell.  I have establisned a time limit
of five workdays for review of pre-referral packages and two days
for response to OLSC concurrence requests.

     I believe that these procedures will enaole us to work
closely with your office in the timely review and referral to
DoJ of requests by the Regions for the initiation of civil

                                                 Attacnraent A
                 Procodures for program Review of
                    Judicial Referral Request
              Office of water Enforcement & Permits
                       Enforcement Division

1.  Copies of pre-referral packages and concurrence documents will
    be logged in and date-stamped when received by the Division

2.  The logged documents will be delivered to Don Olson for
    distribution to the appropriate reviewer.  NPDF.S related
    reviews will be conducted by the Compliance Branch/ and
    Technical Evaluation and Support Section staff.  Non-NPDES,
    SDWA and hPRSA reviews will be conducted by the Drinking Hater
    and special Enforcement Branch staff.

3*  Program reviews will be completed using the review torn and
    returned to Don Olson within tive workdays unless additional
    inrormation not contained in the package is required to
    complete the review.

4.  1C the reviewer uncovers any tactual/policy issues that would
    cause OW£P to non-concur in the Region's request for referral
    to DOJ* tne reviewer should document his/her reason for
    recommendimj non-concurrence on the review form or in a
    separate memorandum and immediately raise the matter to the
    Division Director's attention thru Don Olson.

5.  Completed review sheets and pre-referral packages will be
    checked by Don Olson and held until tne concurrence documents
    are received.

6.  Don ulson will review the concurrence documents for
    consistency with tne pre-referral package and any comments
    from the reviewer, initial the official file copy and forward
    the referral package to the Division Director for Program
    office concurrence.

7.  Any issues that can not be resolved by the Division Director
    should be immediately brought to th«» attention of OLEC - Water
    so that they are aware of OWEP's concerns and recognize that
    there may be a delay in the concurrence process.

Notes  This entire review process should take no longer than seven
       workdays unless additional information is required or the
       matter contains issues that can not be resolved at the
       Division level.

"DIRECT REFERRAL MEMORANDUM", dated September 29, 1983.(Amended by IV.B.29)

                         WASNtWCTOM. OC **M8
                             ocr IT
                                                      ir0«CCMBMT I

SUBJECT:  Direct Referral
FROM:     Richard H.
          Senior Enforcement Counsel

TO:       Associate Enforcement Counsels
      Attached !• a letter of agreement betveen the Deputy'
Administrator, oa "behalf of EPA, aad the Acting Assistant*
Attorney General for Land and Natural Resources, on behalf
of the Department of Justice, regarding the referral ef
certain types of cases from the Regional Offices directly
to the Department of Justice for a period of one year on
an experimental basis.

      You vill note that this agreement does not go into
effect until December 1, 1983, and that Courtney Price
vill distribute a memorandum within EPA explaining this
agreement and how it vill be implemented vithin the Agency.
Courtney would like to have the assistance of each of you
and your staffs in developing the guidance memorandum which
vill implement this agreement.  Please review the agreement
in your respective offices and submit any suggestions you
may have for its implementation.
     This office needs to closely monitor both the efficiency
and the effectiveness ef this method of handling referrals.
Therefore, it is an important responsibility to assure that
this guidance memorandum receives careful and thoughtful
consideration.  Please have your respective comments submitted
to me by Wednesday, October 26, 1983 to enable us to prepare
and distribute a guidance memorandum to the Regions veil In
advance of December 1« 1983.                   ,


                            NGTCK DC
Honorable f. Henry numcht, II
Acting Assistant Attorney General
Land and Natural Resources Division
U.S. Departnent of Justice
Washington, D.C.  20530

Dear Hank:

     As a result of our meeting on Thursday, SepterDer 8 ,* 198*-
and the subsequent discussions of respective staffs, we  are ir
agreement that, sub3ect to the conditions set fort*, belo.', the
classes of cases listed herein will be referred directly fro-".
EPA's Regional Offices to the Land and Natural Resources Divisic-
of the Department of Justice in Washington, D.C.

     The terms, conditions and procedures to be followed in
implementing this agreement are:

1.   The Assistant Administrator for Enforcement aid Co-pi ia-.ce
     Monitoring will waive for a period of one year th^  req_-r?-e-t
     of the Assistant Administrator's prior concurrence  for referral
     to the Department of Justice for the following classes of
     judicial enforcement cases:

     (a)  Cases under Section 1414(b) of the Safe Drinking Water
          Act which involve violations of the National Interir,
          Primary Drinking Water Regulations, such as reporting or
          monitoring violations, or maximum contaminant  violations;

     (b)  The following cases under the Clean Water Act:

          (i)    cases involving discharges without a perrrit
                 by industrial dischargers;

          (ii)   all cases against minor industrial dischargers;

          (iii)  cases involving failure to monitor or report by
                 industrial dischargers;

          (iv)    referrals  to  collect stipulated  penalties  from
                 industrials under  consent  decrees;

          (v)    referrals  to  collect administrative spill  penalt
                 under Section 311(j) of  the  CWA;

     (c)   All cases  under the  Clean Air Act except the folio-.ng:

          (i)    cases involving  the steel  irdjstry;

          \.li)    cases involving  non-ferrous  shelters;

          (111)   cases involving  national E-issio-^s Stancard3 for
                 Hazardous  Air Pollutants;

          (iv)    cases involving  the post-1932  enforcement  policy.

2.    Cases described in Section 1,  above, shall be referred
     directly froT the Regional Administrator to  the Land and
     Natural Resources Division of  DOJ in the following manner:

     (a)   The referral package shall be for-arded to the Assistant
          Attorney General  for Land and Natural Resources,  U.S.
          Department of Justice (DOJ), with copies of the package
          being  simultaneously forwarded  to the U.S. Attorney
          (USA)  for the appropriate judicial  district in which
          the proposed case is to be filed  (marked 'advance copy-
          no action  required at this time"),  anc  the Assistant
          Administrator for Enforcement ana Corpliance Montorin,,
          (OEC.M) at  EPA Headquarters.  DEC" shall have the  foilo-i-g
          functions  with regard to  said referral  package:

          (i)    DECK shall have  no responsibility for review of
                 such referral packages,andthereferral shall be
                 effective  as  of  the date of  receipt of the package
                 by  DOJ; however, OECH shall  conment to the Region
                 upon any apparent  shortcomings or defects  which
                 it  may observe in  the package.   DOJ nay, of course,
                 continue to consult with OECM  on such referrals.
                 Otherwise, OSCM  shall be responsible only  for
                 routine oversight  of the progress and management
                 of  the case consistent with  applicable present
                 and future guidance.  OECM shall, however/ retain
                 final authority  to apsrove settlements on  behalf
                 p£ EP£. for these cases,  as in  other cases.

          (ii)    The referral  package shall be  in the format and
                 contain information provided by  guidance memoranda
                 as  may be  promulgated from time  to time by OECM  in
                 consultation  with  DOJ and  Regional representatives.


           (ni)  DOJ shall, within 30 days fror receipt of the
                 referral package, deternine (1) whether the La-~s
                 Division of D3J will have lead responsib.l-ty fcr
                 the case; or (2) whether the USA »ill na^e IQL-
                 responsibility for the case.
                 While it is agreed that to the extent feasible,
                 cases in which the USP- will have t*e leac will re
                 transmitted to the JS\ for fili-g a^c handl.-c
                 within this 3Q-d3y pence, if DOJ ce_er—_-es t~at
                 the case requires accitic-2i legal cr fact-al
                 deveioprsnt at DOJ prior to referring tne r.attsr
                 to tne US\, the case nay oe returnee to t~e
                 Regional Office, or say oe retainsc-at tr.e Lanes
                 Division of DDJ for farther development, ir.cl.ci~c
                 requesting additional information fron the Regional
                 Office.  In any event, DOJ will notify the Pegicnsl
                 Office, OECM and the USA of its deternnaticn of
                 the lead role within the above-rentioned 30-ca;

           (iv)   Regardless of whether DDJ or the USn is deterrined
                 to have lead responsibility for ir.anagerent of
                 the case, the procedures and time limitations set
                 forth in the MOU and 28 CFR 50.65 et sec., snail
                 renain in effect anc shall run concurrently wit-
                 the management deter-instic^s race pursuant to
                 th«s agreere-t.

3.   (a)  All other cases not specifically aescribec in paragrsp-
          1, above, which the Regional Offices propose for jucic.sl
          enforcement shall first be forwarded to OECM and tne
          appropriate Headquarters prograir office for review.
          A copy of the referral package shall be forwarded sirul-
          taneously by the Regional Office to the Lanes Division of
          DOJ and to the USA fcr the appropriate 3udicial district,
          the USA's copy being marked "advance copy-no action require;
          at this time."

     (b)  OECM shall review the referral package within twenty-one
          (21) calendar days of the date of receipt of said package
          from the Regional Administrator and shall, within said
          time period, make a determination of whether the case
          should be (a) formally referred to DOJ, (b) returned to
          the Regional Administrator for any additional development
          which may be required; or (c) whether the Regional
          Administrator should be requested to provide any additional
          material or information which may be required to satisfy
          the necessary and essential legal and factual requirements
          for that type of case.


      (c)  Any request for information, or return  of  the  case
          to the Region shall be transmitted b> appropriate letter
          or memorandum signed by the AA for OECM (or  her  des*   ^e
          within the aforementioned twenty-one day pence.  s~^^^~
          OECM concur in the proposed referral of the  case to  2C
          the actual referral shall be by letter  fro-  tne  A.- fcr
          OEC.M (or her designee> signea within fourteen  days cf
          the termination of the aforementioned twenty-one ca/
          revie- period.  Copies of the letters r^ferrad to Ksre:~
          shall be sent to the Assistant Attorne,  General  for  t-i-
          Lands Division of DO3.
Upor receipt of the referral packaci- -. £CJ ,  tr.e
procecures ana time deadlines set fort.- i~  piranr^r-
Nc. S of the MO'J snail apply.
      In oroer  to allo* sufficient tine prior  to  i-ple:nent£tic~ cf
 tnis  agreement to make the U.S. Attorneys,  tne recioral Cfficss
 anc our staffs aware of these provisions,  it  is  agreed that tnis
 agreement shall beco-.e effective December  lr  1953.   Courtney Pr.ce
 will  distribute a ne~orandus within EPA explaining this agree-e-t
 and how it will be^irpie-ented wit*in tue  Agenc_ .   (YOJ will recai
 a  copy. )          ~

      I believe that this agreement will eli— mate  the  necessit_  cf
 formally amending the Menorancun o^f Ur.cers tanc.nc  between  our
 respective agencies, and will provice necessary  experience to
 ascertain whether these procedures will result in  significant   -\
 savings of tine and resources.  In that regard,  I  have askec   \   /
 Courtney to  establish criteria for i?e?suring  the efficacy  cf t-.=
 agreerent Guring the one year tr.al per.cc, an-  I  as1  t^^t yc-_
 cooperate witn her in providing sue-; reasonable  and nec2ssar\
 information  as she nay request of you in —.a*, me  that ceterr^-iiic-
 At the end of  the trial period — or at any  tine in  the  interval —
 we may propose such adjustments in the procedures  set  forth here.-
 as may be appropriate based on experience  of  all parties.

      It is further understood that it is the  rutual desire cf t"~e
 Agency and DOJ that cases be referrea to the  USA for filing as
 expeditiously  as possible.

      I appreciate your cooperation in arriving at  this agreement.
 If this meets  with your approval, please sign the  enclosea cosy
 in the space indicated below and return the copy to roe for our
                                    Sincerely  yours,
                                    Alvin L. Air
                                    Deputv Adrinistrato
 ~.  nerr%  Hssicr.t,  II
 Acti.nc Assistant  ^ttorrey Ge-eral
. lar.d  and  Natural  Ress-rces Division

"Implementation of Direct Referrals for Civil Cases", dated November 28,
1983.  See GM-18.

"Guidance on Evidence Audit of Case Files", dated December 30, 1983*  See

"Headquarters Review and Tracking of Civil Referrals",   dated March 8,

      f                WASHINGTON. D C 20460

                               8 19G4
                                                       {>,»rjM'i 'i i - .3
MEMORANDUM                                           COM-I-M^MO. ic*»
SUBJECT:  Heaaquarters  Review^and Tracking/cif Civil Referrals
                           m v^-m*^* t * U  ± 4. fc* W '» A I

                           K i- a ^ ^s »*    *
FROM:     Courtney M.  Price
          Assistant Administrator
          Office of Enforcement  and Compliance Monitoring

TO:       Regional Administrators
          Regions i-x

          Regional Counsels
          Regions I-x

          Associate Enforcement  Counsels

     The Office of Enforcement  and  Compliance Monitoring  is
committed to working cooperatively  with Regional Offices  to
track civil enforcement litigation  and to generally  improve
management of EPA's enforcement  litigation.  The following
procedures provide for expedited handling of case  referrals
which continue to be reviewed by Headquarters and  for  over-
sight of "direct" case referrals.   They also clarity roles
in the management of various classes  of judicial actions.
This guidance supplements and,  where  inconsistent, supersedes
previous guidance on review  and  tracking of civil  referrals.


     Four distinct classes of cases have evolved in  the Agency's
civil judicial enforcement program.  Those classes of  cases and
roles in handling each class may be described as follows:

    Class I:  Nationally managed cases  involving highly
              significant and precedential issues  of major
              importance in  the  particular program,  or
              involving activities  in more than one  Region.
              The lead legal and/or technical responsibilities
              in such cases  usually rest in Headquarters, with
              assistance from the Regional office(s).

Class II:
Class  III:
 Class  IV.
               Cases involving nsues of sxgnificanc    icu
               may be unique or precedential, or ^hic.. a^
               important to establish or further Agency
               enforcement goals.  The lead legal and
               technical responsibilities in such cases
               usually  rest in the Regional offices, with
               substantial assistance and oversight £ron

               Cases which are significant and  irporta~.t  to
               Agency enforcement  goals, but  ^hicn  ars  net,
               likely to raise issues which  are  unique  or
               precedential.  The  lead  legal  and technical
               responsibilities  in such  cases  rest  in  t-e
               Regional offices.   Headquarters  involvement
               will  be  limited to  general oversight to ensu
               that  Agency  policies  are  followed and  tnat
               cases are being prosecuted  in an expeditions
               manner.  Routine  communications should  ts^e
                place directly between  Regional attorney
                staff and  the  Department  of  Justice  or  U.S.

                Cases which  nay be  referred  directly from th.
                Regions  to  Department of Justice (DOJ)
                Headquarters pursuant to the September •>«»,
                1983 letter  agreement between Alvin L.
                for EPA and  F. Henry Habicht, II for D
                (copy attached).   Direct referrals are
                presently  authorized for the nore routine
                cases in the Air  and Water programs.
                Headquarters attorney involvement in these
                cases will  be limited to summary review and
                oversight  as described herein.  Routine
                communications should take place between
                Regional Attorney Staff and DOJ or U.S.

    The classes of cases which fall within the Class iv are
set forth with specificity in the letter agreement between
Alvin Aim and F. Henry  Habicht,  II dated September 29, 1983.
For all other cases, the initial  determination of category
and lead responsibilities will be made by the Regional
Administrator at the time the referral package is forwarded
to Headquarters for review.  That determination should be
included as a part of the cover memorandum accompanying and
summarizing the referral package.  Unless the Associate Enfor
ment Counsel for the appropriate  OECM division disagrees, the
case will be handled accordingly.  Should the Associate
Enforcement Counsel believe that  the case has been
miscategonzed, he or she should  consult with the Regional
Administrator or the designated Regional enforcement contact


regarding the classification  of  the  case or decision  on  lead
responsibilities.  The Associate will  also notify  the Regional
Counsel of the issue.   If  agreement  cannot be  achieved,  i  will
determine the appropriate  classification and  lead  responsi-
bilities after consultation with all relevant  parties within
the Agency.

     After the initial classification of a case,  facts may
develop or issues arise which will  3ustify a  reclassificatxon.
Either the Associate Enforcement Counsel or  the Regional
Administrator (or the designated Regional  enforcement contact
person) ray suggest reclassification of a  case or modifi-
cation of lead responsioilities.  The decision on reclassifi-
cation will be made as cescribed above for original classif--

     On December  1, 1983 we started a one year trial period for
direct referral of certain types of enforcement litigation to
the Department of Justice.  The types of civil enforcement
cases for which I have waived the requirement of concurrence
are listed  in a September 29, 1983 letter from Alvin L.  Aim to
F. Henry Habicht, II  (copy attached),  procedures  for  imple-
menting the  direct referral process were detailed  in a
November 28,  1983» memorandum I addressee to Regional
Administrators, Regional Counsels and Headquarters  staff (copy
attached).   As a  point of clarification, it is my  intent that
contempt actions  may  also be handled as direct referrals if tie
original case would neet the current criteria for  direct referral

     Headquarters will review and evaluate the information copy
required to  be  furnished to EPA Headquarters when  each  direct
referral is  sent  to the Department of Justice.  Associate
Enforcement  Counsels  for the programs where direct referrals
are utilized will prepare checklists which, at a minimum,
provide for  review of the following criteria:

A. Appropriateness o£ direct referral

    The case should be clearly within one of the categories
enumerated  in the September 29, 1983, letter from  Alvin Aim to
F. Henry Habicht, II  for which direct referral may be  used.
Contempt actions  in cases which fit  the direct referral cate-
gories may  also  be handled  through direct referral procedures.


B. Format of the cover memorandum
    The referral package should include the Case Data and
facility Data forms and a cover memorandum which identifies
and discusses at least the following subjects: nature of the
case, cause of action, proposed remedy, issues of national
or precedential significance, description of consultation
for case development (including names of Headquarters and
DOJ attorneys contacted), identification of Regional contact
persons, and basis for treating case as a direct referral.

C. Substantive adequacy of direct referrals

    Each direct referral package should contain  the  following

        1.  An  adequate  cause  of action;

        2.  Description  of evidence sufficient  to  prove  the
           violations  (copies of  documentary evidence should
           be  attached,  if possible,  and  the person(s)  with
           custocy  of  all evidence should  be identified);

        3.  Evaluation  of  potential defendants  and a  discussion
           of  why  the  named defendants  were  selected;

        4.  Discussion  of  State  involvement in  efforts to
           resolve  the violations;

        5.  Evaluation  of  potential defenses  and how they can
           be  refuted;

        6.  Evaluation  of  issues of precedential significance
           in  the  case, including a  discussion about how the
           positions proposed by the Regional  office are
           consistent  with  law and national  policy;

        7.  Description of the environmental harm to be remedied
           or other reasons  which justify prosecution of the
           case at the time  of referral;

        8.  Description of the remedy to be sought or the
           specific discovery required to establish a remedy
           in the case;

        9.  Discussion of penalties to be sought  (a)  if the
           case proceeds to trial and (b) as an  initial
           settlement position;


      10. Description of  attempts made  to  settle  the  case,
          problems encountered  in settlement  discussions,
          and the date of the  last  contact with  the source
          owner or other  potential  defendant.

     Within 30 calendar days after  receiving  the  information
copy of a direct referral the Associate enforcement Counsel
will send a copy of the completed checklist to the  Regional
Office, maintaining a file copy to  serve as a basis  for
periodic evaluation.

     If a case wnicn is not with.n  the category for cirect
referral is erroneously sent through the direct referral pro-
cess, the Associate Enforcement Counsel will prepare  a
response ranging from a simple notice to the Region indicat-
ing why tne direct referral was erroneous to a witharawal
from tne Department of Justice.  If a case whicn should have
been directly referred to the Department or justice is
erroneously sent to Headquarters for concurrence, the
Associate will,  after consultation with the Region, forward
it  to the Department of Justice as a direct referral.  A copy
of  the memorandum  forwarding the case to the Department of
justica  will  be  sent to  the Region.

     All  civil  cases must be entered and tracked  in  the
 Enforcement  Docket  System.  Guidance on responsibilities  for
 docket  procedures is contained  in memoranda dated  April  21,
 1983, Noveraoer  23,  1983, ana November  28,  1983  (copies
 attached) .   The following docket guidance  supplements ana,
 where inconsistent, supersedes  tnose memoranda.

     Each Regional  attorney has primary responsibility  for
 updating  all of his or  her active cases as part of the  monthly
 update  procedures.  Headquarters attorneys will also continue
 to  provide information  to the system.  Case Status Update
 reports will be sent on or about the first of  each month to
 the Regional Docket Control or  Regional Coordinator for
 distribution to the responsible Regional attorneys.  By the
 10th of each month, the Regional attorney  must see that an
 update  is submitted to  the Regional data analyst  (if the
 Region  has one) or  is mailed to Headquarters  Docket Control,
 Bruce Rothrock  (LE-130A).

     As with all referrals,  an  information copy of direct
 referrals must  be sent  to Headquarters, directed  to my  atten-
 tion, and must  include  completed Case  Data and Facility Data
 Forms  (copies of those  forms are attached).   The  Correspondence
 Control unit (CCU)  will route  the package  to  the  appropriate


OECM division, and will yive the Case Data Form, the Focil
Data Form, and a copy of the cover letter rotcrral mcmora
to Headquarters Docket Control Cor entry of the case into
the Docket System.  Kcgions with Regional UocKet Control shcv
give copies o£ the Case ana tacility Data forms and the
referral memorandum directly to regional data analyst for entry
into the system.  Failure to attach those forms may result in
the cases not being entered in the Docket System, and the
Region not receiving credit for the case at the time of

     Copies of direct  referral packages  are to  be sent  simul-
taneously to  the  Department of justice and EPA  Headquarters.
The  "Date to  EPA  Headquarters" ana the "Date  Referred  to
DOJ" shown in  the Case Docket  System will be  tr.e  date  on tne
cover  letter  fro-n the  Regional Acministrator.   The  System is
being  modified so that direct  referrals  will  be identified
and  can  be separately  retrieved  frc-^ the System.   A new
event  for  "Date Received  EPA  HQ"  will  also be added.   This
event  will be  used  as  an  approximate date when  the  Land
and  Natural  Resources  Division,  Departnent of Justice,
receives the  referral  package  and, consequently,  when  the
thirty day clock  begins to run tor determining  whether
Headquarters  DOJ  or the U.S.  Attorney  will have the lead
litigation responsibilities as provided  in the  Septencer 29,
1983 letter  agreement  between Alvin  Aim  ana  Henry Habicht, II.


      The review criteria for direct  referrals contained in
this memorandum also apply to cases  which require Headquarters
concurrence.   Rather than incorporating  tne  results of review
 in a file checklist, however, the results will be incorporated
 in the memorandum that Associates prepare for me recommending
whether to refer the case to the Department  of justice or
 return the case to the Region.  A copy of the memorandum will
be sent to the Region.  It the case  represents a type  that
should be considered  for direct referral in the future, the
memorandum addressed  to me should so indicate.

     All settlements require Headquarters concurrence.  Thus,
 referrals which  include a consent decree to be filed with
 the complaint require Headquarters concurrence.  Such  referrals
 should contain the following elements:

        1. A clear statement of a cause of action;

        2. Identification and discussion of any issues of
           national significance;

                                 — 7 —

       3.  Analysis  justifying proposed penalties  in terms of
          applicable  penalty policies; and

       4.  An  enrorceable  consent decree which  (a)  resolves
          the violation,  (b) is  in accordance  with require-
          ments of  applicable statutes, regulations and
          policies  and (c)  includes an appropriate termi-
          nation date or  specifies some other  process  for
          concluding  the  court's jurisdiction.  See  "GJ-c.a-.C3
          for Drafting Judicial  Consent  Decrees"  (G;>-17)
          issued October  19, 1983  for  a conplete  description
          of  consent  decree requirenents.


     Involvement by the Associate  Enforcement  Counsels in  all
cases, including those that do  and do  not  require Headquarters
concurrence,  will provide a basis  for  developing national
expertise and will identify areas  -/here  national guidance  is
needed.  In addition it will prepare  us  to respond quickly
when settlement proposals are  subnitted  for approval.   We
must ensure that litigation is  expeoitiously prosecuted, that
national policies are implemented  and  that statutory require-
ments are scrupulously observed.  Whenever Headquarters
identifies a problem, the Associate  Enforcement Counsel
should communicate with the Regional Counsel and  Departnent
of Justice.  Where quick resolution  cannot be informally
achieved, the Associate should cormunicate in writing on ths
subject to the Regional Office and Department of  justice anc
place a copy of the memo in the Headquarters case file.  I
rely on the judgment of each Associate as to when a natter is
of sufficient  importance that it should be called to my

     The Associate Enforcement Counsels will monitor the
activities of  the Regions and the Department of Justice to
make sure that all cases are vigorously prosecuted after
referral.  Extensive  informal discussions and efforts at
voluntary resolution normally occur prior to  referral.  We
should move forward  resolutely when litigation is required.
Settlement discussions may, of c  rse, proceed on a parallel
track, but they generally should  ot result in suspension of
litigation activities.  My Novemoer 28, 1983 memorandum
describing procedures for  implementation of direct referrals
specifically requires that I concur in any delay  after a
case has been  referred to the Department of Justice.  Whether


or not the case was directly referred,  the Associates shoul
identify and call to ray attention any instance where the
government has caused or agreed to  delay in the filing or
prosecution of any case without my  consent.

     The Associate Entorcement Counsels wj.ll use the
computerized enforcement docket and other available information
to monitor the overall litigation effort.  in addition, they
and their staffs will make periodic visits to Regional offices
to fulfill this office's oversight role,  unless action  is
required to ensure that an Agency policy or a legal  require-
ment  is followed, or that a case is prosecuted expeditiously,
this  office will not interject itselr  into individual  Class
III or  Class  IV case-?.  Heaccuarters attorneys may,  at.the
request of a  Regional office to  the Associate  Enforcement
Counsel, provide assistance, consistent  with  resource
availability  and other priorities,

    My  November  28,  1983 memorandum on  direct  referrals
indicates  that Regional offices  should  obtain  Headquarters
approval  for  settlement proposals before they  are  forwarcec
to  the  defendant.   This procedure should apply to  to all
cases whether or not they were directly reffered.   Each
Associate  Enforcement  Counsel  is authorized  to approve
settlements  at this  stage,  using his or her  judgment whether
to  confer with me  on critical  issues before  agreeing to a
proposal.   The Associate  will  make  sure the  settlement meet*-
the criteria set forth above for consent decrees,  complies
with  all  applicable policies and laws, and is consistent
with  national program objectives.   I must approve  all f.nal
settlements  before they are filed  in court.


 cc: Office Directors, OECM

"Delegation of Authorities to the Deputy Administrator",  dated March 19,

      f                  WASHINGTON  DC  20460

                          March 19, 1984
                                               THE ADMINISTRATOR
SUBJECT:  Delegation of Authorities to the Deputy Administrator
Assistant Administrators
General Counsel
Inspector General
Associate Administrators
Regional Administrators
Staff Office Directors
     In the interest of streamlining our management of the
Agency, I have today delegated to the Deputy Administrator the
authority to take certain actions relating to internal agency
management and organization or routine regulatory matters.
This delegation will be added to the EPA Delegations Manual
which is currently under revision.

     This action is designed to relieve me of the burden of
acting on the volume of internal management decisions and other
relatively routine or pro forma signature items.  As experience
suggests additional areas in which signature by the Deputy
Administrator may improve our management performance, I will
expand the scope of the current delegation.  Beginning
immediately, decision documents addressing the following
matters should be prepared for Mr. Aim's signature:

      — Agency reorganizations;

      — Agency directives and internal delegations of

      — Advisory Board letters and charter actions

      — Approval of Advance Treatment projects; and
      — Concurrence in modifications of State Plans under
         the Coal Mine Safety and Reclamation Act as
         petitioned by the Department of the Interior.
                          William D. Ruckelshaus

                          WASHINGTON, D.C. 20490
                            KAR  I 3 1984
                                                          OfftCl Of
                                                        AND RESOURCES
MEMORANDUM                                               MANAGEMENT

SUBJECT:  General  Delegation of Authority — ACTION  MEMORANDUM

FROM:     Howard M.
          Assistant Adntinstrator

TO:       The Administrator
THRU:     AX                         * +
          The Deputy Administrator r>/-\


     To allow the  Deputy Administrator to exercise,  at  any  time,
certain delegable  authorities of the  Administrator.


     Reorganization Plan No. 3 of 1970 states that,  "The Deputy
Administrator shall perform such functions as the Administrator
shall assign or delegate, and shall act as Administrator during
the absence or disability of the Administrator or in the event  of
a vacancy in the office of the Administrator.*

    As a part of our analysis of the  Agency's current delegations
of authorities, my staff has identified a number of  opportunities
to streamline Agency action by delegating signature  authority
to the Deputy Administrator.  Generally speaking, these matters
involve routine administrative decisions, minor regulatory  actions,
and matters of internal management and organization.  Examples  of
such actions include:

     0    Advisory Board letters and  charter actions;

     0    Agency reorganizations;

     0    Agency directives and internal delegations;


     *    Approval of Advanced Treatment projects; and

     '    Concurrences in modifications of State Plans under the
          Coal Nine Safety and Reclamation Act as petitioned by
          the Department of the Interior.

     The efficiencies associated with delegating signature authority
to the Deputy Administrator could be obtained by two means.  On
one hand, you could delegate authority to act in these specific
areas set forth in a narrowly-prescribed delegation.  On the other
hand, the delegation could be broadly drafted to authorize the
Deputy Administrator to perform any act not statutorily required
to be performed by the Administrator.

     While our analysis favors the use of as broad a delegation as
possible, the General Counsel has made the point that delegation
language which is too general could cause confusion and possibly
conflict with other delegations as published.  Within the context
of the attached delegation, you and the Deputy would determine
those actions you wish the Deputy to take without prior consulta-
tion with you, and we would publish those in the delegation.  As
experience suggests additional areas in which you wish the Deputy
to act, he could be delegated such actions by amending this single

     The attached delegation authorizes the Deputy to exercise
certain authorities not reserved to the Administrator by statute.
It would give the Deputy full authority to act on your behalf at
any time.  This is designed to relieve you of the burden of signing
or otherwise approving a volume of internal management actions or
relatively routine, pro forma signature items.  This delegation
will become the initial delegation in the EPA Delegations Manual
which is currently undergoing a major revision.


     I recommend you indicate your approval of Delegation 1-1 by
signing below.

                                    Approve:  **_'
                                    Date:       3//f


                            1-1-  GENERAL DELEGATION

 1.  WraCRITy.  1b exercise certain delegable authorities of the Administrator
 including, but not limited to the following:

    a.   signature of Advisory Board letters and charter actions;

    b.   approval of internal Agency reorganizations;
    c.   approval of Agency directives and internal delegations of authority;

    d.   decisions on Advanced Treatment (AT) projects; and

    e.   concurrences in modifications of State Plans under the Coal Mine
 Safety and Reclamation Act as petitioned by the Department of Interior.

 2.  TO WHOM DELEGATED.  The Deputy Administrator.

 3.  REDELEGftTICN.  This authority may be redelegated with the concurrence of
 the Administrator.

 4.  ADDITIONAL^REFERENCES.  This delegation does not supersede any other
delegation in this Manual.  Delegation of other specific authorities will be
documented in revisions of this delegation.

"Races to the Courthouse", dated March 20,  1984.

 \,t  ^c<^                 WASHINGTON DC  20460
                             MAR 20 1984

                                                THE ADMINISTRATOR

 SUBJECT:   Races to the Courthouse

 FROM:      The  Administrator/^

 TO:        Assistant Administrators
           Office Directors
           Chief Judicial  Officer
      When EPA takes regulatory action,  it is frequently sued.
Many  of  the  statutes governing our Agency provide  for such
suits to be  filed only in one  court,  generally the United
States Court of  Appeals  for  the District  of  Columbia  Circuit.
However,  a number of the statutes  under which we operate
allow the Agency to be sued  in any united States Court of
Appeals.   This has led some  litigants to  sue in the court of
appeals  they believe will be most  likely  to  rule in their
favor, a practice known as forum shopping.

      A federal statute,  28 U.S.C.  2112(a), requires all
lawsuits filed against a federal agency in courts  of  appeals
to be transferred  to the court of  appeals in which the first
suit  was filed.   That court may then  transfer all  the suits
to another court of  appeals, but may,  in  its discretion,
decide all the cases itself.   This statute has led some forum
shoppers  to  seek to  be the first to file  a lawsuit in the
court of their choice.   This practice is  known as  racing
to the courthouse.    Racers have adopted  such measures as
stationing staff members for months in  government  offices
waiting  for  an action to be announced,  maintaining open long
distance  telephone lines to distant courthouses, and  estab-
lishing  lengthy  human signalling chains to let lawyers know
when  to  file  petitions for review.

      EPA  actions under the Clean Water  Act are currently
subject  to rules (40 CFR Part  100)  that eliminate  the most
abusive aspects  of races  to the  courthouse by setting  the
date  of  agency action for judicial review purposes at two
weeks after  the  date  of  publication in  the Federal Register.
                                             ,.  •         "
                                          -7   : .,

                             - 2 -
     However, races to the courthouse are possible under
other EPA-administered statutes.  Races were recently run to
file lawsuits against two EPA regulatory actions under the
Uranium Mill Tailings Radiation Control Act and the Federal
Insecticide, Fungicide, and Rodenticide Act.  The races
resulted in  interference with EPA work and in unnecessary
litigation.  Soon I expect to propose rules that will elimi-
nate some of the abusive practices associated with such
races.  The rules, if adopted, will set the time and date of
a number of  EPA actions, for purposes of judicial review, two
weeks or more after the action is signed or, for rules and
similar actions, published in the Federal Register.  In the
meantime, I am asking each of you to take the following steps
to prevent races on regulatory actions that are taken before
these rules are adopted.

     Rulemaking and Related Actions.  In all final rules
and related actions listed in Attachment A, include the
following statement in the "DATES" section of the preamble
to the final rule:

          These regulations shall be promulgated for
          purposes of judicial review at 1:00 p.m.
          eastern time on  [two weeks after the date
          of publication in the Federal Register].

The bracketed material will be deleted by the Office of the
Federal Register and the actual date substituted.   The
effective date should be changed to reflect this delay in
promulgation.  Most rules should be made effective 60 days
after promulgation.  In these cases, the following language
should also appear in the "DATES" section:

          These regulations shall become effective on
          [74 days after the date of publication in the
          Federal Register].

Inclusion of an action in Attachment A does not constitute
an Agency opinion that it is rulemaking for purposes of the
Administrative Procedure Act.

     Adjudication.  All final orders in adjudications listed
in Attachment B should include the following language:
          For purposes of judicial review, the date of
          issuance or entry of this order shall be
          fourteen days after the date it is signed.

     Exceptions.  The General Counsel, or the Judicial Officer,
may shorten  the deferral period or waive these requirements
when special circumstances, such as the need to comply with a
statutory or court-ordered deadline, so require.

                         Attachment A

                Rulemaking and Related Actions

Clean Water Act
     Apply the requirements of 40 C.F.R. Part 100.
Resource Conservation and Recovery Act
     Authorization and interim authorization of state
        Hazardous Waste Management programs.
Toxic Substances Control Act
     All final rules.
Safe Drinking Water Act
     All final direct federal implementation underground
        injection control programs.
     Approval or disapproval of state-submitted
        underground injection control programs.
     Final agency action on petitions for designation
        of aquifers under Section 1424(e).
Uranium Mill Tailings Radiation Control Act
     All final rules.
Atomic Energy Act
     All final rules.
Federal Food, Drug, and Cosmetic Act
     All final rules.

                         Attachment B


Clean Water Act

     Decisions on appeal to the Administrator under 40 C.F.R,
        §§124.91 or 124.125.

Resource Conservation and Recovery Act

     Final decisions on EPA-issued or denied permits for
        hazardous waste management facilities.

Federal Insecticide, Fungicide, and Rodenticide Act

     Final orders following a public hearing in pesticide
        cancellation or suspension proceedings.

Safe Drinking Water Act

     Decisions on applications for variances or exemptions
        under Sections 1415 or 1416

Federal j'ogd, Drug, and Cosmetic Act

     Final decisions on pesticides tolerances that are
        reviewable under 21 U.S.C. 346a(i)  or 348(g).

"Guidance for Enforcing Federal District Court Orders", dated May 8, 1984
This document is reproduced at Section IV D.I., this compendium.

"Guidance on Counting and Crediting Civil Judicial Referrals", dated June
15, 1984.  See GM-29.

"Revised Regional Referral Package Cover Letter and Data Sheet" dated May
30, 1985.  See GM-40.


"Direct Referrals Clean Water Act - 'No Permit'  Cases",  dated September 11,

  /                     WASHINGTON, D.C. 20460
                               " 885
                                                      OFFICI OF tSfOKCEMEST

 SUBJECT:  Direct Referrals Clean Water Act j—/'No Permit" Cases
 FROM:     Courtney M.  Price 1
           Assistant Administrator for Enforcement
             and Compliance Monitoring {LE-133}

 TO:       Henry L. Longest, II
           Acting Assistant Administrator for Water (WH-556)

           Regional Administrators

           Regional Counsels

           Tom Gallagher,  Director
           National Enforcement  Investigation Center

      Assistant Attorney General,  F.  Henry Habicht has recently
 requested  that all Clean  Water  Act  "no permit"  cases be care-
 fully evaluated for possible criminal prosecution.  As Henry
 Habicht  explains,  the  permit requirement has been in effect for
 14  years;  thus, it is  highly unlikely that dischargers would
 be  unaware of the  statute,  and  likely that any  discharge without
 a permit might be  the  result of a willful act.   Furthermore,
 the permit requirement is central to EPA's Water program.

      I therefore am recommending  that you implement the
 following  procedures to address his  concerns.

      1.  The  Regional  Water Division Director in consultation
         with the  Regional  Criminal  Attorney and the
         Special/Resident-Agent-in-charge,  should carefully
         scrutinize all "no permit"  Clean Water Act cases  for
         potential  criminal action prior to their referral for
         civil action.

      2.  if they decide to  bring  a criminal enforcement
         action, the case will be developed and referred
         as provided in the General  Operating Procedures
         for  Criminal  Enforcement.


     3.  If, however, it is decided not to proceed witn a
         criminal prosecution, then that particular "no
         permit" case will be directly referred for civil
         action to the Department' of Justice in accordance
         with existing procedures.

     These procedures will take effect on October 1, 1985.
If there are any questions, please  contact Randall Lutz,
Director, Office of Criminal Enforcement.  He may be reached
at FTS 557-7410; E-Mail Box EPA 2372.

cc:  Glenn Unterberger
     Terrell Hunt
     Randall M. Lutz

"Direct Referrals", dated August 28, 1986.

                     WASHINGTON. O C. 20480
                                                      f M*Q*f f Mf NT MO
                                                       .«•*•» MOMTOMMO

 Honorable  P.  Henry  Habicht,  II
 Assistant  Attorney  General
 Land  and Natural Resources Division
 U.S.  Department of  justice
 Washington, D.C.  20530

                       Ret Direct Referrals

 Dear  Ranks

      During the past year OECM has been holding discussions
 with  the Headquarters program offices and with the 10 Regional
 Counsels on how to  improve and expand the direct referral
 program, wherein certain cases are referred directly from the
 Regional Administrator to your office.  Because the program
 is working well, the consensus of the Associate Enforcement
 Counsels, the program compliance division directors and the
 Regional Counsels is to expand the classes of cases subject
 to direct referral*  We have also consulted with members of
 your  staff and,understand that they acquiesce in this concept
 insofar as the classes of cases set forth herein are concerned.

      This letter, when signed by you, will serve as an amendment
 to our September 29, 1983, agreement which set forth the condi-
 tions of the initial direct referral pilot project.  It will
also  amend the June 15, 1977, Memorandum of Understanding
between our respective Agencies.

      The following 8 classes of cases will be added to the
direct referral programs

      1.  All collection actions in which the relief
         requested is solely for unpaid administratively or
         judicially assessed penalties under any statute,
         except for actions to assess penalties under CERCLA
         and cases where there is little prior experience in
         civil judicial enforcement (i.e., the Ocean Dumping
         Act, underground injection control regulation under
         RCRA/SDWA,  Clean Air Act NESHAPs other than vinyl
         chloride and asbestos).


     2.  All 'actions in which the only relief sought is con-
         tempt for violation of any consent decree or other
         enforceable order* and/or to enforce the terras of any
         consent decree or other enforceable order.£/  The pre-
         ceding types of actions against governmental entities
         shall continue to be referred to OECM.

     3.  Clean Air Act cases involving asbestos and vinyl
         chloride National Emissions Standards for Hazardous
         Air Pollutants.

     4.  All Clean Air Act post-1982 .ate cases except those
         involving steel producers, smelters, and lead
         sources. £/

     5.  All Clean Water Act cases involving NPDES permit
         violations by industrial dischargers, except those
         involving violations relating to or determined by
         biological methods or techniques measuring effluent

     6.  All judicial actions alleging interim status vio-
         lations under RCRA $3008(a) except cases involving
         loss of interim status or closure.  This authority
         will take effect in each Region upon the successful
         referral by the Region of two cases in order to
         demonstrate the requisite experience.  This author-
         ity does not include corrective action cases under

      1.  Cases under Section 1414(b)  of the  Safe  Drinking Water
          Act which involve violations of the National  Interim
          Primary Drinking Hater Regulations, such as reporting
          or monitoring violations or  maximum contaminant
          violations.  (Notes  This category  does  not include any
          causes of action under section 1414(b) established by
          the SDWA Amendments of 1986.)

      2.  The following cases under the Clean Water Act:

          a.  cases involving discharges without a permit by
              industrial dischargers;

          b.  all cases against minor  industrial dischargers;

          c.  cases involving failure  to monitor or report by
              industrial dischargers}

          d.  referrals to collect  stipulated penalties from
              industrials under consent decrees;

          e.  referrals to collect  administrative  spill
              penalties under Section  311(j)  of the CWA.

      3.   All  stationary source cases  under the Clean Air Act
          except  the  following:

          a.  cases involving the  steel industry;

          b.  cases involving nonferrous smelters;

          c.   cases involving NESHAPs;

          d.   post  -  1982  date cases.

     4.   All  TSCA  &  FIFRA collection  actions for  unpaid
          administratively assessed penalties.

     5.   All mobile  source tampering  and fuels cases (except
          governmental  entity cases) arising  under  the Clean
          Air Act,  Sections 203 and 211  respectively.

     OECM will continue  to play a substantive role in these
cases, especially  in view of the  increased size of the Agency's
case load and the  need to ensure that our cases reflect the
Agency's  priorities.   OECN and DOJ will  simultaneously review
these referrals.

     Within 35 days of receipt  of a copy of  the direct referral
package,  the appropriate  AEC will comment on  the merits of the
referral  to DOJ and  to  the originating  regional office.  He may
ask the Assistant Administrator of OECM to recommend to DOJ


that the case be further developed before filing or returned to -
the regional office.  OECM will also continue to oversee the
progress and development of these direct referral cases and will
continue to approve all judicial settlements on behalf of EPA.
All other agreed-upon conditions and procedures regarding direct
referrals and case management will remain in effect.
     In order to allow sufficient tine prior to implementation
of the expansion and to make the U.S. Attorneys, the. regional
offices and our staffs aware of its provisions, it is agreed
that this agreement shall become effective for cases referred
trora a Region on or after September 2, 1966.  I will distribute
a memorandum to the Regions, the Headquarters program offices
and within OECH explaining the expansion and how it will be

     I appreciate your cooperation in arriving at this amendment
to our agreement.  If this direct referral case expansion meets
with your approval, please sign in the space provided below and
return a copy of the letter to me for our files.

                            Thomas L. Adams, Jr.
                            Assistant Administrator
   Henry!Habicht, II
Assistant Attorney General
Land and Natural Resources Division
U.S. Department of Justice

cc:  Richard R. Mays
     Senior Enforcement Counsel

"Expanded  Civil  Judicial  Referral Procedures",  dated
 August  28,  1986.   See  also GM-50.*

                      WASHINGTON. D C 20460
                                                       f N'0«f£Mf NT AN0
                                                     COM', Axrt MO*lltOHl*lG

 SUBJECT:  Expanded Civil Judicial Referral Procedures

 FROM:     Thomas  L. Adams, Jr.
           Assistant Administrator  for Enforcement
              and Compliance Monitoring

 TO:       Regional Administrators
           Program Office Enforcement Division Directors

      The purpose of this memorandum is to provide guidance
 on several issues regarding the procedures by which the Agency
 refers civil judicial referrals to the Department of Justice
 (DOJ).  They art* as follows:  1) expansion of the current
 direct referral program, 2) pre-referral negotiations, 3} hold
 action requests to DOJ for referred cases, and 4) filing proofs
 of claim in bankruptcy by regional attorneys.

 Expansion of Direct Referral Program

      Last summer the Direct Referral Program^/ was expanded to
 include, in the second year of operation, all TSCA and FIFRA
 I/ As used here the term "direct referral" denotes case
 referrals sent directly from the Regional Administrators to
 the Assistant Attorney General for Land and Natural Resources
 cf the Department of Justice, with simultaneous review by OECM
 aid DOJ.  The current DOJ address for direct referrals is:
 L'.S. Department of Justice, Environmental Enforcement Section,
 Box 7415, Ben Franklin Station, Washington, D.C. 20044, or, if
 express delivery is used, U.S. Department of Justice, Land
 and Natural Resources Division, Environmental Enforcement
 Section, Room 1521, 9th. St. and Pennsylvania Ave, N.W.,
 Washington, D.C. 20530.

collection actions and all non-governmental mobile source taa-
oenng and fuels cases.  That expansion has been successful in
helping to expedite the judicial referral process.  Effective
for cases referred on or after September 2, 1986, OECM with
DOJ encouragement is further expanding the categories of direct
referrals by adding the following 8 classes of cases (see
attached copy of my letter of August 28, 1986, to F. Henry
Habicht, Assistant Attorney General for Land and Natural

     1.  All collection actions in which the relief
         requested is solely for unpaid administratively or
         judicially assessed penalties under any statute,
         except for actions to assess penalties under CERCLA
         and cases where there is little prior experience in
         civil judicial enforcement (i.e., the Ocean Dumping
         Act, underground injection control regulation under
         RCRA/SDWA, Clean Air Act NESHAPs other than vinyl
         chloride and asbestos).

     2.  All actions in which the only relief sought is
         contempt for violation of any consent decree or
         other enforceable order, and/or to enforce the
         terms of any consent decree.- or other enforceable
         order.£/  The preceding types of actions against
         governmental entities shall continue to be           (
         referred to OECM.                                     ^

     3.  Clean Air Act cases involving asbestos and vinyl
         chloride National Emissions Standards for
         Hazardous Air Pollutants.

     4.  All Clean Air Act post-1982 date cases except
         those involving steel producers, smelters and
         lead sources.£/

     5.  All Clean Water Act cases involving NPDES permit
         violations by industrial dischargers, except those
         involving violations relating to or determined by
         biological methods or techniques measuring effluent

     6.  AH judicial actions alleging interim status vio-
         lations under RCRA $3008(a) except cases involving
2/  All modifications of consent decrees which result from any
action (direct referral) in this paragraph shall continue to
require OECM approval and program office approval, where
appropriate, prior to submission to DOJ for entry by the court,

3/  OECM approval will also be required when major changes are
made to SIPs due to a future change in the related NAAQS.

         loss of interim status or closure.  This authority
         will take effect  In each Region upon the successful
         referral by the Region of two cases in order to •
         demonstrate the requisite experience.  This author-
         ity does not include corrective action cases under
         b.  cases involving non-ferrous smelters;

         c.  cases involving NESHAPs;


         d.  post - 1982 date cases.

     4.  All TSCA & FIFRA collection actions for unpaid
         administratively assessed penalties.4/

     5.  All mevlie source tampering and fuels cases (except
         governmental entity cases) arising under the Clean
         Air Act, sections 203 and 211 respectively.

Attached for your convenience in Appendix A is a list of all
cases now covered under the direct r ferral program.

     OECM will continue to play a substantive role in these
cases, especially in view of the iace«*«is**1 size of the Agency's
case load and the need to ensure that our cases reflect the
Ajeicy's priorities.  The Regions should continue to send
copies of the case referral reports directly to OECM, and
where appropriate, to the program office for review.  OECM and
DOJ will concurrently review these referrals.  Within 35 days
of receipt of a copy of the direct referral package, the appro-
priate AEC will consent on the merits of the referral to DOJ
and to the originating regional office.  He may ask the
Assistant Administrator of OECM to recommend to DOJ that the
case be further developed before filing or returned to the
regional office.  OECM will also continue to oi~rsee tne
progress and development of these direct refer  1 cases.  It
should be noted that in all direct referral cases, as with
all other enforcement cases, the Regions still must coordinate
settlement terms with Headquarters and submit consent decre<* .
to OECM for review and approval.  (See nemorandua of November 28
1983, entitled, "Implementation of Direct Referrals for Civil
Cases Beginning December 1, 1983" at page 5 (GM-18).}  All other
existing policies and procedures regarding direct referrals and
case management will remain in effect.

Pre-referral Negotiations

     OECM has concluded that Headquarters should not establish
nandatory requirements for pre-ref«rral negotiations.  Hever-
trsless, use by the Regions of pre-referral negotiations, when
s-»cj rfhere appropriate, is to be encouraged by the Regional
Counsels.  Also note that the Regions should continue to follow
current applicable guidance set forth in Frederick F. Stiehl's
July 30, 1985, memorandum entitled "Preparation of Hazardous
r..'iste Referrals" wherein pre-referral negotiations for hazard-
ous wasto cases are discussed.  In addition, refer to the  .
4/~ This class is now included in actions foe unpaid administra-
tively or judicially asb^ssed penalties arising under any
statute.  See expansion category number 1 above.


memorandura entitled  "Enforcement Settlement Negotiations,"
GM-39, dated May  22,  1985, which requires AEC review of draft
consent decrees Before they are sent to the defendant.  Draft
consent decrees must  be reviewed by an. Assistant Chief or
senior lawyer  in  the  DOJ Environmental Enforcement Section
before they are sent  to the defendant.

"Held Action*  Requests

     With a more  decentralized management of the Agency's
enforcement program, greater responsibility is placed on
uhe regional offices  to develop and manage cases, particularly
in the pre-referrai stage.  The Regions are called upon to
sufficiently investigate, prepare and develop civil cases so
that DOJ can file them without delay.  When EPA refers a case,
the referral results  in the expenditure of time and resources
by OECM and DOJ.  A request from the Region to hold action on
the filing of  a case  that results from inadequate case prepara-
tion or from the  desire to conduct negotiations that could.
have been conducted prior to referral severely undercuts our
enforcenant efforts and results in inefficient use of valuable
time and resources in the Regions, in OECM and at DOJ.

     Therefore, it is OECM policy that hoid action requests
should be used only for strategic or tactical reasons, such as
where the defendant has made a significant settlement offer
after referral, or where settlement prior to filing will bo
advantageous to the government.  A hold action request should
be in the form of a memorandum from the Regional Counsel to
the Assistant Administrator for OECM requesting and explaining
its use and the length of delay requested.  The Assistant
Administrator, OECM, will determine whether the request is
justified, and if so, will ask DOJ to delay the filing of the
suit for a specified period ot time.

     OECM will grant hold action requests only where there is
a clear benefit"to the Agency resulting from the delay.  In
those cases where there is no reasonable justification for
tbe requested delay, OECM will ask DOJ to proceed with filing
or consider recommending that the case be withdrawn from DOJ
a-nd possibly will disallow credit for the referral.

filing Proofs of Claim in Bankruptcy

     EPA's judicial bankruptcy docket has grown enormously in
t^(? last two years.  OECM and DOJ arc very concerned about the
i^an-iing of these cases and future bankruptcy matters.  The
la*, in this vital area is not well developed; little favorable
precedent exists on the issues of concern to us.  Moreover, we


must be very careful to avoid risking large resource expendi-
tures in bankruptcy cases where there mew ^e little realistic
chance of obtaining material recoveries, ?ven it we prevail o.
legal issues.  These concerns make it imperative that bankruptcj
cases be especially well prepared and that management review
time be adequate at both OECH and DOJ prior to filing,  see,
e.g., OECM  (Draft) Revised Hazardous Waste Bankruptcy Guidance,
Kay 23, 1986, at 1-4.  In the past, numerous cases have been
referred with very little or no lead time for review and with-
out litigacion reports.  Although we appreciate the difficulties
of obtaining notice that bankruptcy proceedings have been
initiated by a regulated entity, it is still important that
EPA clairao be forwarded for C"*M review and referral to DOJ
at the earliest possible tine   These claims will be referred
by the Assistant Administrator,  OECM and approved in writing
by the Assistant Attorney General, Land and Natural Resources,
prior to filing.

     If you have any questions regarding these procedures,
please contact Jonathan Libber who can be reached at
FTS 475-8777.


cc:   Administrator
      Deputy Aoministrator
      Assistant Administrators
      Senior Enforcenent Counsel
      General Counsel
      Associate Enforcement Counsels
      Regional Counsels
      Regional Enforcement Contacts
      Regional Program Division Directors
      F. Henry Habicht II, Assistant Attorney General
        for Land and Natural Resources, Department of Justice

"Expanded Civil Judicial Referral Procedures", dated August 28, 1986.  See
also GM-50.

"EPA Policy on the Inclusion of Environmental Auditing Provisions in
Enforcement settlements", dated November 14, 1986; See GM-53.  Supplements

                                  , D C I'
                            ^ ,586
SUBJECT:  Final EPA Policy on the Inclusion of Environmental
          Auditing Provisions in Enforcement Settlements
PROM:     Thomas L. Adams, Jr.
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Addressees

     On July 17, 1986, this Office circulated a draft EPA
Policy on the Inclusion of Environmental Auditing Provisions
in Enforcement Settlements.  I am pleased to report that Agency
comments were almost uniformly supportive of the draft as
written.  Attached please find a final version of the policy,
including summaries of the known auditing settlements that
Agency personnel have achieved to date and several model audit
provisions that Agency negotiators may use as a starting point
in fashioning settlements that address the circumstances of
each case.

     I believe that the inclusion of environmental auditing
provisions in selected settlements offers EPA the ability
to accomplish more effectively its primary mission, namely,
to secure environmental compliance.  Accordingly, I would
like to renew last July's call for EPA's Offices of Regional
Counsel and program enforcement offices to consider including
audit provisions in settlements where the underlying cases
meet the criteria of the attached policy statement.

     Inquiries concerning this policy should be directed to
Neil Stoloff; Legal Enforcement Policy Branch, PTS 475-8777,
E-Mail box 2261, LE-130A  Thank you for your consideration of
this important matter.




Assistant Administrators
Associate Administrator for Regional Operations
General Counsel
Associate Enforcement Counsels
Director, Office of Criminal Enforcement and Special Litigation
Director, Office of Compliance Analysis and Program Operations
Headquarters Compliance Program Division Directors
Director, NEIC
Regional Administrators, Regions I-X
Regional Counsels, Regions I-X
Regional Compliance Program Division Directors, Regions I-X
Principal Regional Enforcement Contacts, Regions I-X
Enforcement Policy Workgroup

cc:  Administrator
     Deputy Administrator
     John Ulfelder
     David Buente, Department of Justice (DOJ)
     Nancy Firestone, DOJ


I.  Purpose

     The purpose of this document is to provide Agency enforce-
ment personnel with general criteria for and guidance on selecting
judicial and administrative enforcement cases in which EPA will
seek to include environmental auditing provisions among the
terras of any settlement.  This document supplements the "Guidance
for Drafting Judicial Consent Decrees."jY

II.  Background

     On July 9, 1986, EPA announced its environmental auditing
policy statement (Attachment A) which encourages the regulated
community's use of environmental auditing to help achieve and
maintain compliance with environmental laws and regulations.2/
That policy states that "EPA may propose environmental auditing
provisions in consent decrees and in other settlement negotiations
where auditing could provide a remedy for identified problems
and reduce the likelihood of similar problems recurring in the

     In recent years, Agency negotiators have achieved numerous
settlements that require regulated entities to audit their
operations.  (Attachment B is a representative sample of the
auditing settlements that the Agency has achieved to date.)
These innovative settlements have been highly successful in
enabling the Agency to accomplish more effectively its primary
mission, namely, to secure environmental compliance.  Indeed,
auditing provisions in enforcement settlements have provided
several important benefits to the Agency by enhancing its
ability to:

     0 Address compliance at an entire facility or at all
       facilities owned or operated by a party, rather than
       just the violations discovered during inspections;
       and identify and correct violations that may have gone
       undetected (and uncorrected) otherwise.

     0 Focus the attention of a regulated party's top-level
       management on environmental compliance; produce corporate
       policies and procedures that enable a party to achieve
       and maintain compliance; and help a party to manage
       pollution control affirmatively over tne instead of
       reacting to crises.

     0 Provide a quality assurance check by verifying that
       existing environmental management practices are in
       place,  functioning and adequate.


III.  Statement of Policy

     It is the policy of EPA to settle its judicial and admin-
istrative enforcement cases only where violators can assure the
Agency that their noncompliance will be (or has been) corrected.4/
In some cases, such assurances nay, in part, take the form of
a party's commitment to conduct an environmental audit of its
operations.  While this would not replace the need for correction
of the specific noncompliance that prompted an enforcement
action, EPA nonetheless considers auditing an appropriate part
of a settlement where heightened management attention could
lower the potential for noncompliance to recur.  For that
reason, and as stated in the Agency's published policy,
"[environmental auditing provisions are most likely to be
proposed in settlement negotiations when:

     0 A pattern of violations can be attributed, at least in
       part, to the absence or poor functioning of an environ-
       mental management system; or

     0 The type or nature of violations indicates a likelihood
       that similar noncompliance problems may exist or occur
       elsewhere in the facility or at other facilities operated
       by the regulated entity, "ji/

     This policy is particularly applicable in cases involving
the owner or operator of extensive or multiple facilities,
where inadequate environmental management practices are likely
to extend throughout those facilities.6/  Nevertheless, even
small, single-facility operations may face the types of compliance
problems that make an audit requirement an appropriate part of
a settlement.

     The environmental statutes provide EPA broad authority to
compel regulated entities to collect and analyze compliance-
related information.7/  Given this statutory authority, and
the equitable grounds for imposing a requirement to audit
under the circumstances outlined in this policy statement,
such a requirement may be imposed as a condition of settlement
or, in the absence of a party's willingness to audit voluntarily,
sought from a court or administrative tribunal.

     EPA encourages state and local regulatory agencies that
have independent jurisdiction over regulated entities to consider
applying this policy to their own enforcement activities,  in
order to advance the consistent and effective use of environ-
mental auditing.£/

a.  Scope of the Audit Requirement

     In those cases where it may be appropriate to propose an
environmental audit as part of the remedy, negotiators must
decide which type(s) of audit to propose in negotiations.   This


determination will turn on the nature and extent of the environ-
mental management problem, which could range from a specific
management gap at a single facility £/ to systematic,  widespread,
multi-facility, multi-media environmental violations.^/  In
most cases, either (or both) of the following two types of
environmental audits should be considered:

     !•  Compliance Audit;  An independent assessment of the
current status of a party's compliance with applicable statutory
and regulatory requirements.  This approach always entails a
requirement that effective measures be taken to remedy uncovered
compliance problems and is most effective when coupled with a
requirement that the root causes of noncompliance also be

     2.  Management Audit;  An independent evaluation of a
party's environmental compliance policies, practices,  and
controls.  Such evaluation may encompass the need for:
(1) a formal corporate environmental compliance policy, and
procedures for implementation of that policy; (2) educational .
and training programs for employees; (3) equipment purchase,
operation and maintenance programs; (4) environmental compliance
officer programs (or other organizational structures relevant
to compliance); (5) budgeting and planning systems for environ-
mental compliance; (6) monitoring, recordkeeping and reporting
systems; (7) in-plant and community emergency plans; (8) interna
communications and control systems; and (9) hazard identifica-
tion and risk assessment.^/

     Whether to seek a compliance audit, a management audit, or
both will depend upon the unique circumstances of each case.  A
compliance audit usually will be appropriate where the violations
uncovered by Agency inspections raise the likelihood that
environmental noncompliance exists elsewhere within a party's
operations.  A management audit should be sought where it
appears that a major contributing factor to noncompliance is
inadequate (or nonexistent) managerial attention to environmental
policies, procedures or staf fing.l_3_/  Both types of audits
should be sought where both current noncompliance and shortcomings
in a party's environmental management practices need to be
addres s ed•14/

     In cases where EPA negotiators determine that an acceptable
settlement should include an audit provision, the attached
model provisions IS/ may be used as a starting point in fashion-
ing a settlement tailored to the specific circumstances of each
case.  The model provisions are based on settlements addressing
a broad range of circumstances that give rise to audits.

     3.  Elements of Effective Audit Programs.  Most environ-
mental audits conducted pursuant to enforcement settlements
should, at a. minimum, meet the standards provided in "Elements
of Effective Environmental Auditing Programs," the Appendix to


the Agency's published policy on auditing.  Those elements

     * Explicit top management support for environmental auditing
       and commitment to follow-up on audit findings.

     0 An environmental audit team separate from and independent
       of the persons and activities to be audited.

     ' Adequate team staffing and auditor training.

     * Explicit audit program objectives, scope, resources
       and frequency.

     * A process which collects, analyzes, interprets and docu-
       ments information sufficient to achieve audit objectives.

     • A process which includes specific procedures to promptly
       prepare candid, clear and appropriate written reports
       on audit findings, corrective actions, and schedules
       for implementation.

     0 A process which includes quality assurance procedures
       to ensure the accuracy and thoroughness of environmental

     Agency negotiators may consult EPA's program and enforcement
offices and the National Enforcement Investigations Center,
which can provide technical advice to negotiators in fashioning
auditing provisions that meet the needs of both the party and
the regulatory program(s) to which it is subject.  Additional
information on environmental auditing practices can be found in
various published materials.17/

     A settlement's audit requirements may end after the party
meets the agreed-upon schedule for implementing them.  Neverthe-
less, the Agency expects that most audit programs established
through settlements will continue beyond the life of the settle-
ment.  After the settlement expires, the success of those
programs may be monitored indirectly through the routine inspec-
tion process.

b.  Agency Oversight of the Audit Process

     In most cases, resource and policy constraints will pre-
clude a high level of Agency participation in the audit process.
Several successful audit settlements indicate that the benefits
of auditing may be realized simply by obtaining a party's
commitment to audit its operations for environmental compliance
or management problems (or both), remedy any problems uncovered,
and certify to the Agency that it has done so.18/  Other recent
Agency settlements, also successful, have entailed full disclosure
of the auditor's report of findings regarding noncompliance,


and even access to the company records which the auditors
examined. 1J?/  Audit settlements that require either self-
certificatlbn or full disclosure of audit results may require
a party to submit to the Agency an environmental management
or compliance plan (or both) that addresses identified problems,
to be implemented on an enforceable schedule.2O/

     These approaches require the Agency neither to devote
significant resources to oversight of the audit process nor to
depart from its traditional means of enforcing the terms of
consent decrees and agreements.  Although it may—and will--
evaluate audit proposals in terms of the elements described
in §111.a.3. above, in all but the most extreme cases 21/
the Agency will not specify the details of a party's internal
management systems.  Rather, an independent audit represents
one step a violator can take toward assuring the Agency that
compliance will be achieved and maintained.22/

     Considerations such as the seriousness of the compliance
problems to be addressed by an audit provision, a party's
overall compliance history, and resource availability will
dictate the extent to which the Agency monitors the audit
process in particular cases.  Thus, it will usually be approp-
riate to withhold approval of an audit plan for a party with
an extensive history of noncompliance unless the plan requires:

     * Use of an independent third-pa-. iy auditor not affiliated
         with the audited entity;
     0 Adherence to detailed audit protocols? -nd
     0 More extensive Agency role in identifying corrective

c.  Agency Requests for Audit-Related Documents

     The various environmental statutes provide EPA with broad
authority to gain access to documents and information necessary
to determine whether a regulated party is complying with the
requirements of a settlement.^   Notwithstanding such statute—/
authority, Agency negotiators snould expressly  sserve EPA's
right to review audit-related documents.25/

d.  Stipulated Penalties for Audit-Discovered Violations

     Settlements which require a party to report to EPA audit-
discovered violations r-  include stipulations regarding the
amount of penalties for violations that are susceptible to
prediction and are promptly remedied, with the parties reserving
their respective rights and liabilities for other violations.26/
This policy does not authorize reductions of penalty amounts
below those that would otherwise be dictated by applicable
penalty policies, which take into account the circumstances


surrounding violations in guiding the calculation of appropriate
penalty amounts.  It is therefore important that stipulated
penalties only apply to those classes of violations whose
surrounding circumstances may be reasonably anticipated.  The
application of stipulated penalties to violations discovered
during an audit is consistent with Agency policy.27/

e.  Effect of Auditing on Agency Inspection and Enforcement

    1.  Inspections

     The Agency's published policy on auditing states that
"EPA will not promise to forgo inspections, reduce enforcement
responses, or offer other such incentives in exchange for
implementation of environmental auditing or other sound environ-
mental practice.  Indeed, a credible enforcement program provides
a strong incentive for regulated entities to audit."28/

     Consistent with stated Agency policy, the inclusion of
audit provisions in settlements will not affect Agency inspec-.
tion and enforcement prerogatives.  On the contrary, a party's
incentive to accept auditing requirements as part of a settlement
stems from the Agency's policy to inspect and enforce rigorously
against known violators who fail to assure the Agency that
they are taking steps to remedy their noncompliance.  Auditing
settlements should explicitly provide that Agency (and State}
inspection and enforcement prerogatives, and a party's liability
for violations other than those cited in the underlying enforce-
ment action (or subject to stipulated penalties), are unaffected
by the settlement.29/

    2-  Civil Penalty Adjustments

     Several audit settlements achieved to date have mitigated
penalties to reflect a party's agreement to audit.  In view of
EPA's position that auditing fosters environmental compliance,
EPA negotiators may treat a commitment to audit as a demonstra-
tion of the violator's honest and genuine efforts to remedy
noncompliance.  This may be taken into account when calculating
the dollar amount of a civil penalty.30/  In no case will a
party's agreement to audit result in a penalty amount lower
than the economic benefit of noncompliance.

     For judicial settlements where penalties are proposed to
be mitigated in view of audit provisions, negotiators should
coordinate with the Department of Justice (DOJ) to ensure
consistency with applicable DOJ settlement policies.

    3.  Confidentiality

     EPA does not view as confidential per se audit-related
documents submitted to the Agency pursuant to enforcement
settlements.  Such documents may, however, contain confidential


business information (CBI).  Auditing provisions should indicate
that EPA will treat such information in the same manner that
all other CBI is treated.31/  Where appropriate, negotiators
may consider defining in advance which categories of audit
information will qualify for CBI treatment.$2j  Such determina-
tions shall be concurred in by the Office of General Counsel,
in accordance with 40 CFR Part 2.

     The Freedom of Information Act (FOIA) may provide additional
bases for protecting privileged information from disclosure.33/
However, determinations under FOIA are within the sole discretion
of the Agency and therefore are not an appropriate subject of

IV.  Coordination of Multi-Facility Auditing Settlements

     When negotiating with a party over facilities located in
more than one EPA region, Agency personnel should consult with
affected regions and states to ensure that pending or planned
enforcement actions in other regions will not be affected by .
the terms of an audit settlement.  This may be done directly
(e.g., pursuant to existing State/EPA Enforcement Agreements)
or with the assistance of OECM's L?gal Enforcement Policy
Branch  (LEPB), which will serve as a clearinghouse for infor-
mation on auditing in an enforcement context (contact:  Neil
Stoloff, LEPB, FTS 475-8777, LE-130A, E-Mail Box EPA 2261).

     In most cases, however, auditir  settlements that embrace
facilities in more than one region will affect neither the
Agency's inspection and enforcement prerogatives nor a party's
liability for violations other than those which gave rise to
the underlying enforcement action.34/  Accordingly, inter-office
consultation in most cases will be necessary only for informa-
tional purposes.  Some multi-facility settlements will fall
within the scope of the guidance  iocument, "Implementing
Nationally Managed or Coordinated Enforcement Actions."35/
Such settlements should be conducted in accordance with that
document and the memorandum, "Implementing the State/Federal
Partnership in Enforcement:  State/Federal Enforcement 'Agree-
ments. IM36/


 1.  EPA General Enforcement Policy No. GM-17, October 19, 1983.
 2.  51 Fed. Reg. 25004  (1986).
 3.  51 Fed. Reg. 25007  (1986).
 4.  Seg "Working Principles Underlying EPA's National Compliance/
     Enforcement Programs," at 7 (EPA General Enforcement Policy
     No. GM 24, November 22, 1983).
 5.  51 Fed. Reg. 25007  (1986).
 6.  See, e.g., Owens-Corning Fiberglas Corp., Attachment B,
     p. 1; and Attachments D-F.
 7.  See, e.g., the Clean Air Act (CAA) §§113 and 114, the Clean
     Water Act (CWA) §§308 and 309, and the Resource Conservation
     and Recovery Act (RCRA) §§3007 and 3008.
 8.  See 51 Fed. Reg. 25008 (1986).
 9.  See, e.g., BASF Systems Corp., Attachment B, p. 3.
10.  See Attachment F.
11.  See Attachment C.
12.  See Attachment D.
13.  See Chemical Waste Management, Inc., Vickery, Ohio and
     Kettleman Hills, California facilities. Attachment B, pp. 1
     and 2 respectively; and Attachment D.
14.  See Attachments E and F.
15.  Attachments C-G.
16.  See 51 Fed. Reg. 25009 (1986).
17.  See, e.g., "Current Practices in Environmental Auditing,"
     EPA Report No. EPA-230-09-83-006, February 1984; "Annotated
     Bibliography on Environmental Auditing," September 1935,
     both available from EPA's Office of Policy, Planning and
     Evaluation, Regulatory Reform Staff, PM-223, FTS 382-2685.
18.  See, e.g., Crompton and Knowles Corp., Attachment B, p. 1;
     and Attachments C-E).
19.  See, e.g., Chemical Waste Management, Inc., Vickery, Ohio
     and Kettleman Hills, California facilities, Attachment B,
     pp. 1 and 2 respectively; and Attachment E.


20.  See,  e. g.,  United States v. Georgia PacificCorp.,  Attachmen
     8, p. 2; Attachment D, §8.3; and Attachment F,  §§6(1) and 9.

21.  See,  e.g.,  Attachment G.

22.  See,  e.g..  Potlatch Corp., Attachment B, p. 1;  and Attach-
     ment c.

23.  See Attachment F.

24.  See,  e.g.,  CAA §114, CWA §308, RCRA §3007, CERCLA §103,
     the Toxzc Substances Control Act §8, and the Federal Insec-
     ticide,  Fungicide and Rodenticide Act §8.

25•  See*  e-g*»  Attachment F, §IV, "Access to Documents."

26.  See Attachment F, §§22, 23, 24, 34, and Appendix 2.

27.  See "Guidance for Drafting Judicial Consent Decrees," at 22
     (EPA General Enforcement Policy No. GM-17, October 19, 198.3).

28.  51 Fed.  Reg. 25007 (1986).

29.  See Attachment C, §A.3; Attachment D, §B; Attachment E,
     §C.3j and Attachment F, §34.

30.  See 51 Fed. Reg. 25007 (1986); EPA's Framework for Statute-
     Specific Approaches to Penalty Assessments, General Enforce-
     ment Policy No. GM-22, at p. 19; and applicable medium-
     specific penalty policies, e.g., TSCA Settlement with
     Conditions, November 15, 19837

31.  See "Guidance for Drafting Judicial Consent Decrees," at 28
     (EPA General Enforcement Policy No. GM-17, October 19, 1983).

32.  See Attachment F, §§5(2), 14, and 15.

33.  See,  e.g.,  5 U.S.C. §552(b)(4), which encompasses voluntarily
     submitted information the disclosure of which would impair
     a Government interest such as EPA's interests in the settle-
     ment of cases and in ensuring compliance with statutes
     under its authority.

34.  See Attachment F, §25.b.

35.  General Enforcement Policy No. GM-35, January 4, 1985.

36.  General Enforcement Policy No. GM-41, June 26,  1984.


                     SUMMARY OF ATTACHMENTS

ATTACHMENT A:  Environmental Auditing Policy Statement,
51 Fed. Reg. 25004, July 9, 1986.

ATTACHMENT Bi  Representative Sample of Environmental Auditing
Settlements Achieved to Date, revised 10/9/86.

Attachment C;  Model Environmental compliance audit provision,
with requirement for certification of compliance.

Attachment D;  Model Environmental management audit provision,
with requirement for submission of plan for improvement of
environmental management practices, to be completed on.an
enforceable schedule.

Attachment E:  Model Environmental compliance and management
audit provision, with all audit results submitted to EPA, all
Agency enforcement prerogatives reserved.

Attachment Ft  Model Environmental compliance and management
audit provision, with extensive Agency oversight, audit results
disclosed, stipulated penalties applied to most prospective
violations, and all Agency enforcement prerogatives reserved
for other violations.  [Most appropriate for party with an
extensive history of noncompliance.J

Attachment G;  Model Emergency environmental management reorgan-
ization provision.  [Appropriate for cases where a party's
environmental management practices are wholly inadequate and
action is necessary without waiting for the results of an

"Interim Guidance on Joining States as Plaintiffs," dated December 24,
1986, as corrected February 4, 1987.

     /                WASHINGTON. D C 20460
                       FEB  4 1987
                                                         OFFICE OF
                                                       ENFORCEMENT AND
                                                     COMPllAurt MONITORING
SUBJECT:  Correction to the  December  24,  1986  Interim
          Guidance on Joining States  as Plaintiffs
FROM:     Glenn L. Unterberger
          Associate Enforcement Counsel
            for Water

TO:       Regional Counsels, Regions I - X

     Attached is the corrected Interim Guidance on Joining
States as Plaintiffs.

     The second line in the first paragraph under the heading
Intervention by the State as Plaintiff under Rule 24(a)(2)  and
24(b)(2) of the Federal Rules of Civil Procedures, page  3,  was
inadvertantly dropped from the December 24, 1986, copy of the
guidance.  I believe that this line, which reads  "in the
litiqation, EPA will support a State's motion to intervene",
is important to the understanding of EPA's position on State
intervention.  I am, therefore, reissuing a corrected copy  of
the Guidance.

cc:  Jim Elder
     Bill Jordan
     David Buente
     OECM/Water Attorneys
     Cheryl Wasserman

                                                     CORRECTED COPY
**\m^f                WASHINGTON. O.C. 20460
                           DEC 2 4 1986
                                                          OFFICE Of

  SUBJECT:  Interim Guidance  on  Joining States as Plaintiffs
   FROM:     Glenn  L. Unterberger *.^
            Associate Enforcement Counsel
               for  Water

   TO:       Regional Counsels, Regions  I - X

       This memorandum provides  interim guidance on the conditions
  under which States may participate as plaintiffs in Federal
  lawsuits against municipalities  for civil violations of the
  Clean Water Act.  EPA generally  encourages State participation
  as plaintiff  in Federal Clean  Water Act municipal enforcement


       Section  309(e) of the Clean Water Act requires the
  Federal government to join the State as a party in all civil
  actions brought against a municipality for violations of  the
  Clean Water Act or the municipality's NPDES permit.  The
  State is a necessary party in  such litigation because Section
  309(e) further provides that the "... State shall be liable  -
  for payment of any judgment, or  any expenses incurred as  a
  result of complying with any judgment, entered against the
  municipality  in such action to the extent that the laws of
  that State prevent the municipality from raising revenues
  needed to comply with such judgment."

       In the pastf the usual procedure has been to name the
  State as a party defendant in  a  Federal suit against a
  municipality  under the Clean Water Act.* In many instances,
     Courts have uniformly  held  that  joining  the States  as  a
     party under Section  309(e)  is mandatory,  regardless of whetner
     the Federal government has  alleged  that  a specific  State  law

                          - 2 -
however, States have expressed a desire to participate in the
Federal action as a party plaintiff and have requested guidance
on procedures for doing so.  The easiest way for the Federal
government to achieve this result is to file a complaint namina
the State as a defendant, then support the State's motion for
realignment as a plaintiff*

     In a number of instances, however, a State will be particu-
larly interested in not being named as defendant at the beginning
of a municipal enforcement lawsuit.  As will be explained
below, the Federal government will actively support a State's
participation as a plaintiff from the outset in municipal
enforcement litigation under the Clean Water Act, and can agree
not to name the State as a defendant in the complaint, as lone
as the following general conditions are met: (1)  The Federal
and State governments should jointly reach the decision to
support State participation as a plaintiff early in the referral
process and well before filing suit.  If no such decision is
made, a State must be named as a defendant under Section 309(e).
(2)  When the State intends to intervene as a plaintiff, the
State should agree in writing, to file an appropriate pleading
to intervene within 30 days after the United States files the
lawsuit, and agree not to assert as a defense, the United
States' failure to assert a claim against it under Section

  <-  Because problems as to State liability still may arise,
the Federal government should assert a crossclaim against the
State co-plaintiff to preserve the State's liability under
Section 309(e) for payment of any judgment or expenses of
complying with any judgment which State law prevents the munici-
pality from paying.
   prevents a municipality from raising revenues to comply
   with a -judgment.  See:  United States v. City of Geneva,
   No. 85 C 3917  (N.D. 111., June 27, 1986) at 14 and; UnTted
   States v.  City of Guymon, Oklahoma and the State of Oklahoma,
   No.  84 C 2368  (W.D.  Okla., March 18, 1985) (order denying
   the State's motion to dismiss).

                             - 3 -
Procedural Options forState Alignment As a Plaintiff

     The State has two procedural options for becoming a
plaintiff.  Those ootions are (1) intervention under Rule 24 of
the Federal Rules of Civil Procedure and (2) realignment under
Rule 21 of the Federal Rules.2

Intervention by the State as Plaintiff under Rule 24(a)(2J.
and 24{b)(2) of the Federal Rules of Civil Procedure

     In those situations where a State will participate actively
in the litigation, EPA will support a State's motion to intervene
as of right under Rule 24(a)(2), or permissive intervention
under Rule 24(b}(2).  In addition, EPA will support a State's
right to share in civil penalties, where the State has actively
and publicly litigated the case and the State's claim to penalties
is founded on State law.  See: EPA Guidance On The Division Of
Penalties With State And Local Government (October 30, 1985).

     In order to meet the test for intervention of right, a
State must be able to satisfy the following Rule 24(a){2)
reguirementss  (1)  it must have an interest relating to the
property or transaction; (2)  it must be so situated that the
disposition of the action may, as a practical matter, impair or
impede its ability to protect that interest; and (3)  its
interest may be inadeguately represented by existing parties.
In roost cases, a State which files a timely motion should be
able to make the necessary demonstrations.

     Appropriate demonstrations (particularly in light of the
State's status as a necessary party under Section 309(e)) might
be (1)  that the State, especially one delegated to administer
the NPDES program, has an interest in having its laws and
regulations upheld; (2) that a Federal court's disposition of
the matter may, as a pratical matter, impair or impede the
State's ability to protect this interest; and (3) that the
Federal Government's representation of the State's interest may
   It has also been suggested that EPA and the State initiate
   the suit jointly as co-plaintiffs, citing both Federal and
   State law in the complaint.  This guidance is not intended
   to preclude joint filings.  However, due to the extensive
   coordination needed to arrange a joint filing, it is not
   recommended as the mechanism of first choice where timely
   filing of enforcement actions is desired.

                          - 4 -
he inadequate since these interests are not identical.  Inade-
quacy of representation by the Federal Government is the most
difficult part of the test for the State to meet.  If the State
can assert related State law claims, it has a better chance of
prevailing.  At least one district court has held, however,
that in order to have subject matter jurisdiction over a State
claim, it must derive from a common nucleus of fact or a single
transaction or occurrence.  See U.S. v. Dow Chemical Company,
C^ No. 85-294-A (M.D. La., February 25, 1936) where the district
court denied the State's right to assert a State Clean Air *ict
claim which was based on violations of the State's clean air
laws which occurred after the violations alleged in the Federal

     In order to meet the test for permissive intervention
under Rule 24(b)(2), a State must be able to satisfy the
following two Rule 24(b)(2) requirements:  (1)  its motion for
intervention must be timely; and  (2)  its claims and the main
action must have a question of law or fact in common.

     In our view, a State would normally be able to meet the
t st for permissive intervention with regard to its claims
under the test of common question of law or fact, keeping in
mind the discussion of U.S. v. Dow Chemical Company, supra.  It
.3, however, entirely within the discretion of the Court to
grant such intervention, as well as to rule whether the tests
for intervention of right are met,

     A recent case construing Section 309(e) and how it impacts
Rule 24 is United States v. City of York, 24 E.R.C. 1637 (M.D.
Pa., 1986).  In the York opinion  (copy attached) Pennsylvania's
motion to intervene under Rule 24 as a party plaintiff was
granted.  The Court found that Section 309(e) required the
State to participate as a party, but that such participation
could be either as a plaintiff or defendant.  In ruling that
the State could intervene as a plaintiff, the Court declined to
follow United States v. City of Hopewell, 508 F.Supp. 526 (5.D.
Va. 1980), which had held that a State could only be a defendant
under Section 309(e).  The Court  in York (1) found no legisla-
tive history to support the Hopewell decision and  (2)  noted
that the requirement of State participation as a "party" under
Section 309(e) could >5e met by the State as either plaintiff or

     In granting  the State's motion to intervene under Rule  24,
the Court  in York  in effect found that Section 309(e) created
(1)  an obligation of the State to be a party and  (2) a corres-
ponding right of  the State to intervene under Rule 24 so that
it might fulfill  its Section 309(e) obligation.  Ultimately,
the Court determined that in this case the State's interests
were more closely  aligned with the plaintiff.  The Court did

                            - 5 -
not explain whether  it was arantinq  intervention by right under
Rule 24(a)(2) or permissive intervention under Rule 24(b)(2).

Realignment of Parties Undar Rule 21 of the Federal Rules of
Civil Procedure

     As a practical matter, the State (once named as a party
defendant) may also attain plaintiff status by filing a motion
"of its own initiative, at any stage of the action ... on
such terms as are just," to be realigned as a plaintiff under
Rule 21 of the Federal Rules of Civil Procedure.  In U.S. v.
City of Joliet, CA. No. 86 C 2512 (N.D. 111., June 5, 1986),
the Court granted Illinois' motion to realign in a Clean
Water Act pretreatment case.  In granting the motion, the Court
ruled that (1)  realignment does not preclude later submission
of evidence of the State's liability; (2)  Section 309(e) does
not require a State to be joined as a defendant; and (3) realign"
ment is proper where the defendant is a nominal defendant, and
the party's true interests lie with those of the plaintiff.
See also Securities and Exchange Commission v. Cuing N. Wong,
et al., 42 F.R.D. 599  (D.P.R. 1967).


     Regional Counsels should work with States subject to
Section 309(e) claims to use whichever of the above methods
appears appropriate when the Agency determines that a State
merits status as a plaintiff in a civil lawsuit against a
publicly-owned treatment works under the Clean Water Act.

     If you have any Questions regarding this interim guidance,
please contact Blyse DiBiagio-Wood of my staff at 475-8187.


cc:  Jim Elder
     Bill Jordan
     David Buente
     OECM/Water Attorneys
     Cheryl Wasserman

"Expansion of Direct Referral Cases to the Department  of  Justice11,  dated
January 14, 1988.  See GM-69.

"Delegation of Concurrence and Signature Authority", dated January 14,
1988.  See GM-70.

11 Enforcement Docket Maintenance", dated April 8, 1988.

     f                WASHINGTON, 0 C 20460
                                                       ENFO*rEMENT AND

                                                     COMPllAHTk MOMlTO«t*C
SUBJECT:  Enforcement Docket Maintenance

          Edward E. Reid _
          Acting Deputy Assistant Administrator
            for Civil Enforcement
          Regional Counsels, Regions I - X
          Associate Enforcement Counsels
     As was discussed in Tom Adams' memo of February 8, entitled
"Responsibilities for Assuring Effective Civil Judicial
Enforcement" primary responsibility for the timeliness, accuracy
and completeness of information contained in the Enforcement
Docket lies with the Offices of Regional Counsel.  Specifically:

     (1)   Regions are responsible for accurate updates, at
          least monthly;

     (2)   Headquarters is responsible for accurate monthly
          update of Headquarters - initiated data fields
          (e.g., "checklist completed'1) ;

     (3)   Headquarters will not amend regional data entry?

     (4)   Headquarters will continue to monitor overall data
          quality,  on a monthly basis for the balance of
          FY'88, and thereafter on a quarterly basis;
          discrepancies will be brought to the attention of the
          Regional  Counsel;

     (5)   Docket maintenance will be considered as part of the
          annual performance assessment discussion with
          Regional  Counsels.


     To insure that all parties understand their responsi-
bilities, we have developed detailed procedures, which are
attached.  I request that you distribute copies to all  attorneys
in your office.

     If you or your staff have any comments or questions, please
let me know, or contact Sally Mansbach or Bruce Rothrock at

     My thanks for your cooperation.






     "Responsibilities for Assuring Effective Civil Judicial
Enforcement" is the subject of a Tom Adams memorandum, FEB OS,
1988, which gives the Regions increased authority and
responsibility in the judicial enforcement process.  One of these
responsibilities pertains to the maintenance of the Enforcement
Docket System.

     The Regions also will take the lead in the
     criticalfunction of maintaining the Agency's
     Enforcement DocketSystem.  Except in national lead case
     or where this responsibility is undertaken by a
     Headquarters attorney and this is so noted in the case
     management plan, Offices of Regional Counsel will be
     solely responsible for ensuring that accurate and up-
     to-date information on each caseis maintained in the
     System.  OECM attorneys will no longer make separate
     docket entries as a matter of course;  instead we will
     rely on the Regionally-entered casestatus information.
     OECM will retain an oversight  responsibility to
     ensure, to the extent possible, thataccurate
     information, consistent across the Regions,is available
     from the Docket System....

     This document describes the procedures and responsibilities
for entering cases in the DOCKET and for the regular, monthly
review and update of the Case Status Report.  As stated in Mr.
Adams' memorandum, this responsibility is almost entirely that of
the Regional Attorney, who in most instances is designated the
Lead EPA Attorney.


     A.  DOCKET Design and Assigning a Case Number.

     The Enforcement Docket has been designed primarily as a
system for tracking civil judicial enforcement cases.  A case is
a matter which is developed and referred with the intent that it
will be filed in court as a separate and independent entity, will
receive its own court docket number and not be joined with any
other case,  with th ,s in mind, an enforcement matter which
involves multiple facilities, multiple statutory violations, or
multiple defendants is entered as one case if it is intended and
believed at the time of case development and case referral that
it should be handled as one action, filed in court as one case,

and negotiated or litigated as one case.  The Docket system has
been designed to handle and report on multiple law/section
violations, multiple facilities and multiple defendants, all
linked to the parent case.

     B.  Amendments to Ongoing Cases.

     It may be necessary once a case has been initiated to
prepare and refer a related matter with the intent of amending
the original case.  An example might be an additional statute
violation or other defendants.  These matters should not be
entered as separate cases but as amendments.  There is a separate
record in the Docket System that allows for entry and tracking of

     C.  Use of DOCKET for SPMS, Accountability, and with the
         Workload Model.

     The numbers used in the SPMS and Accountability process are
based on cases, the fundamental ingredients of the Docket System.
These are the numbers that we also report to Congress and the
public.  The numbers used in the workload model are based on
cases and their component parts, such as amendments, number of
facilities, etc.  The Docket structure allows for tracking all
these separate activities for workload model counts, even though
they are included under a single case name and number.


     A case should be entered in the system ( Opened ) as soon as
possible after the Regional program office refers the matter to
the Regional Counsel for civil litigation, and an attorney is
assigned and begins case development.  The Regional Attorney is
responsible for completing the following and giving them to the
Regional data analyst for assignment of a case number and initial
data entry:

     1. Case Data Form  ( APPENDIX A ).  Complete all items as

     2. Facility Data Form ( APPENDIX B ).  Complete a separate
        form for each violating facility.

     3. Case Summary ( APPENDIX C ).  Develop a case summary that
        contains the following information:

          -  Case Name:  The name of the case as specified in the
             litigation report.

          -  Facility Name:  The name of the facility and
             location where the violation(s) occurred.

          •  Nature of case 'and violations(s) upon which the case
             is based.  Include the laws and sections violated.

          -  Proposed relief and remedy, including in^junctive
             and proposed penalty to be sought at settlement.
             Enter penalty fields on the Case Data Form.

          -  Significant national or precedential legal or
             factual issues.

          -  Previous enforcement actions (date, type).

          -  Recent contacts with defendant(s) (nature, outcome).

          -  Other significant aspects.

These paragraphs will be entered in the DOCKET as narrative under
the heading "Case Summary."  See APPENDIX C for an example.

     The Regional Attorney is responsible for entering a new case
as soon as possible after case development is begun.  While the
case is under development and prior to being referred (Initiated)
the case is in an overall status of "Opened."  The earlier the
case is entered as an "Opened" case the sooner it will appear on
the DOCKET for use in case management.  This procedure reduces
the end-of-quarter data entry crisis to record cases initiated (a
large proportion of which appear at the very end of the quarter).
If the case has been entered during case development it is
necessary to enter only the "Date Initiated" at the time the case
is referred.  This eliminates the risk that a case might not be
counted because all of the appropriate information could not be
entered before accountability reports are run.  Entry of "opened11
cases also facilitates management of actions which are the
subject of pre-referral negotiation.


     The Lead EPA Attorney has primary responsibility for the
review and update of all active cases.  This is done at a minimum
monthly by reviewing the Case Status Report and making any
changes or updates directly on the report.  The Lead EPA Attorney
receives update forms for all his/her cases from the Regional
data analyst once each month.  The Lead EPA Attorney is
responsible for annotating the update forms. These forms are
returned by the Lead EPA Attorney to the data analyst for entry
by the last work day of the month.  The data analyst completes
corrections and updates and returns revised forms within five
work days to the Lead EPA Attorney for the next month's review
and update.
     The Lead EPA Attorney should pay particular attention to the

following areas:

     Case Information
     Major Milestone and Miscellaneous Events
     Staff, Attorney Names
     Case Status Comments

     An entry must be made in the attorney comment area every
month.  Any issues which have been discussed or significant
events which occurred during the past month since the last update
must be included in the comments.  An example of the nature and
method of entering status comments is contained in APPENDIX D.
If there has been no development or no activity in the case, "No
Change11 must be entered by the Lead EPA Attorney.  The lead EPA
attorney gives the annotated monthly reports to the data analysts
for data entry and data base update.  If the analyst does not
receive an update for an active case by the time the review
period has ended, he/she will enter "NO UPDATE RECEIVED."

     Except in cases where the Headquarters attorney is the Lead
EPA Attorney, Headquarters attorneys will be responsible only fo]
updating HQ-specific data (e.g., received at EPA KQ, checklist
completed, for direct referrals and referred to DOJ for other
than indirect referrals).

     A chart display of  roles and responsibilities is contained
in Appendix E.  Summary  "case code" tables are included in
Appendix F.


     The Lead EPA Attorney is responsible for assuring the
accurate, complete, and  timely entry of all cases and for the
ongoing, monthly update  and verification of case data.  Regional
Counsel are responsible  for periodic review of the Docket for
accuracy and completeness of all data elements, including
Attorney Comments.

     Repeated problems with accuracy of data entry should be
brought to the attention of the Regional Counsel.  The Regional
Counsel should notify Sally Mansbach or Bruce Rothrock if
problems merit  further attention.

     OECM Headquarters will review the overall Docket for
accuracy and completeness, on a monthly basis for the balance of
FY 1988 and quarterly thereafter.  Obvious errors or omissions
will be brought to the attention of the Regional Counsel, for
appropriate Regional action.  Headquarters data entry will be
restricted to those data elements which are Headquarters
responsibility.  No amendment of Regional data will be made by

Headquarters staff.

     Comments or questions regarding Docket update and
                              ** addressed to S*^Y Mansbach or

                         ENFORCEMENT CASE DATA FORM
                                                                APPENDIX A
     ASE NO. :  	-	- E
    (Assigned by Docket Control
                Date Entered:

(See Back for Adm.)

1.	/	
2.	/	
3.	/	
4.	/	
5.        /




  (Adj. Adm.)


CIV - Civil
CIT - Citizen Suit
BNK - Bankruptcy
AIR - Air
HAZ - Hazardous Waste
PES - Pesticides and Toxics

* (Please use the section
of the law VIOLATED,
NOT the section that
authorizes the action)
     MOB - Mobile
     WAT - Water
      1.	/	
      2.	/	
      3.     /
                         PHONE: FTS -

                         PHONE: FTS - _

                              NAMED IN

       Direct Referral Lead: DOJ
          RECEIVED BY ORC:
         RH: Region to HQ
         RD: Region to DOJ
         (Direct Referral)
*  Required fields - must be filled out for case entry

                                                           Appendix B
                            FACILITY  DATA FORM


 (Assigned by DOCKET analyst)
|  EPA ID f:
                   (Assigned by FINDS analyst)


           * STATE
           P:   Private industry or individual
           F:   Federal Government
           S:   State
           C:   County
           M:   Municipal
           D:   District
1C CODE(s): 	
  (one required)




             (Y or N)

                                                  APPENDIX C


     The following is an example of a Case Summary.  The summary
is written by the Regional Attorney and provided to the Regional
Data Analyst along with the Case Data Form and Facility Data Form
at the time the case is .initially entered.  The summary includes:
Case Name, Facility Name, Nature of case and violation(s) upon
which the case is based, Proposed relief and remedy, Significant
national or precedential legal or factual issues, Previous
enforcement actions, Recent contacts with defendants, Other
significant aspects.

                           - EXAMPLE -

SINCE 1942.
ARE 51,524,000.

                                                  APPENDIX D

                       CASE  STATUS  COMMENTS

     The following are examples of attorney case status comments,
provided as part of the monthly review of active cases.  Comments
are written by the attorney directly -on the Case Status Report
directly below or in the margin beside the previous months entry.

                           - EXAMPLE -



  01-30-88:  COMPLAINT FILED IN DIST. CT (EDMA) ON 01/15/88

     (1)  It is important to add precise dites to update comments
both to be specific and to avoid confusion between the date of
the docket entry and the date of the event.

     (2)  It is important to follow up on stated planned events
in subsequent monthly  updates with comments as to whether or not
the planned event took place and,  if so, when.

     (3)  Case status  comments should reflect the general content
of settlement proposals and draft  and final consent decrees,
including final construction deadlines, final compliance
deadlines, penalties,  duration of  the decree, and whether or not
stipulated penalties are  included.

     (4)  If there are no updates  during a month, enter "NO

                                       CIVIL JUDICIAL FNFOR       DOCKET
                                      DATA mm MAINTENANCF     FICATION
                                         RESPONSIBILITIES AND PROCEDURES
 Open a Case
Regional Attorney
assigned to Case
development or
Lead EPA Atty
Completes  Case Data Form,
Facility Data Form for each
violating Fac., Case Summary.
Case is a matter which is
filed, settled or litigated
separately from any other
                               Optional, When case is
                               opened or any time up
                               to but no later than
                               when case is  referred
                               to HQ or directly to
                         Attorney completes forms and
                         Case Summary.  All Items
                         marked with  '*' nuat he
                         completed.  Gives to Regional
                         data analyst.
Initial Case
Regional Data
Assign Case Number-   Enter
data from Case Data and
Facility Data Forms, Case
At time Regional
Attorney Completes
                                                        On-line from Case Data and
                                                        Facility Data Forms, Case
Case Review
and Case Update
of all Active
a. Lead EPA Atty
Mai. Milestones/Misc. Events,
Dates, Staff. Status Comments
and Signficant Case events
Monthly, Completed and
given to Regional
Analyst by 1st work
day of each month
                                                        Review & edit as appropriate
                                                        Case Update Report (using
                                                        clear notations in bright
                                                        colored ink)
                 b HQ Attorney
                    HQ data fields (e.g.  checklst  Monthly
                    complete.  HQ Comments if appropriate)
                                                        Case Update Report, as above,
                                                        delivered by HQ data analyst
Data Entry,
Data Rase
a. Reg. Analyst
Case Update Report aa
reviewed and annotated by
Lead Attorney
                 b.  HQ Analyst
                    As appropriate
HQ Attorney
Ma]or milestone Dates, Over-
all Status (see 3b), other
Case Level Data; Regular
Status Comment Update by
Lead Attorney
Monthly, Beginning the
1st of the month,
completed by the 5th
work day.  Run new
Update Reports and
distribute by 8th work
                                                        On-line, directly from Case
                                                        Update provided by Regional
                                                        Attorney.  Update all active
                                                        cases even if no change made
                                                        or no update received.
Monthly for FY'88
quarterly thereafter
                                                        Scan Case Update Report
                                                        provided by HQ Analyst.  Any
                                                        obvious errors or omissions
                                                        are brought to the attention
                                                        attention of Associate and
                                                        then Regional Counsel for
                                                        Lead EPA Atty to supply
                                                        corrections to Regional data
                                                        arwl waf-

Lead EPA Atty
             HQ Attorney
 hiding a     Lead FPA Atty
> (CD/Judge-
,ing a  Case   Lead KPA Atty
il Compli-
i, Case
lined,  Dis-
>ed or
a Returned    Lead EPA Atty

e Rere  err   "Tead" FPA Atty
itor Case
iirned to
Lead EPA Atty
             HQ Attorney
nding a
Lead EPA Atty
eking CD
     EPA Atty
                                   DATA H4TKY MAINTtNANCK VFRIFl CATION
                                      RESPONSIBILITIES AND PROCEDURES
  Significant events related
  to settlement negotiation
  or Litigation as  required
  by RC
                     HQ Events, as appropriate
                     Enter data about settle-
                     ment/Judgement Results,
                     Date.  Penalty
                    Enter Data  for Closed Case -
                    when final  compliance
                    achieved or case  is with-
                    drawn,  declined or dismissed
                    Fnter "Date Returned*""
                    Enter "Date Re-referral"
 Determine cases  returned  and
 pending > fiO days.   Deter-
 mine action to be taken
Refer or close.  Update Docket
                    Assess  need to discuss cases
                    with Region
 Add amendments to existing
 case when matter is part
 of on-going case and will
 not be filed as a separate
 matter for litigation
 Monitor Compliance w t
 terms of CD or Court Order

Uhen matter is referred
Part of monthly  review of
Case Update Report.
                         monthly case review.
                         Part of monthly review of
                         Case Update Report, or as
                         events occur.
                         Part of monthly review of
                         Case Update Report, or as
                         events occur.
                         Part of Monthly Update, or
                         as returns occur by proper
                         notification of data analyst.
                         Part of Monthly Update
                         Analyst produces report
                         of all cases returned to
                         Region and pending >60 days
                         for Lead FPA Attorney review
                         HQ analyst prepares quarterly
                         report on cases rtd to Region
                         >60 days
Monthly Case Update, or on
amendment data  form, to
Regional Analyst, when
amendment occurs
Contact with Regional
Program Office and rev

                                                         Appendix F


                                 Air Pollutants

Administrative Order Violation
Closure and Post-Closure Plan
Financial Responsibility
General Facilities Requirements
P.L. 92-500 Facility
Groundwater Monitoring
Imports             »
Industrial Source
CAA/114 (INFO)
Land Disposal & Treatment
National Emission Stds. for Haz.
Discharge w/o Permit
No Reporting or Monitoring
New Source Performance Standards
New Source Review
Pre-manufacturing Notice
Permit Violation
Prevention of Significant Deterioration
PUS Monitoring/Reporting
PWS Maximum Containment L-vel
PWS Notification to Publi:
PWS Sampling & Analyzing
Required Records Maintenance
Reporting Violations
State Implementation Plan
UIC Casing & Cementing
UIC Fluid Movement in Underground Source
  Drinking Water
UIC Mechanical Integrity
    Mom tori ng
    No Approved Plugging & Abandonment Plan
    Injection Between Outermost Casing
    Injection Beyond Authorized Pressure
    Unauthorized Injection
    Unauthorized Operation of a Class IV Well
    Compliance w/Plugging & Abandonment Plan
         Hazardous Air Pollutants

                                                      Appendix F


Bery I iuo
Carbon Monoxide
Coke Oven Emissions
Containers (Drums, Tanks)
Nitrogen Oxides
Po1ych1orinated Biphenyls
Particulate Matter
Sulfur Dioxide
Vinyl Chloride
    If you would like to see any more pollutants added to
    the table, please contact Bruce Rothrock at

                                                     Appendix F
1- Before
WR - Withdrawn by
OE - Declined by HQ
2- After         WE
   Referral to   DJ
   DOJ/US Atty,  DA
   Before fi1 ing
   of Complaint
   or CD
          Withdrawn by HQ
          Declined by DOJ
          Declined by US
          at torney      *
3- After filing  LN -
   of Complaint
   or CD         CN -
          Litigated w/no
          Pena 1 ty
          CD w/no Penalty
                 CP - CD w/Penalty        *RO
                 LP - Litigated w/Penalty *CO
                                    Penalty under
                                    Penalty under
                                    Penalty under
                                    & CERCLA
                                             both RCRA


          CD/Cost Recovery    *OC -
          Litigated/Cost      *OT -
          CD w/Penalty & Cost *RC -
          Litigated w/Penalty *'CC -
          and Coat Recovery
                              *CT -
                                          *BC -
                                          *BT -
                               Cost Recovery under CERCLA
                               Cost Recovery w/treble
                               damages under CERCLA
                               Penalty under RCRA & Cost
                               Recovery under CERCLA
                               Penalty and Cost Recovery
                               under CERCLA
                               Penalty under CERCLA, Cost
                               Recovery w/treble damages
                               under CERCLA
                               Penalty under RCRA, Cost
                               Recovery w/treble damages
                               under CERCLA
                               Penalty under both RCRA &
                               CERCLA, Cost Recovery undei
                               Penalty under both RCRA &
                               CERCLA, Cost Recovery w/
                               treble damages under CERCLA
                 DC - Dismissed by Court
                 VD - Voluntarily Dismissed
                 CO - Combined
* Result code and Result reason apply only to RCRA/CERCLA eases

                                                   Appendix F

   RH            Region  to Headquarters
   RO            Region  to DOJ
   RO            Region  to US Attorney
   HD            Headquarters to  DOJ

"Process for Conducting Pre-Referral Settlement Negotiations on Civil
Judicial Enforcement Cases", dated April 13,1988.  See GM-73.

"Criteria for Active OECM Attorney Involvement in Cases", dated May 22,


    J         -      WASHINGTON. D C 20460
 •BC"-*"                .                                 ,"
                                             "* ~      „    *" ""'

                       MW 2  '988                     ,^w««*
                                                    *-CM(>. AWt 4OmfOr su

SUBJECT:  Criteria  for Active OECM Attorney Involvement
          in Cases

FROM:     Thomas L. Adams, Jr.      \.        v    Vn    X-.
          Assistant Administrator'SB^*M!rw^v  w'  x>***~~ V"

TO:       Regional Administrators
          Deputy Regional Administrators
          Regional Counsels

     The following criteria have been developed for evaluating
what cases warrant active OECM attorney involvement.  Taken
together with the "guidance on the pre-referral negotiation
process and on the use of case management plans, the following
guidelines will significantly contribute <-o our efforts to
enhance the enforcement process.

     Cases that meet one or more of the c .teria listed below
are appropriate for active involvement by OECM attorneys.  The
extent and nature of an OECM attorney's involvement in any
given case will depend on a number of factors, including
availability of legal resources in the Region, the expertise
and workload of the OECM attorney involved, and the reason
involvement is considered appropriate.  OECM management, in
consultation with the Regional Office, will take all of these
factors into account in determining the level of active
involvement, if any, by the OECM attorney.

     Cases which warrant active involvement by the OECM
attorney include those .cases:

     1.  that are nationally-managed or nationally-coordinated;

     2.  raising issues whose resolution may set a legal or
policy precedent of national significance;

     3.  which have unusually significant environmental impacts
or in which there is a particularly high level of Congressional

                             - 2 -

     4.  jointly selected with the Regional Office which are
well-suited to serve as training vehicles for newer attorneys
or as a refresher for other attorneys in need of exposure to
particular elements of the negotiation or litigation process
related to their responsibilities;

     5.  where OECM's involvement would facilitate or support
a special enforcement initiative;

     6.  requiring the specialized expertise jf an OECM
attorney that is not currently possessed within the Region;

     7.  for which the Region or DOJ has requested OECM
attorney involvement (e.g., where the Region cannot adequately
staff the case or where OECM's presence is desired for tactical
reasons) and it is OECM's judgment that its involvement is
warranted; and

     8.  where OECM's participation would directly further its
evaluation of the effectiveness of a particular national policy
and the need for modification or supplementation of that

     Assuming that active involvement by tFe OECM attorney is
deemed warranted, the process for initial determination of the
degree of involvement will be based upon whether the case is
undergoing pre-referral negotiations.  For rases that are the
subject of pre-referral negotiations, the .nitial 21-day review
process will be the vehicle for making the determination.  For
cases that are not the subject of pre-referral negotiations,
the review within OECM of the case management plan will be the
vehicle for determining the degree of involvement.  The role of
the OECM attorney may subsequently be modified as the case
evolves, through consultation with the Region and DOJ, to
increase or decrease the level of involvement in light of
changing circumstances.

     Please feel free to contact Ed Reich (FTS-382-4137) if you
have any questions regarding the implementation of these

cc:  Associate Enforcement Counsels
     OECM Attorneys
     Program Office Enforcement Directors
     Roger J. Marzulla, Assistant Attorney General,
         Land and Natural Resources Division,
         U.S. Department of Justice
     David T. Buente, Chief, Environmental Enforcement Section,
         Land and Natural Resources Division,
         U.S. Department of Justice

"Withdrawal of Referrals and Issuance of 'Hold' Letters", dated February
24, 1989.

                      WX^HIM.TON  DC  :
                           FEB24I989               "'   *

 SUBJECT:   Withdrawal  of Referrals  and  Issuance of  "Hold" letters
 FROM:      Edward E.  Reich
           Acting Assistant  Administrator

 TO:        Regional Administrators
           Deputy Regional Administrators
           Regional Counsels

     There has been  some  recent confusion  about the process for
 withdrawing directly referred  cases  from the Department of
 Justice  (DOJ)  and the issuance of  "hold" letters  for cases
 pending  at DOJ.   For clarification,  please note the January 14,
 1988, memorandum from Tom Adams entitled '  xpansion of Direct
 Referral of Cases to the  Department  of Ju.-ice."  In accordance
 with that  memorandum:

     (a) In the  unusual circumstance necessitating a withdrawal
 of a directly  referred case, the Regions are required to consult
 with OECM  prior  to requesting  a withdrawal.  If a withdrawal is
 determined to  be appropriate,  the  Region should then send a
 written  request  for  withdrawal of  the referral to DOJ with a copy
 to the Assistant Administrator for OECM and the appropriate
 program  office;  and

     (b) In accordance with the December 24, 1987 Adams to
 Marzulla letter  attached  to the January 14 memorandum, all "hold"
 letters  must continue  to  be requested in accordance with the
 procedures contained in the memorandum entitled "Expanded Civil
Judicial Referral Procedures"  dated  August 28, 1986.  Those
procedures outline at  page  5 the narrow basis on which "hold"
actions  will be  considered  and require the Regional Counsel to
 submit a memorandum  to the  Assistant Administrator for OECM to
request  a  delay  in filing.  DOJ will not recognize a "hold"
request  not  coming from the AA for OECM in accordance with these

                              - 2 -
                ** ta°W if y°U haV" any ('uestions a*out this
ce:  Associate Enforcement Counsels
     David Buente, OOJ

I "Agency Judicial Consent Decree Tracking and Follow-up Directive," dated
January 11, 1990.  Attached to IV.D.4. this compendium.



"Civil Penalty Policy11, dated July 8, 1980 (for reference only).

       r                     WASHINGTON DC 20460
                       TABLE OF CONTENTS



I.        Preamble	1

II.       Statutory Basis for Civil Penalty 	  3

III.      Types of Violations to Which Policy
            Applies 	  3

IV.       Use of the Penalty Policy in Enforcement
            Actions 	  5
V.        Determining the Amount of the Statutory
            Maximum Penalty and of the Minimum Civil
            Penalty 	   7

VI.       Determining the Minimum Penalty Acceptable
            for Settlement	   9

VII.      Explanation of Factors Considered in
            Determining Minimum Amount of Civil
            Penalty	10

          A.  Harm or Risk of Harm to Health or
                the Environment	10

          3.  Economic Benefit of Delayed
                Compliance	11

          C.  Violator's Recalcitrance, Defiance,
                or Indifference to the Requirements
                of the Law	12

          D.  Extraordinary Costs of Enforcement
                Action	12

          E.  Mitigation for Noncompliance Caused
                bv the Government Itself	13

          F.  Mitigation for Impossibility  	  13

          G.  Other Bases for Mitigation    	  14

          H.  Specified Clean Air Act Factors	14

VIII.     Approved Environmentally Beneficial
            Expenditures in Lieu of Payment of
            Penalty Sum to State or Federal Treasury
            (i.e., "Credits Against Penalty") 	  15

          A.  Use of Credit to Satisfy or
                Offset Penalty  	  15

          B.  Criteria for Acceptable Credits  ....   16

          C.  Constraints on Federal Enforcement
                Officials with Respect to Payment
                of Penalties and Use of Credits in
                Lieu of Penalties	13

          D.  Discretionary Nature of Credit 	   18

          E.  Consideration of After-Tax Effects
                of Credit Expenditures 	   13

IX.       Penalty Postponement or Forgiveness Based
            Upon Inability to Pay	19

X.        Time Period for Application of Civil
            Penalty Policy	  .  2Q

XI.       Application of Civil Penalty Policy to
            Different Types of Sources - Private,
            Public, Regulated Utilities, etc	  22

          A.  Privately-Owned or Operated Sources
                (other than Regulated Utilities)   ...  22

          B.  Publicly-Owned Utilities and Investor-
                Owned, Regulated Utilities  	  22

          C.  State and Municipal Facilities (Other
                them Utilities)   	23

          D.  Federal Facilities (Other than
                Utilities   	23

XII.    Federal-Stats Cooperation in Implementing
          this Policy	24

XIII.   Effective Date of this Civil Penalty
          Policy	24

XIV.    Previous Civil Penalty Policy Superseded 	   25

I.  Preamble

     The oojective of this civil penalty policy is to assist
in accomplishing the goals of environmental laws oy deterring
violations and encouraging voluntary compliance.

     The elements of the policy reflect years of experience
by federal, state and local enforcement officials, adapted
to present conditions and needs.  The policy has had the
benefit of much informed comment in meetings of federal, state,
and local officials in every region, in written comments, and
in a working group of federal and state enforcement officials.

      The policy is based upon the main themes of the Clean Air
and Water Acts/in which Congress required all citizens, private
firms and public bodies to join in a common effort to restore
and maintain the quality of the nation's air and waters, and
to do so consistently in all parts of the country, in accordance
with statutorily mandated tune schedules.  The theme of national
consistency has been reinforced by the Clean Air Act Amendments
of 1977, which directed the Administrator of the Environmental
Protection Agency to promulgate regulations designed to assure
fairness and uniformity in implementing and enforcing the Act
by the EPA Regional Offices and the states (Clean Air Act,
Section 301).

     The national response to the Air and Water Acts is
encouraging.   The overwhelming majority of citizens, private
firms and public bodies have met the deadlines and complied
with what was required of them.  A minority have not.  This
penalty policy will keep faith with those who Coined the
common effort.  It will help maintain the voluntary compliance
on which achievement of our environmental goals depends.

     The Clean Air and Water Acts authorize civil penalties
up to stated maximums.  This policy enunciates general principles
for determining appropriate penalties that the government will
seek in individual cases.  It is based primarily on four
considerations—the harm done to public health or the
environment;  the economic benefit gained by the violator;
fcne degree of recalcitrance of the violator; and any unusual
or extraordinary enforcement costs thrust upon the public.
The policy recognizes appropriate mitigating circumstances
or factors.  Eacn of these penalty considerations and each of
the mitigating factors is well founded in law and is consistent
with statutorv recuirements.

     While fulfilling its primary objective to deter violations
and encourage compliance, this policy has very significant
additional justifications and benefits as well:

     A.  The policy is fair:

         1.  in an ethical sense, because it
             will assure that violators of the
             law do not economically benefit
             from their violation,

         2.  in an economic sense, because it will
             assure that violators do not gain an
             economic advantage over others who
             incurred costs to obey the law, and

         3.  in a geographic sense, for it will
             assure that no area of the country can
             offer lenient enforcement as an advantage
             to its industries or a lure to the industries
             of other areas.

     B.  The policy seeks to improve the operation of the
         market sector of our economy by more fully
         imposing onto polluting firms costs otherwise
         thrust upon the public.  By internalizing more
         of the social costs of producing goods or
         services, it makes prices of goods or services
         better reflect' the resources used in their
         production, and allows the market system to
         better allocate resources.

     C.  The policy seeks to compensate the public for
         harm done to public health or the environment,
         or for unusual or extraordinary enforcement expenses.

     D.  The policy seeks to make efficient use of govern-
         ment resources by removing economic incentives to
         violate environmental laws, ^nus maintaining high
         voluntary compliance rates.  Because there are
         hundreds of thousands of pollution sources, even
         a small decline in compliance rates brings major
         new requirements for enforcement resources.

     Because this policy is to be used by many federal, state
and local enforcement officials throughout the country, it has
been drafted in general form.  It is a policy for determining
wnat civil penalties the government will seek when civil
actions are taken, not a policy to determine which enforcement
actions should be taken.  Enforcement strategy or priorities
are determined elsewhere, not by this policy.


II.  Statutory Basis for Civil Penalty under Water and
     Air Acts

     Civil penalties are provided for in Section 309(b) of
the Clean Water Act, which subjects violators to civil penalties
of up to $10,000 per day of such violation.  The Water Act has
no further statutory criteria for determining the precise
amount of the penalty/ leaving that to be determined by the
court.  Authority,for such civil penalties has been in the
Act since its passage in 1972.

     Since 113(b)of the Clean Air Act provides for civil penalties
of up to $25,000 per day of violation and requires courts to "take
into consideration  (in addition to other factors) the size of the
business, the economic impact of the penalty on the business and
the seriousness of  the violation."  The authority for civil
penalties was added by the Amendments of 1977.  There was no
authority for civil penalties in the Air Act prior to these
amendments, at least for violations such as the ones within the
scope of this policy.

     In addition to adding civil penalty authority in Section 113,
the Clean Air Act Amendments of 1977 also established, in Section 120,
mandatory administratively imposed, noncompliance penalties.

     Regulations implementing Section 120 noncompliance penalties
nave now been promulgated.  Such noncompliance penalties are not
covered by this civil penalty policy, and nothing stated in this
policy should be taken to refer to them in any way, except
than provision has been made in this civil penalty to avoid
duplication of penalties based upon the economic benefit of
delayed compliance during the same time period {see discussion
in part X below.)1

III.  Types of Violations to Which Policy Applies

     The civil penalty policy is to be used by federal, state
and local officials in enforcement actions involving certain
violations of the Clean Air Act, as amended, and certain
violations of the Clean Water Act, as amended.
 The preamble to EPA's final noncompliance penalty regulations
provides that no notices of noncompliance will be issued, or
penalties assessed, prior to January 1, 1981.  For purposes
of determining an appropriate civil penalty, SPA will only
calculate the economic benefit of delayed compliance prior
to this date.


     The policy applies to major and minor water pollution
sources which violate thos- requirements of the Water Act made
subject to civil penalties oy Section 309(d) ,  and to major
and minor stationary air pollution sources which violated those
requirements of the C-ean Air Act made subject to civil penalties
by Section 113(b).3

     The application of this civil penalty policy to situations
in which f.11 compliance is required prior to operation (as,
e.g., unde.  the New Source Performance Standards under Section 111
of the Clean Air Act) should not be interpreted as suggesting
that noncompliar.ee can be tolerated if penalties are paid.
1 cont.

with respect to any emission limitation or other requirement
approved or promulgated :>y the Administrator after August 7, 1977,
which is either more stringent than those in effect at that time
or which establishes a requirement where none existed before,
Section 120(g) of the Act provides that the effective date for
noncompliance penalties will be the date that full compliance
is required with such limitation or requirement (though not       v_
later than three years from such approval or promulgation, nor      t
earlier than the effective date that noncompli^ice penalties
begin with respect to violations of existing l-^itations).

 i.e., violators cf effluent limitations under Section 301
of the Clean Water Act; water quality related effluent limitations
under Section 302; national standards of performance under Section 30
toxic and pretreatment standards under Section 307; monitoring
under Section 308; aquaculture under Section 310;  disposal of
sewage sludge under Section 405; violators of permit conditions
or limitations under Section 402 and 404; and violators of orders
issued under Section 309(a).

 i.e., violators of an administrative order issued under Section 113(
of the Clean Air Act; a stata implementation plan requirement
approved under Section 110; a New Source Performance Standard under
section 111; National Emission Standards for Hazardous Air Pollutants
under Section 112; a compliance date extension issued to a source
converting to coal under 119(g) (as in effect prior to August 7, 1977
a delayed compliance order issued to a source converting to coal unde
113(d)(5); a nonferrous smelter order under Section 119; certain
requirements relating to monitoring under Section 114; a require-
ment imposed in a delayed compliance order under Section 113(d);
and attempts to construct or modify a ma^or stationary source
in any area for which the Administrator has found, under
Section 113(a)(5), that the state is not acting in compliance witn
applicable requirements for issuance of permits to construct or
modify sources in nonattainment areas.


     This policy applies to past and future violations of the
above-mentioned requirements of the Clean Air and Water Acts
wnere tne violation results from the source's failure to make
capital or operation and maintenance expenditures necessary to
bring itself into initial compliance with the requirements (e.g.,
failure to install equipment, buy and use complying fuel, carry
out a process change, etc.).

     The policy does mDt apply to violations following initial
compliance or to violations of an intermittent or transient kind,
such as spills, violations of emission or discharge limits through
accidents or when attributable solely to the failure to adequately
operate or maintain pollution control equipment.  Civil penalties
are probably desirable in most actions against such violations, but
the appropriate amount of such penalties is not set by this pol-u/,

     This policy does not apply, of course, to penalties for
criminal violations, nor for violations of court decrees.  In
most cases that are settled, it will be desirable to include
stipulated contempt penalty amounts in the consent decree.  Such
amounts are not subject to the civil penalty statutory limits and
are not covered by this policy.

     While this policy has been limited at this time to circum-
stances where its application is clearly appropriate, experience
will undoubtedly indicate other circumstances to which it should
be extended.  Such situations will be considered on a case-by-case
basis.  Penalties appropriate for other violations under the Clean
Air and Water Acts, and under other Acts, will be the subject of
future guidance.

IV.  Use of the Penalty Policy in Enforcement Actions

     This civil penalty policy is intended to be used by
federal and state enforcement officials and, in appropriate
cases, by local officials (e.g., local air pollution control
agencies operating under authority of state air pollution
laws).  It is to be used in civil actions in state and
federal courts, and in state and local administrative

     Enforcement actions must seek both expeditious compliance
and adequate civil penalties.  The penalties to be sought in
accordance witn, this policy are in no way a substitute for
compliance nor do tney preclude injunctive relief or other
non-duplicative remedies.

     The goal of an enforcement action where this policy applies
is both compliance (including interim controls)  and appropriate
penalties.  Compliance and penalties should not be in any way
traded off against each other.  Compliance with the law Is
mandatory, and whereas details of technology or schedules may
differ, enforcement officials should not bargain for compliance
(or interim controls) by offering any reduction in penalties.

     Even in the period before the statutory deadlines, the
Clean Wa^er and Air Acts required compliance immediately or
as expeditiously as practicable.  After the deadline has
passed, it is even more urgent that violators be brought
quickly into compliance.

     The penalty policy, moreover, already is structured
to provide a strong economic incentive for rapid compliance,
for the more rapid the compliance the lower the penalties
under this policy.  Such an effect is automatically built into
the method of calculating the economic benefit of delayed
compliance, for one of the ma}or factors of the formula is
the length of the period of noncompliance.  The penalty factors
of harm to the environment and recalcitrance of the violator
may also lead to penalty reductions as the speed of compliance
increases.  In the case of major source violators of the Air A
moreover, the requirement of mandatory, administratively asses
noncompliance penalties adds additional economic incentive for
rapid compliance.

     Additionally, it must be kept in mind that penalties are
authorized and intended to deter violations and encourage
compliance.  Penalties are not effluent or discharge fees.
Payment of penalties does not give any right or privilege
to continue operation in violation of law or to slow down

     When civil enforcement actions are brought in courts, the
question of penalties will arise in three contexts—filing the
civil complaint, determining the minimum amount acceptable in
settlement, and presenting argument to the court (and possibly
affidavits or testimony, as well) for its consideration in setting
penalties at trial.

     The Agency is prepared to settle enforcement actions brought
under this policy, "where settlement is not possible, the Agency
is obviously free  to claim penalty amounts up to the statutory
maximum, which will generally be the amount claimed in the


     The mei-.odology of this penalty policy will be used to
determine a  "minimum civil penalty" whicn would typically be
presented to the court as an appropriate penalty to be imposed.

     In addition, the methodology will be used to determine a
lower "minimum civil penalty acceptable for settlement" (set out
in Part VI)  to be used for settlement negotiations.

    This policy will allow enforcement officials to arrive
at fair, consistent and rationally based penalty sums while
providing a  lower minimum figure as an encouragement to settlement
if enforcement officials believe that settlement is desirable.

     By providing them with a minimum settlement figure, this
policy gives the enforcement officials responsible for the actaon
a range in which to exercise their discretion to settle or not to
settle (i.e., between the statutory maximum and the minimum sum
acceptable in settlement as determined by this policy).

     Where the state or local administrative bodies are taking
enforcement actions and have authority to administratively impose
civil penalties, the minimum penalty figure determined for settle-
ment purposes in civil actions should also serve as the minimum to
imposed in the administrative action.  The administrative body,
nowever, will want to consider its statutory maximum penalty
authority and the minimum civil penalty and will probably want
to impose penalties above the settlement amount.  This is
particularly the case since the administrative body will
probably have already decided the case regarding the violation,
and reductions for settlement will no longer be relevant.

V.  Determining the Amount of the Statutory Maximum
    Penalty and of the Minimum Civil Penalty

     The minimum civil penalty should be determined by the factors
and method set out below.  The civil penalty so determined will,
in most cases, be lower than the statutory maximum sum.  Where
the civil penalty sum so determined is higher, this information
may be used in settlement negotiations or litigation but the
statutory maximum is, of course, all that may be requested ay
tne government or imposed oy the court.

     The amount of the minimum civil penalty should be determined
as follows:

     Step 1 - Factors Comprising Penalty

          Determine and add together the appropriate
          sums for each of the four factors or elements
          of this policy, namely:

               the sum appropriate to redress
               the harm or risk of harm to
               public health or the environment,

               the sum appropriate to remove the
               economic benefit gained or to be
               gained front delayed compliance,

               the sum appropriate as a penalty
               for the violator's degree of recalci-
               trance, defiance, or indifference to
               requirements of the law, and

               the sum appropriate to recover unusual
               or extraordinary enforcement costs
               thrust upon the public.

     Step 2 - Reductions for Mitigating Factors

          Determine and add together sums appropriate
          as reductions for mitigating factors, of
          which the most typical are the following:

               the sum, if any, appropriate to
               reflect any part of the noncompliance
               attributable to the government itself,

               the sum appropriate to reflect any
               part of the noncompliance caused by
               factors completely beyond the violator's
               control (floods, fires, etc.).

     Step 3 - Summing of Penalty Factors and Mitigating

          Subtract the total reductions of Step 2 from
          the total penalty of Step 1.  The result is
          the minimum civil penalty.  If no settlement
          can be reached with the defendant, this sum
          would typically be presented to the court as
          an appropriate penalty to ce imposed.


     In some unusual cases, the penalty amount determined in
tnis manner may be larger than the violator can reasonably
be expected to pay while bringing itself expeditiously into
compliance and continuing to do business.  In such cases,
enforcement officials may recommend that the penalty be post-
poned or forgiven in part or in total.

VI.  Determining the Minimum Penalty Acceptable for Settlement

     Many cases may, of course, be settled prior to trial and
result in consent decrees or orders, rather than being litigated
to conclusion.  The objectives of the enforcement action are still
the same, however — full and expeditious compliance (including
interim controls), and penalties.  In cases in which enforcement
officials think settlement is appropriate, they may/ as an
encouragement to settlement, reduce the penalty below the lesser
of the statutory maxir.um and the sum determined to be the
minimum civil penalty.  This reduction, however, may not be
greater than the percentage which reflects the likelihood of
being unable to establish the violation or violations.


     Assume statutory maximum penalty - $5,000,000

     (200 days of violation 3 $25,000/day)

     Assume minimum civil penalty =* $2,000,000

     Assume estimate of government's chance of proving
     violation at trial * 80% (or, chance of being
     unable to prove violation = 20%)

     The maximum reduction permitted for settlement
     is, therefore, $400,000 (20% X $2,000,000)

     The minimum civil penalty acceptable for settlement
     is, therefore, $1,600,000 (80% X $2,000,000 or
     $2,000,000 - $400,000)  (i.e., range for settlement
     negotiation = $5,000,000 to $1,600,000)

     It is assumed chat enforcement actions will not ae taken
unless the evidence of violation is strong,- therefore,  in most
cases,  tne percentage of reduction should not be large—probaoly
not more than 25%.   Unusual circumstances ray, however, exist
where larger reductions are appropriate.

     It is not required, of course, that enforcement officials
nandling an enforcement action reduce the penalty for settlement,
or that they reduce it in any given amount.  Defendants who
settle quickly will undoubtedly stand better chances of receiving
such reductions than those who do not.

     It should be noted, moreover, that the reduction relates
only to the degree of uncertainty of proving that the violation
or violations resulted from the source's failure to make capital
or operation and maintenance expenditures necessary to bring
itself into initial compliance.  It does not relate to uncertainty
as to the court's decision on compliance schedules and penalties.
Enforcement officials should carefully and thoroughly prepare
the facts and reasoning supporting their penalty request, and
should not be reluctant to present these arguments to the court.
Judges are accustomed to deciding such matters, and will
make better decisons after receiving well-reasoned recommendations
based on fair principles consistently applied.

     There may be extraordinary instances where the minimum
settlement penalty amount is more than the violator is able to
pay.  In such cases, it may be appropriate to agree to a post-
ponement of the penalty or payment over time, or, in an extreme
case, to a further reduction of the penalty.  Further guidance
on handling these extraordinary instances is set out below.

VII.  Explanation of Factors Considered in Determining
      Minimum Amount of Civil Penalty

     A.  Harm or Risk of Harm to Health or the Environment

         The extent that the violation harms or poses risks
of harm to public health or the environment must oe carefully
considered in setting the appropriate penalty, for violations
which involve such harm or risk are certainly very serious.
For example, a violation involving discharges of toxic chemicals
into waters which enter or threaten to enter public drinking
water supplies certainly causes or threatens serious harm to
public health.  It may also destroy or threaten valuable
fishing or recreational resources.

         Similarly, a violating air pollution source in an area
which has not attained the primary (i.e., health protective)
ambient air standard is contributing to a health hazard or is
actually causing harm to residents of the area.

       * All pollutants introduced into the environment create
some harm or risk, of course, and it will be difficult in many
cases to precisely quantify the hana or risk caused by the
violation in question.  The penalty anount attributaole to
such public harm or risk will have to be determined on the facts
of each specific case.

         Estimated costs of environmental restoration may be
useful in quantifying harm to the public, and traditional
personal injury damage concepts may be helpful in quantifying
injuries to public health.  It may also be possiale to use
the recreational values developed by various public agencies
to assist in quantifying environmental harm.

     B.  Economic Benefit of Delayed Compliance

          Violations which are the subject of this policy
usually consist of a failure to install and operate required
pollution control equipment within time limits set by law,
or a failure to utilize fuels or raw materials with lower
pollutant content.

          Delaying the purchase and operation of pollation
control equipment results in economic savings or gains to
zhe owner or operator of a facility.  These savings or gains
arise from two distinct sources:

               the opportunity to invest the capital
               funds not spent to purchase and install
               pollution control equipment during the
               period of noncompliance, and

               the avoidance of the operation and main-
               tenance expenses associa-ed with the
               pollution control equipment during the
               period of delayed compliance (labor,
               materials, energy, etc.).  These costs
               avoided represent a permanent savings
               to the owner or operator; they may, of
               course, also be invested in income-producing

          The economic benefits attributable to delaying capital
expenditures and avoiding operation and maintenance expenses have
been combined in a single formula.  Because these benefits occur
over a period of time, both past and future in some cases, the
formula reduces these benefits to a present dollar value by
standard accounting methods, and also takes into account tax
effects, and other appropnare economic factors.  The formula
is further described in a tecnnical support document dated
September 27, 1973, subject:  Computation of Economic Benefit
of Delayed Compliance under Civil Penalty Policy.  The formula
described in tnat memorandum should be utilized in calculating
taconomic benefit for the purpose of arriving at appropriate
penalty amounts.  It is recognized, however, that there may be
unusual circumstances in which a different method of measuring
economic benefit may be appropriate.  The acceptability of any
such method will have to be determined on a case-by-case basis *


     c-  Violator's Recalcitrance,Defiance, or Indifference
         tothe Requirements ofthe Law

          Good faith efforts to obey the law are expected of
all subject to its jurisdiction.  Except as provided below
in Sections E and F (pp. 13 and 14) assertions of "good
faith" should not be considered as a basis for reducing the
otherwise appropriate penalty.  Courts traditionally consider
the degree of the violator's recalcitrance, defiance,
purposeful delay or indifference to its legal obligations
in setting penalties.  Enforcement officials should do so also,
and should not hesitate to include a sum in the civil penalty
to reflect such factors where tney exist.

          Care should be exercised, however, not to seek to
add such an element of penalty on a person, firm, or entity
for exercising, without purpose of delay, its lawful rights
to challenge agency determinations in administrative or
court proceedings.  A violator which has complied with all
requirements that were not disputed while challenging the
rest has not been, on these grounds alone, recalcitrant,
defiant or indifferent.  Such a violator is on a different
footing from one which used a challenge of one aspect of its
compliance requirement to delay all compliance/ or which
made frivolous challenges for purposes of delay.  This latter
mode of behavior may indeed constitute recalcitrance, defiance,
or indifference so as to justify adding an element of penalty.

          If a violator, in good faith, did challenge agency
determinations without purpose of delay, but did not prevail,
and by virtue of the litigation has missed a deadline, or other-
wise failed to comply, it is nevertheless in violation, and
subject to the civil penalty factors other than the one related
to the recalcitrance, defiance, or indifference of the violator —
i.e., harm or risk to public health or the environment, economic
benefit of delayed compliance, and extraordinary enforcement
costs.  When a source decides to challenge an agency requirement,
it assumes the risks of not prevailing in its challenge.  Violators
"litigate on their own time."  U.S._._S_teel v. Train., 556 2d 822,
(7th Cir. 1977).

     D.  Extraordinary Costs of Enforcement Action

          Although attorney's fees and court costs cannot be
recovered by the federal government in civil enforcement actions,
there are situations when it is appropriate to consider unusual
expenses incurred in detecting the violation, defining its
extent, and in bringing the enforcement action.

          Where, for example, a source hi.  disregarded its
ooligation to identify its own pollutant discharges and apply
for a permit, and tne government, as a result, must undertake
such work, the government's costs in identifying the discharges
may be included in the amount sought.  Or, for examp_e, where
the violator's sampling and analytical procedures are so
deficient that the government must conduct significant sampling
on its own to confirm discharge levels, the expense of such
sampling may be added tc the sum of civil penalties sought.
Those coszs which are routinely incurred by state and federal
enforcement officials need not, however, be sought as part of
a civil penalty.

     E.  Mitigation for Noncompliance Caused by the
         Government Itself

          When failure to comply or compliance delay was caused
by, requested by/ or attributable to the government, civil
penalties are not appropriate.  When the failure to delay
was partiall" caused by the government, the penalties may
be reduced in proportion to the relative share of government
responsibility or in proportion to the period of delay caused
by the government.  It is expected that mitigation on tnis
basis will only be permitted when the government was clearly
responsible for the delay, as, for example, it may have been
in a small number of cases under the Water Act.  In these
instances, a discharger challenged conditions of an NPDES
permit, requested an ad}udicatory hearing, prosecuted its
request expeditiously and in good faith, and may have been
delayed by the Agency's lack of resources tc provide prompt
hearings for all those who challenged their permits.

          Stares and the federal government are not sound by
the acts of t.-.e other, but they will, of course, want to be
informed of and consider carefully the acts of the other in
connection with penalty decisions.

     F.  Mitigation for Impossibility

          Where delayed compliance was, in fact, attributable
to causes absolutely oeyond the control of tne violator (such as
floods, fires, and other acts of nature) and was not due to
faulz or negligence, a civil penalty is not required—even in
instances wnere as a result of zhe impossiDility the violator
has enjoyed an economic benefit.  If only a portion of the
period of delayed compliance is attributable to such factors
beyond the violator's control, a civil penalty should be
sought only for that period of noncompliance that was not
attributable to sucn factors.


     G.  Other gases for Mitigation

          There may also be other unforeseeable mitigation
circumstances because of which all or a part of the otherwise
appropriate civil penalty should not be sought, as, for example,
when it was not technically possible to comply.  Acceptability
of such a situation as a mitigating circumstance will have to be
considered on a case-by-case basis, keeping in mind also the
"technology forcing" aspects of the laws.  Another instance
in which all or part of an otherwise appropriate civil penalty
might not be sought would be where emergency needs require that
sources be operated even though they fail to comply with discharge
or emission limitations.  Obviously, situations involving unusual
mitigating circumstances must be looked at individually since the
full range of such circumstances cannot be predicted.

          Since the Water Act and the Air Act impose absolute
duties of compliance, requiring sources to take whatever measures
are possible to come into compliance by the legally established
dates, the burden is clearly upon the violator to establish a
compelling reason why a civil penalty should be mitigated.  This
burden should only be considered satisfied where urgent efforts
are made to comply but actual impossibility or government conduct
alone precluded compliance, or where a similar mitigating circ     j
caused the delay.  Only in these instances have violators reall
made what should be considered a "good faith" effort that excuses
noncompliance.  All dischargers must be held to a standard that
requires careful and diligent planning and an urgent, serious
effort to come into compliance in a timely manner.

     H.  Specified Clean Air Act Factors

          The civil penalty policy factors described above
include consideration of the three factors specified in Section 113
of tne Clean Air Act.  The "size of the business" is reflected
in the economic benefit of delayed compliance since less expensive
control equipment is typically required for smaller businesses
and the benefit of delaying installation of such equipment is
correspondingly less.  The "economic impact of the penalty on
the business" is considered by the penalty deferral or reduction
chat is allowaole where violators lack the anility to iinmediately
pay the full amount of the penalty  (see section IX below).  The
third factor, the "seriousness of the violation," is taken into
account by looking at the harm done to public health and the
environment  {violations may, though, be considered as serious,
even though they do no measurable or quantifiable harm to the
environment) and the violator's recalcitrance, defiance or
indifference to the requinaents of the law.

VIII.  Approved Environmentally Senef ic. _1 Expenditures
       In_Lieu of Payment of ?er.al-ty Sur to State or
       Federal Treasury  (i.e., "Creaits Against Penalty")

     A.  use of Cr zit to Satisfy or Offset Penalty

          Occasions have arisen in enforcement actions where
 -lolators have offered to make expenditures for environmentally
beneficial purposes above and beyond expenditures made to comply
with all existing legal requirements, in lieu of paying penalties
to the treasury of the enforcing government.  Courts have
sometimes accepted such payments, and in some circumstances
such arrangements are acceptable under this penalty policy.
For ease of reference (but without characterizing them for
any other legal purposes~e.g., tax deductibility) such
alternative ways for a violator to satisfy the penalty instead
of paying the penalty sum to the federal,  state, or local
treasury are referred to herein as "credits" against the

          Examples of possible credits against a penalty
might be:

          (1)  construction and operation of approved
          pollution control equipment in addition to that
          required for compliance with existing requirements
          which will achieve a significant further increment
          of environmental benefit above all present require-
          ments of federal, state or local law.

          (2)  financial contributions to a private or
          governmental body or agency for environmentally
          approved uses—e.g., restoring fish and wildlife
          resources, carrying out environmental studies or
          research of a high priority need, improving the
          ability of citizen or public interest groups
          to monitor and assist in enforcing the law.
          Credits, however, will not be given for expen-
          ditures that would properly be required as part of
          equitable relief being sought for the violations,
          such as cleaning up tne pollution, restoring the
          areas affected, or reimbursing the government's
          costs of doing so, unless these costs have been
          included in the penalty sum.  In all events, tne
          financial contributions must be acceptable to tne
          enforcing agency.  Credits for high priority researcn
          are desirable, but the research must be closely
          scrutinized to insure it is beneficial from rhe
          point of view of t.ie enforcing agency, not merely
          from the point of view of tne violator.


     B.   Criteria for Acceptable Credits

          In determining whether a proposed expenditure is
creditable against the penalty, the following criteria must
be satisfied:

          (1)  The penalty sum itself will generally be
          stated in the order, decree or judgment as
          determined, before any credits are allowed, and
          this amount should be clearly identified as a

          (2)  The expenditure proposed for credit must
          be approved by enforcement officials in advance
          of the entry of the decree, order, or judgment
          in the case, must be clearly delineated therein, and
          must be enforceable along with other elements of
          the decree, e.g., subject to stipulated contempt
          penalties or to the court's continued contempt authority
          for the full lengtn of time over which expenditures
          are to be made.

          (3)  The item to be acquired by additional expendi-
          ture for which credit is given must be described
          with sufficient precision to bind the violator
          to the agreed expenditure level.  Where the
          credit is for the construction and operation of
          additional pollution control equipment that
          will bring about a greater degree of control than-
          that required by law (and a considerably reduced
          discharge or emission level)  an agreement should
          be obtained from the violator that it will treat
          che reduced discharge or emission, in all respects,
          as a requirement of law for tne period that it nas
          agreed to operate sucn equipment.

          (4)  The proposed expenditure must be clearly
          for environmental benefits above and beyond
          the requirements of law.  Interim controls and
          expeditious compliance are required by law (not
          just waiting for the last day before the
          statutory deadline) and are not appropriate for credit.

          (5)  Environmental laws require compliance ac all
          times.  Good engineering practice, therefore,
          includes design of pollution control systems
          with sufficient capacity and reliability to provide
          a margin of safety to ensure such continuous com-
          pliance.  Expenditures for tnis margin of safety
          are5 to assure compliance with the requirements of
          law and are not eligible for credits.

          (6)  If in accomplishing the required level of
          pollution control, tne violator necessarily
          will accomplish a higher level of control/ there
          can be no credit for such incidental benefit.
          (e.g., to accomplish 80% removal of a pollutant,
          the violator must necessarily purchase and operate
          equipment which removes 85% of the pollutant.)

          (7)  Studies or research and development which are
          necessary parts of compliance with legal require-
          ments are not eligible for credits (e.g., studies
          assessing the feasibility and costs of alternative
          metnods of compliance or prototype research and
          development).  Research and development work
          -ligible for credit should be work from which
          -ne public in general can benefit.  To insure this,
          tne following measures should be required:

               (a)   the enforcing agency should ^nsure
               that adequate reporting procedures are
               required.  These procedures should include
               an initial research and development plan,
               periodic progress reports, and a comprehensive
               final report that documents startup and the
               first year of operations if a facility was

               (b)   the enforcement agency or its contractors
               should be given the right to obtain first hand
               information about the work by inspecting all
               documents associated with it and by making
               on-site inspections; and

               (c)   the source should agrse that all domestic
               patents, design rights and trade secrets that
               result from the work will be placed in the
               public domain.

          In most instances the research and development should
be related to tne violation, but other instances can be considered
on a case-by-case basis.  As stated above, credits for research
or stadias will be closely scrutinized,

          (9)  Expenditures accepted for credit may only
          be expenditures tnat the violator agrees it may
          not later use (or sell to anyone else to be
        '  used)  as a credit against any other existing
          provisions of environmental law (such as emis-
          sion offset to allow the construction or modifica-
          tion of a ma]or stationary source in an area where
          national air q.ality standards are not being
          satisfied) and tne decree must so provide.

     C.   Constraints on Federal Enforcement Offlcials
          with Respect to Paymentof Penalties and Use
          of Credits In Lieu"of Penalties

          The Air and Water Acts both authorize civil penalties
which are payable only to the United States Treasury.  State
statutes may differ/ but most provide for payment of the penalties
to the State Treasury.

          Civil enforcement actions to enforce the Air or
Water Acts whether settled or litigated to conclusion will
end in orders, decrees, or judgments of a court.  In such
actions there are limitations governing the positions to be
taken by federal enforcement officials.  In settling cases/
federal enforcement officials may accept proposals for
expenditures as credits against penalties and recite them,
as well as the penalty sum, in the proposed consent decree,
but it must be kept in mind that such provisions as well as
the entire decree are subject to approval by the court.

          With respect to credit for proposed contributions
to third parties, federal enforcement officials may not
agree with defendants as to such payments in lieu of paying
tne penalty to the United States Treasury, for that prefers
a third party as recipient of the payment over the United
States, and prefers one third party potential recipient over

          State and local enforcement officials may or may
not be as constrained with respect to proposing contributions
to third parties.  Accordingly, the appropriateness of state
or local government officials proposing credits for contributions
to third parties must be governed by their own policies.

     D.  Discretionary Nature of Credit

          Acceptance of a proposed credit is purely discretionary
with federal, state, and local enforcement officials.  Enforcement
officials may, of course, insist on payment of the penalty into
the treasury.  The statutes provide for penalties.  Violators
have no "rights" to credits against these penalties.

     E.  Consideration of After-Tax Effects of Credit

         The amount of the credit to be given for proposed
expenditures is governed by the rule that it must have the
same after-tax effect on tne violator as payment of the penalty
som would have.  Since the penalty sum is immediately payaale u
entry  of tne order, decree or judgment, any proposed credit whi
includes other than immediate payment of tne full sum must be


reduced to an equivalent present value by standard accounting
methods.  Where tne expenditure proposed for credit is construction
and operation of additional pollution control equipment, the formula
for computing economic benefit of delayed compliance  (see paragrapn
VII.B. above) should be used to compute the present value of the
credit.  It should be noted that this formula assumes that the
expenditures will receive normal tax treatment  (deductibility or
credit against tax) and accounts for that.  The present value result! 3.
from use of this formula may, therefore, be used dollar-for-dollar
as credit against the penalty.

IX.  Penalty Postponement cr Forgiveness Based Upon Inability
     To Pay

     In some instances, the indicated appropriate civil penalty
may be so severely disproportionate to the resources of the
owner or operator of the violating facility that its imposition
would cause the owner or operator very serious economic hardship.
In sucn unusual cases, enforcement officials may recommend to
the court than it postpone or forr.ve the otherwise appropriate
penalty, in part or in total as circumstances may indicate.

     While the appropriate civil penalty amount may be post-
poned or reduced in such circumstances, no such concession
iray be made with respect to tne cos:: of coming into com-
pliance.  Except as the Air and Water Acts may themselves
provide, compliance is required in every case, regardless of
cost and regardless of the violator's financial situation.

     Clearly the burden is on the violator to establish its
inability to pay.  This burden can only be satisfied when
the violator has procucec adequate evidence to establish
its financial condition and when the enforcement officials
involved have obtained a competent review of the violator's
financial condition.  Mere statements of inability to pay
are not enough, and a violator making such a claim must be
willing to make* full disclosure of its financial affairs to
enforcement officials and the court under circumstances that
assure such disclosure is accurate and complete.

     If review by persons competent to assess the violator's
financial condition and prospects indicates that the violator's
resources would not pezrnit it to finance its compliance, and
also pay tne penalty, tr.en, if adequate interest can be arranged,
the penalty may be paid over tune.

     If even payment over time is not possible, then the
penalty may be reduced to an amount commensurate with the
resources of the violator (taking into account the cost of

     In making a determination of the violator's ability to
pay, it is important to insure that the economic condition
of the violator has not been distorted by transactions with
parent companies or shareholders or by unusual or uncon-
ventional accounting practices.   Where such distortion has
taken place, parent company and shareholder or other owners1
resources should be considered in determining whether or not
the violator is aole to pay the civil penalty.  In all cases,
review of financial information by persons competent in
financial affairs should be obtained.

X.  Time Period for Application of Civil Penalty Policy

     In general, this civil penalty policy would appropriately
apply to violations of the kinds covered which have occurred
since enactment of the Air Act in 1970 and the Water Act in 1972.
In determining tne penalty sum,  both with respect to the
statutory maximum and the minimum civil penalty, the period of
violation should begin with tne earliest provable date of
violation and continue until the violator has installed and
operated the required equipment, made the required process chan
or converted to the complying fuel and thus brought itself into

     Under the Water Act, this general rule will be applied
in this civil penalty policy, since authority for civil penalties
has existed since 1972.  Consequently, the period covered and
the noncompliance period commence on the date when the schedule
requirements of a National Pollutant Discharge Elimination System
(NPDES) permit were violated or on July 1, 1977, (the statutory
deadline for best practicable control technology or secondary
treatment), whichever is earlier.  The period of noncompliance
ends when the violator has brought itself into full compliance
with statutory  (including permit) requirements.

     Under the Air Act, there are other considerations whicn,
as a matter of policy, lead to application of a different rule
regarding tne time period for application of this civil penalty
policy.  The Air Act has had authority for criminal or civil
in^unctive relief since 1970, but general authority for civil
penalties was not added until the amendments of 1977, which
took effect August 7, 1977.  Whether, as a matter of law, civil


penalties are authorized in civil enforcement actions commenced
or amended after August 7, 1977, for violations occurring before
August 7, 1977, may be debated, bur regardless of that, and
without conceding any issue of law, as a decision of policy, this
civil penalty policy will be applied by federal enforcement
officials only to those violations of the Air Act occurring
after August 7, 1977.

     Accordingly, under the Air Act, for purposes of computing
the statutory maximum penalty, the period of noncompliance will
commence with August 7, 1977, or the date of earliest provable
violation, whichever is later.  For purposes of computing
the minimum civil penalty, the period of noncompliance used will
also be as stated in the previous sentence, except that when
considering the sum to be included for the violator's recalcitrance,
defiance, or indifference to its legal obligations, the entire
record of the violator should be considered.

     When determining a civil penalty under the Air Act a
special consideration also applies concerning the end date of
the period of noncompliance, but only with respect to the
element of the penalty based on removing the economic benefit
of delayed compliance.

     As indicated earlier, Section 120 of the Air Act requires
SPA to assess and collect noncompliance penalties against certain
categories of stationary sources.  The purpose of these admin-
istratively imposed penalties is to recapture the economic value
which a delay in compliance may have to the source owner or operator
EPA will not issue any notices of noncompliance or assess and
collect any noncorapliance penalties prior to January 1, 1981.
While the authority to collect noncompliance penalties (Section 12*.'
is independent of and additional to the authority to seek civil
penalties (Section 113), federal enforcement officials will net
seek double recovery of any portion of the economic value attrab •+-T-
to delayed compliance.  Accordingly, when the period of noncorn^i- ar-
will extend beyond January 1, 1981, the economic benefit element ,
the civil penalty should be based only upon the noncompliance that
will have occurred prior toi that date.

     Sources subject to judicial orders or tnat have negotiated
consent decrees with SPA, will not have their civil penalties
recalculated.  Additionally, even if a consent decree has not
been approved by tne court, the amount of the penalty need not  ^
recomputed if it is clear that agreement has been reached on a  1
material terms, including the penalty amount, and among all pnj.-f.->
economic benefit components of the civil penalty will be basct*


upon noncompliance which will occur up to January 1, 1981, or t*
date for final compliance specified in the consent decree,
wnichever is earlier.  In this way the policy will provide an
incentive for expeditious and fair settlements, while honoring
the Agency's commitment not to seek double recovery of any
portion of the economic benefit element attributable to delayed

     In all other respects, however, in Air Act cases, both when
computing the statutory maximum penalty and when determining
the rair aium civil penalty (or the minimum acceptable for
settlement), the period of noncompliance continues until the
violator has brought itself into full compliance witn the
requirements of the law.

     Where state or local government civil penalty authority
existed prior to August 7, 1977, then that additional authority
might, of course, be used by the state to extend the period of

XI.  Application of Civil Penalty Policy to Different Types of
     Sources - Private, Puolie,Regulated utilities, etc.

     Congress, in enacting the civil penalty provisions of the Air
and Water Acts, and in the Air Act's (Section 120) administratively
imposed noncompliance penalties, made no exemptions or distinct     t
for classes or -y?es of violators on the basis of ownership or     \
form of organization.  This civil penalty policy seeks to carry out
Congress1 fair, evenhanded, consistent approach, but recognizes
obstacles in a few situations.

     A.   Privately-Owned or Operated Sources  (other than
          Regulated Utilities)

          This penalty policy, as described above, applies in
full in civil enforcement actions against privately-owned and
operated sources other than regulated utilities.  Extraordinary
situations, if any, can be handled on a case-by-case basis.
     8.   Publicly-Owned Utilities and Investor-Owned,
          Regulated Utilities

          Publicly-owned utilities and investor-owned, regulated
utilities are to be treated equally.

          Penalties will be sought from utilities whose violations
come within the scope of this policy.  The focus of these penalties
will be on deterrence.  That is, penalties should be in sufficient
amounts to deter future violations.  Penalties should include
appropriate amounts for environmental harm or  risk of harm caused
by  the source's violations and recalcitrance or indifference of t-^(
source to  its legal obligations as well as any extraordinary
enforcement costs whicn the government has been forced to pay.


     C.   Stateand Municipal Facilities

          In enforcement actions against state or municipal
facilities, including publicly-owned treatment works, this civil
penalty policy applies, except with respect to the penalty element
for economic benefit of delayed compliance.

          Because state and municipa" budgeting and fir.incial
 2Cisions are generally concerned wi_r. the allocation of tax
 erivec public funds to provision of puolic services, rather than
the sale of goods or services for profit, recovering the economic
benefit of delayed compliance is somewhat less applicable.  In ail
such cases, the economic benefit of delayed compliance should be
calculated and cor idered as a guide, but in determining the
minimum civil penalty and the minimum civil penalty acceptable for
settlement, enforcement officials may recommend that this factor
be discounted or eliminated in cases where they think it is
appropriate.  Because the other elements (harm or risk; recalci-
trance; extraordinary enforcement expense)  are not always susceptible
to precise quantification, the appropriate minimum civil penalty
or the minimum civil penalty acceptable in settlement for such
facilities can only be determined on a case-by-case basis.

          The only further guidance with respect to penalties
in such cases is as follows:

          1.  Enforcement officials should not excuse all
          civil penalties except in extraordinary situations,
          for that would create a double standard of more
          lenient treatment for public agencies than private
          individuals or firms.

          2.  Civil penalties for violations by state or
          municipal facilities should be in sufficient amounts
          to deter future violations, considering the element?
          of this penalty policy, size of the facility, and tne
          duration of the violation, and in a municipal casef the
          size and the resources of the municipality.  To
          achieve a deterrent effect, civil penalties for
          violations by state or municipal facilities should
          near some relationship to the population served oy
          the violating facility and upon which the burden
          of the penalty will fall.

     D.   Federil Facilities(Other than Utilities)

          Because of recent amendments to the Air Act and
the Water Act and the federal mecnanism that exists for the
payment of penalties, federal facilities present a significanti
different proolem fron otner violating sources.  Accordingly,
guidance as to them will be provided elsewnere.

XII.  Federal-State Cooperation in Implementing,this Policy

     As part of their efforts to enforce air and water pollution
laws, many federal, state, and local enforcement officials will
be using this penalty policy.  To assist in achieving consistency
in its application, a method of consultation among federal, state
and/or local enforcement officials has been devised to insure
that appropriate penalties will be sought in specific cases.

XIII.  Effective Date of this Civil Penalty Policy

     Many of the factors comprising this penalty policy have
been used by federal and state enforcement officials for years.
EPA's civil penalty policy has been more fully articulated over
the last year.

     On June 3, 1977, guidance was provided to EPA regional
offices by the Office of Enforcement regarding criteria for
settlement of civil penalty aspects of enforcement cases under
the Water Act.  This guidance included most of the factors now
more fully explained in this document, including, for example,
recovery of the economic benefit of delayed compliance, harm
to the public, and recalcitrance of the violator.  EPA's intention
to take enforcement action against ma;jor source violators of
the Water Act and to seek civil penalties, including sums to ta'
away the economic benefit of delayed compliance, was announced
at a press conference on June 21, 1977, by Assistant Administrat
Thomas C. Jorling.

     Further elaboration of this Water Act civil penalty policy
was provided by an Office of Enforcement memorandum to EPA
regional offices dated June 28, 1977.

     The Air Act Amendments became effective on August 7, 1977,
including authority for civil penalties, and regions were
advised on September 2, 1977 that civil penalties should only
be sought for violations occurring or continuing after
August 7, 1977.

     The first comprenensive version of this consolidated Air
and Water Act civil penalty policy was distributed to federal
and state enforcement officials on November 23, 1977, and took
effect on that date.

     In addition to these general communications, this civil
penalty policy was explained at meetings and workshops of
federal, state, and local officials, at press conferences
and other gatnerings at Washington, D.C., and in all regions
of  the country in  the last half of 1977 and early 1973.  This
policy has had the benefit of comments, discussion and analysis
over rnanv montns.


     The civil penalty policy (including its predecessors as
explained above) covers all Air and Water Act cases witnir.
its scope, as follows.

               all Water Act cases not concluded prior
               to June 3, 1977,  and

               all Air Act cases not concluded prior to
               August 7, 1977.

     The application to Water Act cases concluded after
June 3, 1977 and Air Act cases concluded after August 7, 1977,
but prior to the dace of this memorandum, is governed by
the guidance extant and in effect at the time the case was
concluded, including any case-by-case guidance given.

     For purposes of this policy, a case was concluded if it
is clear that agreement had been reached on all material terms,
including penalties, and among all the parties, including EPA
where it was a party.  Where the agreement had been reduced to
writing so as to memorialize its terms, it was clearly conclude.
Other situations will have to be individually considered.

     Enforcement officials aware of civil enforcement actions
which they believe should not be included within trie coverage
of this policy or its predecessors should present the facts
or circumstances for consideration.

XIV.  Previous Civil Perialty Policy Superseded

     This civil penalty policy supersedes all previous Air Act
stationary source and Water Act civil penalty policy, including
the following, but only to the extent that such previous policy
was inconsistent herewith:

          (1)  U.S. Environmental Protection Agency, Office
          of Enforcement guidance letter entitled "Settlerent
          of Section 309 (d)  Enforcement Cases for Monetary Air aris"
          dated June 3, 1977, signed by Stanley W. Legro, Assistant
          Administrator for Enforcement.

          (2)  U.S. Environmental Protection Agency, Office
          of Enforcement guidance letter entitled "Settlement
          of Section 309(d)  Enforcement Cases for Monetary
          Amounts—Policy Background" daced June 23, 1977
          signed by Stanley W. Legro, Assistant Administrator
          for Enforcement.

(3)  U.S. Environmental Protection Agency, Office
of Enforcement guidance letter entitled "Civil
Penalties under Section 113(b) of the Clean Air
Act Amendments of 1977," dated September 2, 1977,
signed by Richard D. Wilson,  Acting Assistant
Administrator for Enforcement.
                        Jeffrey G. Miller
          Acting Assistant Administrator for Enforcement
               U.S. Environmental Protection Agency

See GM-17.

"New Civil Penalty Policy", dated February 16, 1984.  See GM-21.

V  ""y                WASHINGTON. D C. 2O46O
                               C »--

   SUBJECT:   New Civil Penalty  Policy
                              f!,  IT,.
FROM:     Courtney M. Price*  ;t ..I -^i'** *
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Associate Administrators
          Assistant Administrators
          General Counsel
          Inspector General
          Regional Administrators
          Staff Office Directors
       Attached  is the Agency's new civil penalty policy.  This
  new penalty policy will establish a consistent Agency-wide
  approach  to the assessment of civil penalties while allowing
  substantial flexibility for  individual cases within certain
  guidelines.  It is designed  to promote the goals of deterrence,
  fair and  equitable treatment of the regulated community and
  swift resolution of environmental problems.  No attempt is
  made to address issues specific to each statute the Agency
  administers.   Instead, this will be left to guidance developed
  by each program.

       The  policy consists of  two documents:  Policy on Civil
  Penalties and  A Framework for Statute-Specific Approaches to
  Penalty Assessments.  The first document focuses on the
  general philosophy behind the penalty policy.  The Framework
  provides  guidance to each program on how to develop medium-
  specific  penalty policies.

       The  new penalty policy will not be truly effective until
  the medium-specific penalty policies are completed.  Thus it
  is important that work begin on the medium-specific policies
  as soon as possible.  I am therefore requesting that each
  program office meet with their counterparts in OECM and develop
  workplans for  the development of those policies.  Please submit


those workplans to me by March 31, 1984.  The Deputy Adminis-
trator has requested that we add the workplans to the Action
Tracking System as we receive them.  If you have any questions
regarding this memorandum or the new civil penalty policy,
please contact Jonathan Libber of the Office of Legal and
Enforcement Policy.  He may be reached at 426-7503.


cc:  Enforcement Policy Workgroup Members
     Associate Enforcement Counsels
     OECM Office Directors


     This document, Policy on Civil Penalties, establishes a
 single set of goals for penalty assessment  in EPA administrative
 and judicial enforcement actions*  These goals * deterrence,
 fair and equitable treatment of the regulated community, and
 swift resolution of environmental problems - are presented here
 in general terms.  An outlinevof the general process for the
 assessment of penalties is contained in Attachment A.

     A companion document, A Framework for Statute-Specific
 Approaches to Penalty Assessments, will also be issued today.
 This document provides guidance to the user of the policy on
 how to write penalty assessment guidance specific to the user's
 particular program.  The first part of the Framework provides
 general guidance on developing program-specific guidance; the
 second part contains a detailed appendix which explains the basis
 for that guidance.  Thus, the user need only refer to the appendjx
 when he wants an explanation of the guidance in the first part of
 the Framework*

     In order to achieve the above Agency policy goals, all
 administratively imposed penalties and settlements of civil
 penalty actions should, where possible, be consistent with the
 guidance contained in the Framework document.  Deviations from
 the Framework's methodology, where merited, are authorized as
 long as the reasons for the deviations are documented.  Documen-
 tation for deviations from the Framework in program-specific
 guidance should be located in that guidance.  Documentation for
 deviations from the program-specific guidance in calculating
 individual penalties should be contained in both the case files
 and in any memoranda that accompany the settlements.

     The Agency will make every effort to urge administrative
 law judges to impose penalties consistent with this; policy and
 any medium-specific implementing guidance.  For cases that go
 to court, the Agency will request the statutory maximum penalty
 in the filed complaint.  And, as proceedings warrant, EPA will
 continue to pursue a penalty no less than that supported by the
 applicable program policy.  Of course, all penalties must be consis-
 tent with applicable statutory provisions, based upon the number
 and duration of the violations at issue.

     This policy statement does not attempt to address the
specific mechanisms for achieving the goals set out for penalty
assessment.  Nor does it prescribe a negotiation strategy to
achieve the penalty target figures.  Similarly, it does not
address differences between statutes or between priorities c£
different programs.  Accordingly, it cannot be used,  by itself,
as a basis for determining an appropriate penalty in a specific


action.  Each EPA program office, in a joint effort with the
Office of Enforcement and Compliance Monitoring, will revise
existing policies, or write new policies as needed.  These
policies will guide the assessment of penalties under each
statute in a manner consistent with this document and, to the
extent reasonable, the accompanying Ftamewc-k.

     Until new program-specific policies are issued, the
current penalty policies will remain in effect.  Once new
program-specific policies are issued, the Agency should
calculate penalties as follows:

          •  For cases that are substantially settled,
             apply the old policy.

          •  For cases that will require further sub-
             stantial negotfation, apply the new policy
             if that will not be too disruptive.

     Because of the unique issues associated with civil penal-
ties in certain types of cases, this policy does not apply to
the following areas:

          *  CERCLA 5107*  This is an area in which
             Congress has directed a particular kind
             of response explicitly oriented toward
             recovering the cost of Government cleanup
             activity and natural resource damage.

          *  Clean Water Act 5311(f) and (g).  This also
             is cost recovery in nature.  As in CERCLA
             $107 actions, the penalty assessment
             approach is inappropriate.

          •  Clean Air Act 5120.  Congress has set out in
             considerable detail the level of recovery
             under this section.  It has been implemented
             with regulations which, as required by law,
             prescribe a non-exclusive remedy which
             focuses on recovery of the economic benefit
             of noncomplie ce.  It should be noted, how-
             ever, that t  -S general penalty policy builds
             upon, and is consistent with the approach
             Congress took in that section.

     Much of the rationale supporting this policy generally
applies to non-profit institutions, including government entities.
In applying this policy to such entities, EPA must exercise judg-
ment case-by-case in deciding, for example, how to apply the
economic benefit and ability to pay sanctions, if at all.  Furt
guidance on thfe 1&&..& of sc;' -r; pe-?Ifc:»* ?~?!"st non-orofit
entities will be forthcoming.



     The  first goal of penalty assessment  is  to deter people from
 violating the law.  Specifically, the penalty should persuade the
 violator  to  take precautions against falling  into noncompliance
 again  (specific deterrence) and dissuade others from violating the
 law  (general deterrence).  Successful deterrence is important
 because it provides the best protection for the environment.  In
 addition, it reduces the resources necessary to administer the
 laws by addressing noncompliance before it occurs.

     If a penalty is to achieve deterrence, both the violate** and
 the  general public must be convinced that the penalty places the
 violator  in a worse position than those who have complied in a
 timely fashion.  Neither the violator nor the general public
 is likely to believe this if the violator  is able to retain an
 overall advantage from noncompliance*  Moreover, allowing a
 violator  to benefit from noncompliance punishes those who have
 complied by placing them at a competitive disadvantage.  This
 creates a disincentive for compliance.  For these reasons, it
 is Agency policy that penalties generally should, at a minimum,
 remove any significant economic benefits resulting from failure
 to comply with the law.  This amount will be referred to as the
 "benefit component" of the penalty.

     Where the penalty fails to remove the significant economic
 benefit, as defined by the program-specitic guidance, the case
 development team must explain in the case file why it fails to do
 so.  The case development team must then include this explanation
 in the memorandum accompanying each settlement for the signature
 of the Assistant Administrator of Enforcement and Compliance
Monitoring,  or the appropriate Regional official.

     The removal of the economic benefit of noncompliance only
 places the violator in the same position as he would have been if
 compliance had been achieved on time.  Both deterrence and funda-
mental fairness require that the penalty include an additional
 amount to ensure that the violator is economically worse off than
 if it had obeyed the law.  This additional amount should reflect
 the seriousness of the violation.  In doing so, the penalty will
 be perceived as fair.   In addition the penalty's size will tend
 to deter other potential violators*

     In some classes of cases,  the normal gravity calculation may
 be insufficient to effect general deterrence.  This could happen
 if, for example,  there was extensive noncompliance with certain
 regulatory programs in specific areas of the United states.   This
would demonstrate that the normal penalty assessments had not been
achieving general deterrence.   In such cases, the case development
 team should consider increasing the gravity component sufficient to


achieve general deterrence.  These extra assessments should
balance the other goals of this policy, particularly equitable
treatment of the regulated community.

     This approach is consistent with the civil penalty
provisions in the environmental laws.  Almost all of them
require consideration of the s^ iousness of the violation.
This additional amount which reflects the seriousness of the
violation is referred to as the 'gravity component".  The
combination of the benefit and gravity components yields the
•preliminary deterrence figure."

     As explained later in this policy, the case development
team will adjust this figure as appropriate.  Nevertheless, EPA
typically should seek to recover, at a minimum, a penalty which
includes the benefit component plus some non-trivial gravity
component.  This is important because otherwise  regulated
parties would have a general economic incentive to delay
compliance until the Agency commenced an enforcement action.
Once the Agency brought the action, the violator could then
settle for a penalty less than their ecorjmic benefit of
noncompliance.  This incentive would directly undermine the
goal of deterrence*

Fairand EquitableTreatmentof theRe.ulated Community

     The second goal of penalty assessment is the fair and
equitable treatment of the regulated community.  Fair and
equitable treatment requires that the Agency's penalties must
display both consi :ency and flexibility.  The consistent
application of a penalty policy is important because otherwise
the resulting penalties might be seen as being arbitrarily
assessed.  Thus violators would be more inclined to litigate
over those penalties.  This would consume Agency resources and
make swift resolution of environmental problems less likely.

     But any system for calculating penal ies must have enough
flexibility to make adjustments to reflect, legitimate differences
between similar violations.  Otherwise the policy migvt be
viewed as unfair.  Again, the result would be to undermine
the goals of the Agency to achieve swift and equitable resolu-
tions of environmental problems*

     Methods for quantifying the benefit and gravity components
are explained in the Framework guidance.  These methods signifi-
cantly further the goal of equitable treatment of violators*
To begin with, the benefit component promotes equity by re-
moving the unfair economic advantage which a violator may have
gained over complying parties.  Furthermore, because the benefi
    jrsvjty c^»popi«irt'« ?*•«* c6-pr?ted systematically, thev


will  exhibit  relative  consistency  from  case  to case.  Because
the methodologies  account  for a wide range of relevant factors,
the penalties generated will be responsive to legitimate
differences between  cases.

      However, not  all  the  possibly relevant  differences between
cases are accounted  for in generating the preliminary deterrence
amount.  Accordingly,  all  preliminary deterrence amounts should
be increased  or mitigated  for the  following  factors to account
for differences between cases:

          •   Degree  of willfulness and/or negligence

          *   History of noncompliance.

          •   Ability to pay.
          *   Degree  of cooperation/noncooperation.

          •  Other unique  factors  specific to the
              violator  or the case.

Mitigation based on  these  factors  is appropriate to the extent
the violator  clearly demonstrates  that  it is entitled to miti-

     The preliminary deterrence amount  adjusted prior to the
start of settlement  negotiations yields the  "initial penalty
target figure".  In  administrative  actions,  this figure
generally is  the penalty assessed  in the complaint.  In judicial
actions, EPA will use  this figure  as the first settlement goal.
This  settlement goal is an internal target and should not be
revealed to the violator unless the case development team feels
that  it is appropriate*  The initial penalty target may be
further adjusted as  negotiations proceed and additional
information becomes  available or as the original information is
Swift Resolution of Environmental Problems

     The third goal of penalty assessment is swift* resolution
of environmental problems.  The Agency's primary mission is to
protect the environment.  As long as an environmental violation
continues, precious natural resources, and possibly public
health, are at risk.  For this reason, swift correction of
identified environmental problems must be an important goal of
any enforcement action.  In addition, swift compliance conserves
Agency personnel and resources.


     The Agency will pursue two basic approaches to promoting
quick settlements which include swift resolution of environmental
problems without undermining deterrence.  Those two approaches
are as follows:

     1«  Provide incentives to settle and institute prompt
         remedial action.

     EPA policy will be to provide specific incentives to settle,
including the following:

          *  The Agency will consider reducing the
             gravity component of the penalty for
             settlements in which the violator already
             has instituted expeditious remedies to
             the identified violations prior to the
             commencement of litigation.^/ This would
             be .considered in the adjustment factor
             called degree of cocperation/noncooc2ra-
             tion discussed above.

          •  The Agency will consider accepting additional
             environmental cleanup, and mitigating the
             penalty figures accordingly.  But normally,
             the Agency will only accept this arrangement
             if agreed to in pre-litigation settlement.         ,    N

Other incentives can be used, as long as they do not result in
allowing the violator to retain a significant economic benefit.

     2.  Provide disincentives to delay.- j_ compliance.

     The preliminary deterrence amount is based in part upon
the expected duration of the violation.  If that projected period
of time is extended during the course of settlement negotiations
due to the defendant's actions, the case development team should
adjust that figure upward.  The case development team should
consider making this fact known to the violator early in the negoti-
ation process.  This will provide a strong disincentive to delay
T7For the purposes of this document, litigation is deemed to
           * for administrative actions - when the
            respondent files a response to an adminis-
            trative complaint or when the time to
            file expires or

           ' for judicial actions - when an Assistant
            United States Attorney files a com-
            plaint in court.

Intent of Policy and Information Requests for Penalty Calculations"

     The policies and procedures set out in this document and in
the framework for Statute-Specific Approaches to Penalty Assessment
are intended solelyfor the guidance of government personnel.
They are not intended and cannot be relied upon to create any
rights, substantive or procedural* enforceable by any party in
litigation with the United States.  The Agency reserves the right
to act at variance with these policies and procedures and to change
then at any time without public notice.  In addition* any penalty
calculations under this policy made in anticipation, of litigation
are exempt from disclosure under the Freedom of Information Act.
Nevertheless as a natter of public interest, the Agency nay
elect to release this information in some cases.
                                          —^fc .* i

                                   Courtney M. Price
                              Assistant Administrator for
                         Enforcement and Compliance Monitoring


                          ATTACHMENT A
Outlineof Civil Penalty Assessment
*•   Calculate Preliminary Deterrence Amount
     A.  Economic benefit component and
     B*  Gravity component
(This yields the preliminary deterrence amount.)

II.  Apply Adiustroent Factors
     A.  Degree of cooperation/noncooperation (indicated through
         pre-settlement action.)
     B.  Degree of willfulness and/or negligence.
     C.  History of noncompliance.
     D.  Ability to pay (optional at this stage.)
     E.  Other unique factors (including strength of case,
         competing public policy concerns.)
(This yields the initial penalty target figure.)
III. Adjustments to Initial Penalty Target Figure After
     Negotiations Have Begun
     A.  Ability to pay (to the extent not considered in
         calculating initial penalty target.)
     B.  Reassess adjustments used in calculating initial
         penalty target.  (Agency may want to reexantine
         evidence used as a basis for the penalty in the
         light of new information.)
     C.  Reassess preliminary deterrence amount to reflect
         continued periods of noncompliance not reflected
         in the original calculation.
     D.  Alternative payments agreed upon prior to the
         commencement of litigation.
(This  yields the adjusted penalty target figure.)

"A Framework for statute Specific Approaches to Penalty Assessment", dated
February 16, 1984.  See GM-22.



                      PROTECTION AGENCY
                                 FEB i 6 1984
                 EFFECTIVE DATE:  	

Contents   	                   Pace
    Writing a Program-Specific Policy                          2
         I.    Developing a Penalty Figure                     2
         II.   Calculating a Preliminary Deterrence Amount     2
         III.  Adjusting the Preliminary Deterrence Amount     3
               to Derive the Initial Penalty Target Figure
         IV.   Adjusting the Initial Penalty Target Figure     4
               During Negotiations
    Use of the Policy in Litigation
    Use of the Policy as a Feedback Device
    Appendix                                                   6

         Introduction                                          6
         The Preliminary Deterrence Amount                     6
         I.     The Benefit Component                           6
               A.   Benefit from delayed costs                  7
               B.   Benefit from avoided costs                  9
               C.   Benefit from competitive advantage         10
               D.   Settling a case for an amount less than    11
                   the economic benefit component
         II.   The Gravity Component                          13
               A.   Quantifying the gravity of a violation     13
               B.   Gravity factors                            14
         Initial and Adiusted Penalty Target Fioure           16
         I.    Flexibility-Adjustment Factors                  17
              A.  Degree of willfulness and/or negligence     1*7
              B.  Degree of cooperation/noncooperation        19
              C.  History of noncompliance                    21
              D.  A£>lilt> to poj                              °'1
              E.  Other unique factors                        24

Appendix (Con't)
     II.   Alternative Payments
     HI.  Promoting Consistency
     Use of Penalty  Figure  in  Settlement  Negotiations



     This document, A Framework for Statute-Specific Approaches
to Penalty Assessment, provides guidance to the user of the
Policy on Civil Penalties on how to develop a medium-specific
penalty policy.  Such policies will apply to administratively
imposed penalties and settlements of both administrative and
judicial penalty actions.

     In the Policy on Civil Penalties, the Environmental
Protection Agency establishes a single set of goals for penalty
assessment.  Those goals - deterrence, fair and equitable
treatment of the regulated community, and swift resolution of
environmental problems - will be substantially impaired unless
they are pursued in a consistent fashion.  Even different
terminology could cause confusion that would detract from the
achievement of these goals.  At the same time, too much'rigidity
will stifle negotiation and make settlement impossible.

     The purpose of this document is to promote the goals of
the Policy on Civil Penalties by providing a framework for
medium-specific penalty policies.  The Framework is detailed
enough to allow individual programs to develop policies that
will consistently further the Agency's goals and be easy to
administer.  In addition, it is general enough to allow each
program to tailor the policy to the relevant statutory provi-
sions and the particular priorities of each program.

     While this document contains detailed guidance, it is not
cast in absolute terms.  Nevertheless, the policy does not
encourage deviation from this guidance in either the development
of medium-specific policies or in developing actual penalty
figures.  Where there are deviations in developing medium-
specific policies,  the reasons for those changes must be
recorded in the actual policy.  Where there are deviations from
medium-specific policies in calculating a penalty figure, the
case development team must detail the reasons for those changes
in the case file.  In addition, the rationale behind the deviation!
must be incorporated in the memorandum accompanying the settlement
package to Headquarters or the appropriate Regional official.

     This document is divided into two sections.  The first one
gives brief instructions to the user on how to write a medium-
specific policy*  The second section is an appendix that gives
detailed guidance on implementing each section of the instruc-
tions and explains how the instructions are intended to further
the goals of the policy.

Writing a Program Specific Policy
     Summarized below are those elements that should be present
in a program-specific penalty policy.  For a detailed discus-
sion of each of these ideas, the corresponding f   :ions of the
appendix should be consulted.

!•  Developing a Penalty Figure

    The development of a penalty figure is a two step process.
First the case development team must calculate a preliminary
deterrence figure.  This figure is composed of the economic
benefit component (where applicable) and the gravity component.
The second step is to adjust the preliminary deterrence figure
through a number of factors.  The resulting penalty figure is
the initial penalty target figure.  In judicial actions, the
initial penalty target figure is the penalty amount which the
government normally sets as a goal at the outset of settlement
negotiations.  It is essentially an internal settlement goal and
should not be revealed to the violator unless the case develop   t
team feels it is appropriate.  In administrative actions, this
figure generally is the penalty assessed in the complaint.
While in judicial actions, the government's complaint will regue&»
the maximum penalty authorized by law.

     This initial penalty target figure may be further adjusted
in the course of negotiations.  Each policy should ensure that
the penalty assessed or requested is within any applicable
statutory constraints, based upon the number and duration of
violations at issue.

II.  Calculating a Preliminary Deterrence Amount

     Each program-specific policy im. t contain a section on
calculating the preliminary deterrence figure.  That section
should contain materials on each of the following areas:

          *  Benefit Component.  This section should

             a.  the relevent measure of economic benefit
                 for various types of violations,
             b.  the information needed,
             c.  where to get assistance in computing
                 this figure and
             d.  how to use available computer systems
                 to compare a case with   imilar previous


          *  Gravity Component.  This section should first
             rank different types of violations according
             to the seriousness of the act.  In creating
             that ranking, the following factors should be

             a.  actual or possible harm,
             b.  importance to the regulatory
                 scheme and
             c.  availability of data from other

     In evaluating actual or possible harm, your scheme should
consider the following facts:

             amount of pollutant,
             toxicity of pollutant,
             sensitivity of the environment,
             length of time of a violation and
             size of the violator.

     The policy then should assign appropriate dollar amounts
or ranges of amounts to the different ranked violations to
constitute the "gravity component".  This amount, added to the
amount reflecting economic benefit, constitutes the preliminary
deterrence figure.

III* Adjusting the Preliminary Deterrence Amount to Derive the
     Initial Penalty TargetFigure (Prenegotiation Adjustment)

     Each program-specific penalty policy should give detailed
guidance on applying the appropriate adjustments to the pre-
liminary deterrence figure*  This is to ensure that penalties also
further Agency goals besides deterrence (i.e. equity and swift
correction of environmental problems).  Those guidelines should
be consistent with the approach described in the appendix.  The
factors nay be separated according to whether they can be con-
sidered before or after negotiation has begun or both.

     Adjustments (increases or decreases, as appropriate) that
can be made to the preliminary deterrence penalty to develop an
initial penaly target to use at the outset of negotiation include:

          •  Degree of willfulness and/or negligence

          0  Cooperation/noncooperation through pre-
             set tlement action.

          *  History of noncompliance.


          •  Ability to pay.

          '  Other unique factors (including strength of
             case, competing public policy considerations).

     The policy nay permit consideration of the violator's ability
to pay as an adjustment factor before negotiations begin.  It
may also postpone consideration of that factor until after negoti-
ations have begun.  This would allow the violator to produce
evidence substantiating its inability to pay.

     The policy should prescribe appropriate amounts, or ranges
of amounts, by which the preliminary deterrence penalty should
be adjusted.  Adjustments will depend on the extent to which
certain factors are pertinent.  In order to preserve the penalty's
deterrent effect, the policy should also ensure that, except for
the specific exceptions described in this document, the adjusted
penalty will: 1) always remove any significant economic benefit
of noncompliance and 2) contain some non-trivial amount as a
gravity component.

IV.  Adjusting the Initial Penalty Target During Negotiations

     Each program-specific policy should call for periodic rea.,
sessment of these adjustments during the course of negotiations.
This would occur as additional relevant information becomes avail-
able and the old evidence is re-evaluated in the light of new
evidence.  Once negotiations have begun, the policy also should
permit adjustment of the penalty target to reflect "alternative
payments" the violator agrees to make in settlement of the case.
Adjustments for alternative payments and pre-settlement corrective
action are generally permissible only before litigation has

     Again, the policy should be structured to ensure that any
settlement made after negotiations have begun reflects the
economic benefit of noncompliance up to the date of compliance
plus some non-trivial gravity component.  This means that if
lengthy settlement negotiations cause the violation to continue
longer than initially anticipated, the penalty target figure
should be increased.  The increase would be based upon the extent
that the violations continue to produce ongoing environmental
risk and increasing economic benefit.

Use of the Policy In Litigation

     Each program-specific policy should contain a section on
the use of the policy in litigation.  Requests for penalties


should account  for all the factors  identified in the relevant
statute and still allow  for compromises in settlement without
exceeding the parameters outlined in this document.  (For each
program, all the statutory factors  are contained in the Frame-
work either explicitly or as part of broader factors.)  For admin-
istrative proceedings, the policy should explain how to formulate
a penalty figure, consistent with the policy.  The case develop-
ment team will  put this figure in the administrative complaint.

     In judicial actions, the EPA will use the initial penalty
target figure as its first settlement goal.  This settlement
goal is an internal target and should not be revealed to the
violator unless the case development team feels it is appro-
priate*  In judicial litigation* the government should request
the maximum penalty authorized by law in its complaint*  The
policy should also explain how it and any applicable precedents
should be used  in responding to any explicit requests from a
court for a minimum assesment which the Agency would deem
Use of the Policy as a Feedback Device

     Each program-specific policy should first explain in detail
what information needs to be put into the case file and into the
relevant computer tracking system.  Furthermore, each policy
should cover how to use that system to examine penalty assessments
in other cases.   This would thereby assist the Agency in making
judgments about the size of adjustments to the penalty for the
case at hand.  Each policy should also explain how to present
penalty calculations in litigation reports.
                                   Courtney M. Price
                              Assistant Administrator for
                         Enforcement and Compliance Monitoring


     This appendix contains three sections.  The first two sections
set out guidelines for achieving the goals of the Policy on Civil
Penalties.  The first section focuses on achieving deterrence by
assuring that the penalty first removes any economic benefit from
noncompliance.  Then it adds an amount to the penalty which reflects
the seriousness of the violation.  The second section provides
adjustment factors so that both a fair and equitable penalty will
result and that there will be a swift resolution of the environmental
problem.  The third section of the framework presents some practical
advice on the use of the penalty figures generated by the policy.

The Preliminary Deterrence Amount

     The Policy on Civil Penalties establishes deterrence as an
important goal of penalty assessment.  More specifically, it speci-
fies that any penalty should, at a minimum, remove any significant
benefits resulting from noncompliance*  In addition, it should
include an amount beyond removal of economic benefit to reflect
the seriousness of the violation.  That portion  ">f the penalty
which removes the economic benef:  ?f noncomplia-.ce is referre
as the "benefit component;" that p-rt of the penalty which ret    >
the seriousness of the violation is referred to as the "gravity
component."  When combined, these two components yield the "prelim-
inary deterrence amount."

     This section of the document provides guidelines for calcu-
lating the benefit component and the gravity component.  It will
also present and discuss a simplified version of the economic
benefit calculation for use in developing quick penalty deter-
minations.  This sertion will also discuss the limited circum-
stances which justify settling for less than the benefit component.
The uses of the preliminary deterrence amount will be explained
in subsequent portions of this document.

I.   The Benefit Component

     In order to ensure that penalties remove any significant
economic benefit of noncompliance, it is necessary to have
reliable methods to calculate that benefit.  The existence of
reliable methods also strengthens the Agency's position in both
litigation and negotiation.  This section sets out guidelines for
computing the benefit component.  It first addresses costs which
are delayed by noncompliance.  Then it addresses costs which are
avoided completely by noncompliance.  It also identifies issue--


to be considered when computing the benefit component for those
violations where the benefit of noncompliance results from factors
other than cost savings.  This section concludes with a discussion
of the proper use of the benefit component in developing penalty
figures and  in settlement negotiations.

     A.  Benefit from delayed costs

     In many instances, the economic advantage to be derived from
noncompliance is the ability to delay making the expenditures
necessary to achieve compliance.  For example, a facility which
fails to construct required settling ponds will eventually have to
spend the money needed to build those ponds in order to achieve
compliance*  But, by deferring these one-time nonrecurring costs
until EPA or a State takes an enforcement action, that facility
has achieved an economic benefit.  Among the types of violations
which result in savings from deferred cost are the following:

          *  Failure to install equipment needed to meet
             discharge or emission control standards.

          •  Failure to effect process changes needed
             to eliminate pollutants from products or
             waste streams.

          '  Testing violations, where the testing still
             must be done to demonstrate achieved com-

          *  Improper disposal, 'where proper disposal is
             still required to achieve compliance.

          *  Improper storage where proper storage is still
             required to achieve compliance.

          9  Failure to obtain necessary permits for dis-
             charge, where such permits would probably be
             granted.  (While the avoided cost for many
             programs would be negligible, there are pro-
             grams where the the permit process can be

     The Agency has a substantial amount of experience under
the air and water programs in calculating the economic benefit
that results from delaying costs necessary to achieve compliance.
This experience indicates that it is possible to estimate the
benefit of delayed compliance through the use of a simple formula.
Specifically, the economic benefit of delayed compliance may be
estimated at:  5% per year of the delayed one-time capital cost
for the period from the date the violation began until the date


compliance was or is expected to be achieved.  This will be
referred to as the "rule of thumb for delayed compliance* method.
Each program may adopt its own "rule of thumb" if appropriate.
The applicable medium-specific guidance should state what that
method is.

     The rule of thumb method can usually be used in making
decisions on whether to develop a case or in setting a penalty
target for settlement negotiations.  In using this rule of thumb
method in settlement negotiations, the Agency may want to make
the violator fully aware t: t it is using an estimate and not
a more precise penalty determination procedure.  The decision
whether to reveal this information is up to the negotiators.

     The "rule of thumb" method only provides a first-cut estimate
of the benefit of delayed compliance.  For this reason, its use
is probably inappropriate in situations where a detailed analysis
of the economic effect of noncompliance is needed to support or
defend the Agency's position.  Accordingly, this "rule of thumc"
method generally should not be used in any of the following cir-

          •  A hearing is likely on the amount of the

          0  The defendant wishes to negotiate over the
             amount of the economic benefit on the basis
             of factors unique to the financial condition
             of the company.

          •  The case development team has reason to
             believe it will, produce a substantially
             inaccurate estimate; for example, where the
             defendant is in a highly unusual financial
             position, or where noncompliance has or will
             continue for an unusually long period.

     There usually are avoided costs associated with this type
of situation.  Therefore, the "rule of thumb for avoided costs"
should also be applied.  (See pages 9-10).  For most cases, both
figures are needed to yield the major portion of the economic
benefit component.

     When the rule of thumb method is not applicable, the ecor.or.ic
benefit of delayed compliance should be computed using the Meth-
odology for Computing the Economic Benefit of Koncompllance.
This document, which is under development, provides a method
for computing the economic benefit of noncompliance based on &
detailed economic analysis.  The method will largely be a refi «c
version of the method used in the previous Civil Penalt  Poll
is«u*d July S, 19cO, for the Clean Water Act ano Title I of th
Clean Air Act.  It will also be consistent, witn cne teg-la-..c s.


 implementing  Section 120 of  the Clean Air Act.  A computer
 program will  be available  to the Regions to perform the analysis,
 together with instructions for its use.  Until the Methodology
 is  issued,  the economic model contained in the July 8, i960,
 Civil Penalty Policy should  be used.  It should be noted that
 the Agency  recently modified this guidance to reflect changes in
 the tax law.

     B.   Benefit from avoided costs

     Many kinds of violations enable a violator to permanently
 avoid certain costs associated with compliance.

          •   Cost savings  for operation and maintenance of
              equipment that  the violator failed to install.

          "   Failure to properly operate and maintain
              existing control equipment.

          0   failure to employ sufficient number of
              adequately trained staff.

          0   Failure to establish or follow precautionary
              methods required by regulations or permits.

          *   Improper storage, where commercial storage is
              reasonably available.

          0   Improper disposal, where redisposal or cleanup
              is not possible.

          •   Process, operational, or maintenance savings
              from removing pollution equipment.

          0   Failure to conduct necessary testing.

     As with  the benefit from delayed costs, the benefit com-
ponent for avoided costs may be estimated by another "rule of
thumb" method.  Since these  costs will never be incurred, the
estimate is the expenses avoided until the date compliance is
achieved less  any tax savings.  The use of this "rule of thumb"
method is subject to the same limitations as those discussed in
the preceding  section.

     Where the "rule of thumb for avoided costs" method cannot
be used, the  benefit from avoided costs must be computed using
the Methodology for Computing the Economic Benefit of Noneom-
pliahce.Again, until the Metholology is issued, the method
contained in  the July 8, 1960, Civil Penalty Policy should be
used as modified to reflect  recent changes in the tax law.


     C.   Benefit from competitive advantage

     For most violations! removing the savings which accrue
from noncompliance will usually be sufficient to remove the
competitive advantage the violator clearly has gained from
noncompliance.  But there are some situations in which noncom-
pliance allows the violator to provide goods or services which
are not available elsewhere or are more attractive to the
consumer.  Examples of such violations include:

          •  Selling banned products.

          •  Selling products for banned uses.

          •  Selling products without required labelling
             or warnings.

          *  Removing or altering pollutio" ccrtrol
             equipment for a fee, (e.g., tampering with
             automobile emission controls.)

          0  Selling products without required regula-
             tory clearance, (e.g., pesticice registra-
             tion or premanufacture notice under TSCA.)

     To adequately reiove the economic incentive for such viola-
tions, it is helpful to estimate the net profits made from the
improper transactions (i.e. those transactions which would not
have occurred if the party had complied).  The case development
team is responsible for identifying violations in which this
element of economic benefit clearly is present and significant.
This calculation may be substantially different depending on the
type of violation.  Consequently the program-specific policies
should contain guidance on identifying these types of violations
and estimating these profits.  In formulating that guidance, the
following principles should be followed:

          •  The amount of the profit should be based on
             the best information available concerning
             the number of transactions resulting from

          '  Where available, information about the
             average profit per transaction may be used.
             In some cases, this nay be available from
             the rulemaking record of the provision

          0  The benefit derived should be adjusted to
             reflect the present value of net profits
             derived in the past.


     lt is recognized that the methods developed for estimating
the profit from those transactions will sometimes rely substan-
tially on expertise rather than verifiable data.  Nevertheless,
the programs should make all reasonable efforts to ensure that
the estimates developed are defensible.  The programs are encour-
aged to work with the Office of Policy, Planning and Evaluation
to ensure that the methods developed are consistent with the
forthcoming Methodology for Computing the Economic Benefit of
Honcompliance and with methods developed Jay other programs.  The
programs should also ensure that sufficient contract funds are
available to obtain expert advice in this area as needed to
support penalty development, negotiation and trial of these kinds
of cases.

     D.   Settling cases for an amount less than the economic

     As noted above, settling for an amount which does not remove
the economic benefit of noncompliance can encourage people to
wait until EPA or the State begins an enforcement action before
complying.  For this reason, it is general Agency policy not to
settle for less than this amount.  There are three general areas
where settling for less than economic benefit may be appropriate.
But in any individual case where the Agency decides to settle for
less than enconomic benefit, the case development team must detail
those reasons in the case file and in any memoranda accompanying
the settlement.

          1* Benefit component involves insignificant amount

     It is clear that assessing the benefit component and
negotiating over it will often represent a substantial commitment
of resources.  Such a commitment of resources may not be warranted
in cases where the magnitude of the benefit component is not likely
to be significant, (e.g. not likely to have a substantial impact on
the violator's competitive positions).  For this reason, the case
development team has the discretion not to seek the benefit com-
ponent where it appears that the amount of that component is
likely to be less than $10,000.  (A program nay determine that
other cut-off points are more reasonable based on the likelihood
that retaining the benefit could encourage noncomplying behavior.)
In exercising that discretion, the case development team should
consider the following factors:

        •  Impact on violator:  The likelihood that
           assessing the benefit component as part
           of the penalty will have a noticeable
           effect on the violator's competitive
           position or overall profits.  If no such
           effect appears likely, the benefit com-
           ponent should probably not be pursued.

        *  The size of the gravity componentt  If the
           gravity compone.tv *a i«.*t^..i.j  srz.ll, :*
           may not provide a sufficient deterrent, by


            itself, to achieve the goals of this policy.

         *  The certainty of the size of the benefit
            componentl1C the economic benefit is quite
            well defined, it is not likely to require
            as much effort to seek to include it in the
            penalty assessment.  Such circumstances also
            increase the likelihood that the economic
            benefit was a substantial motivation for the
            noncompliance.  This vould make the inclusion
            of the benefit component more necessary to
            achieve specific deterrence*

     It may be appropriate not to seek the benefit component in
an entire class of violation.  In that situation, the rationale
behind that approach should be clearly stated in the appropriate
medium-specific policy.  For example, the most appropriate way
to handle a small non-recurring operation and maintenance vio-
lation may be a small penalty.  Obviously it makes little sense
to assess in detail the economic benefit for each individual
violation because the benefit is likely to be so small.  The
medium-specific policy would state this as the rationale.
         2. Compelling public concerns

     The Agency recognizes that there may be some instances wher
there are compelling public concerns that would not be served b
taking a case to trial.  In such instances, it may become necess
to consider settling a case for less than the benefit component.
This may be done only if it is absolutely necessary to preserve
the countervailing public interests.  Such settlements might be
appropriate where the following circumstances occur:

         •  There is a very substantial risk of creating
            precedent which will have a significant
            adverse effect upon the Agency's ability
            to enforce the law or clean up pollution
            if the case is taken to trial.

         •  Settlement will avoid or terminate an
            imminent risk to human health or *
            environment.  This is an adequate
            justification only if injunctive relief
            is unavailable for some reason, and if
            settlement on remedial responsibilities
            could not be reached independent of any
            settlement of civil penalty liability.

         •  Kemc al of the economic benefit would
            result in plant closings, bankruptcy, or
            other extreme financial burden, and there
            is an important public interest i»- allow-
            ing the firm to continue in busin  s.


              Alternative payment plans should be fully
              explored  before resorting to this option.
              Otherwise, the Agency will give the per-
              ception that shirking one's environmental
              responsibilities  is a way to keep a failing
              enterprise afloat.  This exemption does not
              apply to  situations where the plant was
              likely to close anyway, or where there is a
              likelihood of continued harmful noncompliance.

          3.  Litigation practicalities

     The Agency realizes that in certain cases, it  is highly unlikely
the EPA will be able to recover the economic benefit in litigation.
This may be due to applicable precedent, competing  public interest
considerations, or the  specific facts, equities, or evidentiary
issues pertaining to a  particular case.  In such a  situation it is
unrealistic to expect EPA to obtain a penalty in litigation which
would remove the economic benefit.  The case development team then
may pursue a lower penalty amount.

II.  The Gravity Component

     As noted above, the Policy on Civil Penalties  specifies that
a penalty, to achieve deterrence, should not only remove any eco-
nomic benefit of noncompliance, but also include an amount reflecting
the seriousness of the  violation.  This latter amount is referred
to as the "gravity component."  The purpose of this section of the
document is to establish an approach to quantifying the gravity
component.  This approach can encompass the differences between
programs and still provide the  basis for a sound consistent treat-
ment of this issue.

     A.   Quantifying the gravity of a violation

     Assigning a dollar figure  to represent the gravity of a vio-
lation is an essentially subjective process.  Nevertheless, the
relative seriousness of different violations can be fairly
accurately determined in most cases.  This can be accomplished
by reference to the goals of the specific regulatory scheme and
the facts of each particular violation.  Thus, linking the dollar
amount of the gravity component to these objective  factors is a
useful way of insuring  that violations of approximately equal
seriousness are treated the same way.

     Such a linkage promotes consistency.  This consistency
strengthens the Agency's position both in negotiation and before
a trier of fact.  This  approach consequently also encourages
swift resolution of environmental problems.

     Each prcgra-' must  develop  a system for quantifying the
gravity ot viOAatiorit wl u.e ia-s sr; reguiatic-s it ?'•-:«!


This development must occur within the context of the penalty
amounts authorized by law for that program.  That system must
be based, whenever possible, on objective indicators of the
seriousness of the violation.  Examples of such indicators are
given below.  The seriousness of the violation should be based
primarily on:  1) ;he risk of harm inherent in the violation at
the time it was committed and 2) the actual harm that resulted
from the violation.  In some cases, the seriousness of the
risk of harm will exceed that of the actual harm   Thus, each
system should provide enough flexibility to allot EPA to consider
both factors in assessing penalties.

     Each system must also be designed to minimize the possi-
bility that two persons applying th* system to the same set of
facts would come up with substantially different numbers.  Thus,
to the extent the system depends on categorizing events, those
categories must be clearly defined.  That way there is little
possibility for argument over the category in which a violation
belongs.  In addition, the cat --jorization of the events relevant
to the penalty decision shoulc  .e noted in the penalty develop-
ment portion of the case file.

     B.   Gravity Factors

     In quantifying the gravity of a violation, a program-sped
policy snould rank different types of violations according to t
seriousness of the act.  The following is a sue;  sted approach tc
ranking the seriousness of violations.  In this approach to rank-
ing, the following factors should be considered:

          *  Act ua1 or possible h a rm i  This factor
             focuses on whether (and to what extent)
             the activity of the defendant actually
             resulted or was likely to result in an
             unpermitted discharge or exposure.

          •  Importance to the regulatory scheme:  This
             factor focuses on the importance of the
             requirement to achieving the goal «,f the
             statute or regulation.  For example, if
             labelling is the only method used to pre-
             vent dangerous exposure to a chemical,
             then failure to label should res .It in a
             relatively high penalty.  By contrast, a
             warning sign that was visibly posted but
             was smaller than the required size would
             not normally be considered as serious.

          *  Availability of data from other sources:
             The violation of any recordkeeping or
             reporting requirement is a very serious


             matter.  But if the involved requirement
             is the only source of information, the
             violation is far more serious.  By contrast,
             if the Agency has another readily available
             and cheap source for the necessary infor-
             mation r a smaller penalty may be appro-
             priate.  (E.g. a customer of the violator
             purchased all the violator's illegally
             produced substance.  Even though the
             violator does not have the required
             records, the customer does.)

          *  Size of violator:  In some cases, the
             gravity component should be increased
             where it is clear that the resultant
             penalty will otherwise have little
             impact on the violator in light of the
             risk of harm posed by the violation.
             This factor is only relevant to the
             extent it is not taken into account by
             other factors.

     The assessment of the first gravity factor listed above,
risk or harm arising from a violation, is a complex matter.   For
purposes of ranking violations according to seriousness, it  is
possible to distinguish violations within a category on the  basis
of certain considerations, including the following:

          •  Amount of pollutant; Adjustments for the
             concentration of the pollutant may be
             appropriate, depending on the regulatory
             scheme and the characteristics of the
             pollutant.   Such adjustments need not be
             linear, especially if the pollutant can
             be harmful at low concentrations.

          •  Toxicity of the pollutantt  Violations
             involving highly toxic pollutants are more
             serious and should result in relatively
             larger penalties.

          •  Sensitivity of the environment;  This
             factor focuses on the location where the
             violation was committed.   For example,
             improper discharge into waters near a
             drinking water intake or a recreational
             beach is usually more serious than dis-
             charge into waters not near any such use.

          °  The length  of tine a violation continues?
             In most circumstances, the longer a
             violation continues uncorrected, the
             greater ic  t*e n?v  of hanr.


     Although each program-spec.if ic policy should address each
of the factors listed above, or determine why it is not relevant,
the factors listed above are not meant to be exhaustive.  The
programs should make every effort to identify all factors rele-
vant to assessing the seriousness of any violation*  The programs
should then systematically prescribe a dollar amount to yield a
gravity component for the penalty.  The program-specific policies
may prescribe a dollar range for a certain category of violation
rather than a precise dollar,amount within that range based on
the specific facts of an individual case*

     The process by which the gravity component was computed must
be memorialized in the case file.  Combining the benefit component
with the gravity component yields the preliminary deterrence amount.

     In some classes of cases, the normal gravity calculation may
be insufficient to effect general deterrence.  This could happen
if there was extensive noncompliance with certain regulatory
programs in specific areas of the United States.  This would
demonstrate that the normal penalty assessments had not been
achieving general deterrence.  The medium specific policies should
address this issue.  One possible ^oproach would be to direct the
case development team to consider .ncreasing the gravity component
within a certain range to achieve general deterrence.  These extra
assessments should be consistent with the other goals of this

Initial andAdjustedPenalty Target Figure

     The second goal of the Policy on Civil Penalties is the
equitable treatment of the regulated community.  One important
mechanism for promoting equitable treatment is to include the
benefit component discussed above in a civil penalty assessment.
This approach would prevent violators from benefitting economi-
cally from their noncompliance relative to parties which have
complied with environmental requirements*

     In addition, in order to promote equity, the system for
penalty assessment must have enough flexibility to account for
the unique facts of each case.  Yet it still must produce enough
consistent results to treat similarly-situated violators similarly.
This is accomplished by identifying many of the legitimate differ-
ences between cases and providing guidelines for how to adjust
the preliminary deterrence amount when those facts occur.  The
application of these adjustments to the preliminary deterrence
amount prior to the commencement of negotiation yields the initial
penalty target figure.  During the course of negotiation, the case
development team may further adjust this figure to yield the
adjusted penalty target figure.


     Nevertheless,  it  should  be  noted  that  equitable  treatment  is
a  two-edged  sword.  While  it  means  that  a particular  violator will
receive no higher penalty  than a similarly  situated violator, it
also means that  the penalty will be no lower.

t.  Flexibility-Adjustment Factors

     The purpose of this section of the  document  is to establish
additional adjustment  factors to promote flexibility  and  to  iden-
tify management  techniques that  will promote consistency.  This
section sets out guidelines for  adjusting penalties to account  for
some factors that frequently  distinguish different cases.  Those
factors are: degree of willfulness  and/or negligence, degree of
cooperation/noncooperation, history of noncompliance, ability to
pay, and other unique  factors.   Unless otherwise  specified,  these
adjustment factors will apply only  to  the gravity component  and
not to the economic benefit component.   Violators bear the burden
of justifying mitigation adjustments they propose based on these

     Within each factor there are three  suggested ranges  of
adjustment.  The actual ranges for  each  medium-specific policy
will be determined by  those developing the  policy.  The actual
ranges may differ from these  suggested ranges based upon  program
specific needs.  The first, typically  a  0-201 adjustment  of  the
gravity component, is within  the absolute discretion  of the  case
development team. £/  The  second, typically a 21-301  adjustment,
is only appropriate" in unusual circumstances.  The third  range,
typically beyond 30% adjustment,  is  only appropriate  in extra-
ordinary circumstances.  Adjustments in  the latter two ranges,
unusual and extraordinary  circumstances, will be  subject  to scrutin
in any performance audit.  The case  development team may wish to
reevaluate these adjustment factors  as the  negotiations progress.
This allows the  team to reconsider  evidence used  as a basis for
the penalty in light of new information.

     Where the Region develops the penalty  figure, the appli-
cation of adjustment factors  will be part of the  planned Regional
audits.  Headquarters will be responsible for proper application
of these factors in nationally-managed cases.  A  detailed dis-
cussion of these factors follows.

     A.  Degree of Willfulness and/or  Negligence

     Although most of the  statutes which EPA administers are
strict liability statutes, this  does not render the violator's
I/ Absolute discretion means that the case development team
may make penalty development decisions independent of EPA
Headquarters.  Nevertheless it is understood that in all
judicial matters, the Department of Justice can still review
tn«ss»e tie vBrr.inat.c-c if t-cy 5r £*««**•<*.  Of cour«e the authority
to exercise the Agency's concurrence in final settlements is
covered by the applicable delegations.

willfulness and/or negligence irrelevant.  Knowing or willful
violations can give rise to criminal liability, and the lack
of any culpability may, depending upon the particular program,
indicate that no penalty action is appropriate.  Between these
two extremes, the willfulness and/or negligence of the violator
should be reflected in the amount of the penalty.

     In assessing the degree of willfulness and/or negligence,
all of the following points should be considered in most cases:

          *  How much control the violator had over the
             events constituting the violation.

          •  The forseeability of the events consti-
             tuting the violation.

          0  Whether the violator took reasonable
             precautions against the events con-
             stituting the violation.

          •  Whether the violator knew or should have
             known of the hazards associated with the

          *  The level of sophistication within the
             industry in dealing with compliance issues
             and/or the accessibility of appropriate
             cor .rol technology (if this information is
             reauily available).  This should be balanced
             against the technology forcing nature of the
             statute, where applicable.

          •  Whether the violator in fact knew of the
             legal requirement which was violated.

     It should be noted that this last point, lack of knowledge
of the legal requirement, should never be used as a basis to
reduce the penalty.  To do so would encourage ignorance of
the law.  Rather, knowledge of the law should serve only to
enhance the penalty.

     The amount of control which the violator had over how
quickly the violation was remedied is also relevent in certain
circumstances.  Specifically, if correction of the environmental
problem was delayed by factors which the violator can clearly
show were not reasonably foreseeable and out of its control, the
penalty may be reduced.

     The suggested approach for this factor is for the case
development team to have ac-olute discretion to adjust the
penalty '-•? or 
 Adjustments for this factor beyond + 30% should be made only in
 extraordinary circumstances.  Adjustments in the unusual or
 extraordinary circumstance range will be subject to scrutiny in
 any audit of performance.

      B.  Degree of Cooperation/Noncooperation

      The degree of cooperation or noncooperation of the violator
 in remedying the violation is an appropriate factor to consider in
 adjusting the penalty.  Such adjustments are mandated by both the
 goals of equitable treatment and swift resolution of environmental
 problems.  There are three areas where this factor is relevant.

           1.  Prompt reporting of noncompliance

      Cooperation can be manifested by the violator promptly
 reporting its noncompliance.  Assuming such self-reporting is not
 required by law, such behavior should result in the mitigation of
 any penalty.

      The suggested ranges of adjustment are as follows.  The case
'development team has absolute discretion on any adjustments up to
 + 10% of the gravity component for cooperation/noncooperation.
 Adjustments can be made up to ± 20% of the gravity component, but
 only in unusual circumstances." In extraordinary circumstances,
 such as self reporting of a TSCA premanufacture notice violation,
 the case development team may adjust the penalty beyond the ^ 20%
 factor.  Adjustments in the unusual or extraordinary circumstances
 ranges will be subject to scrutiny in any performance audit.

           2.  Prompt correction of environmental problems

      The Agency should provide incentives for the violator to
 commit to correcting the problem promptly.  This correction must
 take place before litigation is begun, except in extraordinary
 circumstances.£/  But since these incentives must be consistent
 with deterrence, they must be used judiciously.
 2V  For the purposes of this document,  litigation is deemed  to
           * for administrative actions  - when the
             respondent files a response to an adminis-
             trative complaint or when the time to
             file expires or

           • for judicial actions - when an Assistant
             United States Attorney files a com-
             plaint in court.


     The circumstances under which the penalty is reduced depen
on the type of violation involved and the source*s response to
the problem.  A straightforward reduction in the amount of the
gravity component of the penalty is most appropriate in those
cases where either: 1) the environmental problem is actually cor-
rected prior to initiating litigation, or 2) ideally* immediately
upon discovery of the violation.  Under this approach* the re-Suction
typically should be a substantial portion of the unadjusted gravity

     In general, the earlier the violator instituted corrective
action after discovery of the violation and the more complete
the corrective action instituted, the larger the penalty
reduction EPA will consider.  At the discretion of the case
development team, the unadjusted gravity component may be
reduced up to 50%.  This would depend on how long the environ-
mental problem continued before correction and the amount of any
environmental damage.  Adjustments greater than 50% are permitted,
but will be the subject of close scrutiny in auditing performance.

     It should be noted that in some instances, the violator
will take all necessary steps toward correcting the problem but
may refuse to reach any agreement on penalties.  Similarly, a
violator may take some steps to ameliorate the problem, but
choose to litigate over what constitutes compliance,  in such
cases, the gravity component of the penalty may be reduced up
to 25% at the discretion of the case development team.  This
smaller adjustment still recognizes the efforts made to correct
the environmental problem, but the benefit to the source is not
as great as if a complete settlement is reached.  Adjustments
greater than 25% are permitted, but will be tne subject of close
scrutiny in auditing performance.

     in all instances, the facts and rationale justifying the
penalty reduction must be recorded in the ^ase file and in-
cluded in any memoranda accompanying settlement.

          3.  Delaying compliance

     Swift resolution of environmental problems will be encour-
aged if the violator clearly sees that it will be financially
disadvantageous for the violator to litigate without remedying
noncompliance.  The settlement terms described in the preceding
section are only available to parties who take steps to correct a
problem prior to initiation of litigation.  To some extent, this
is an incentive to comply as soon as possible.  Nevertheless, once
litigation has commenced, it should be clear that the defendant
litigates at its own risk.


     In addition, the methods for computing the benefit component
and the gravity component are both structured so that the penalty
target increases the longer the violation remains uncorrected.
The larger penalty for longer noncompliance is systematically
linked to the benefits accruing to the violator and to the con-
tinuing risk to human health and the environment.  This occurs
even after litigation has commenced.  This linkage will put the
Agency in a strong position to convince the trier of fact to
impose such larger penalties.  For these reasons, the Policy
on Civil Penalties provides substantial disincentives to litigat-
ing without complying.

     C.  History of noncompliance

     Where a party has violated a similar environmental require-
ment before, this is usually clear evidence that the party was
not deterred by the Agency's previous enforcement response.
Unless the previous violation was caused by factors entirely out
of the control of the violator,, this is an indication that the
penalty should be adjusted upwards.

     In deciding how large these adjustments should be, the case
development team should consider the following points:

          *  How similar the previous violation was.

          *  How recent the previous violation was.

          *  The number of previous violations.

          •  Violator's response to previous violation(s)
             in regard to correction of the previous

     Detailed criteria for what constitutes a "similar violation"
should be contained in each program-specific policy.  Neverthe-
less a violation should generally be considered "similar* if the
Agency's previous enforcement response should have alerted the
party to a particular type of compliance problem.  Some facts
that indicate a "similar violation" was committed are as follows:

          •  The same permit was violated.

          *  The same substance was involved.

          0  The same process points were the source
             of the violation.

          •  The same statutory or regulatory provision
             was violated.


          *  A similar act or omission (e.g. the failure
             to properly store chemicals) was the basis
            ' of the violation.

     For purposes of this section, a "prior violation* includes
any act or omission for which a formal enforcement response has
occurred (e.g. notice of violation, warning letter, complaint,
consent decree, consent agreement, or final order).  It also
includes any act or omission for which the violator has pre-
viously been given written notification, however informal, that
the Agency believes a violation exists.

     In the case of large corporations with many divisions or
wholly-owned subsidiaries, it is sometimes difficult to deter-
mine whether a previous instance of noncompliance should trigger
the adjustments described 'n this section.  New ownership often
raises similar problems.  .1 making this determination, the case
development team should ascertain who in the organization had
control and oversight responsibility for the conduct resulting
in the violation.  In some situations the same persons or the
same organizational unit had or reasonably should have had
control or oversight responsibility for violative conduct.  In
those cases, the violation will be considered part of the com-
pliance history of that regulated party.

     In general, the case development team should begin with
the assumption that if the same corporation was involved, the
adjustments for history of noncompliance should apply.  In
addition, the case development team should be wary of a party
changing operators or shifting responsibility for compliance to
different groups as a way of avoiding increased penalties.  The
Agency may find a consistent pattern of noncompliance by many
divisions or subsidiaries of a corporation even though the
facilities are at different geographic locations.  This often
reflects, at best, a corporate-wide indifference to environmental
protection.  Consequently, the adjustment for history of noncom-
pliance should probably apply unless the violat r can demonstrate
that the other violating corporate facilities are independent.

     The following are the Framework's suggested adjustment
ranges.  If the pattern is one of "dissimilar" violations,
relatively few in number, the case development team has absolute
discretion to raise the penalty amount by 35%.  For a relative~v
large number of dissimilar violations, the- gravity component
be increased up to 701.  If the pattern is one of "similar"
violations, the case development team has absolute discretion
raise the penalty amount up to 35% for the first repeat violation,
and up to 70% for further repeated similar violations.  The case
development team may make higher adjustments i- extraordinary
circumstances, but such adjustments wil- be su:;ect to scrut
in any performance audit.


     P.  Ability to pay

     The Agency will generally not request penalties that are
clearly beyond the means of the violator.  Therefore EPA should
consider the ability to pay a penalty in arriving at a specific
final penalty assessment.  At thetsane time, it is important
that the regulated community not see the violation of environ-
mental requirements as a way of aiding a financially troubled
business.  EPA reserves the option, in appropriate circumstances,
of seeking a penalty that might put a company out of business.

     For example, it is unlikely that EPA vould reduce a penalty
where a facility refuses to correct a serious violation.  The same
could be said for a violator with a long history of previous vio-
lations.  That long history would demonstrate that less severe
measures are ineffective.

     The financial ability adjustment will normally require a
significant amount of financial information specific to the
violator.  If this information is available prior to commence-
ment of negotiations, it should be assessed as part of the
initial penalty target figure.  If it is not available, the
case development team should assess this factor after commence-
ment of negotiation with the source.

     The burden to demonstrate inability to pay, as with the
burden of demonstrating the presence of any mitigating circum-
stances, rests on the defendant.  If the violator fails to
provide sufficient information, then the case development team
should disregard this factor in adjusting the penalty.  The
National Enforcement Investigations Center (NEIC) has developed
the capability to assist the Pegions in determining a firm's
ability to pay.  Further information on this system will be made
available shortly under separate cover.

     When it is determined that a violator cannot afford the
penalty prescribed by this policy, the following options should
be considered:

          •  Consider a delayed payment schedule;  Such a
             schedule might even be contingent upon an
             increase in sales or some other indicator of
             improved business.  This approach is a real
             burden on the Agency and should only be
             considered on rare occasions.

          •  Consider non-monetary alternatives, such as
             public service activities;  For example, in
             the mobile source program, fleet operators
             who tampered with pollution control devices


             on their vehicles agreed to display anti-
             tamper ing ads on their vehicles.  Similar
             solutions may be possible in other industries.

             Consider straight penalty reductions as a last
             recourse:  if this approach is necessary, the
             reasons for the case development team's
             conclusion as to the size of the necessary
             reduction should be made a part of the formal
             enforcement file and the memorandum accompany-
             ing the settlement.
          *  Consider joinder of the violator's individual
             owners;  This is appropriate if joinder is
             legally possible and justified under the

Regardless of the Agency's determination of an appropriate
penalty amount to pursue based on ability to pay considerations,
the violator is still expected to comply with the law.

     £.  Other unique factors

     Individual programs may be able to predict other factors
that can be expected to affect the appropriate penalty amount.
Those factors should be identified and guidelines for their use
•set out in the program-specific policies.  Nevertheless, eac1
policy should allow for adjustment for unanticipated factors
which might affect the penalty in each case.

     It is suggested that there be absolute discretion to adjust
penalties up or down by 10% of the gravity component for such
reasons.  Adjustments beyond the absolute discretion range will
be subject to scrutiny during audits.  In addition, they will
primarily be allowed for compelling public policy concerns or the
strengths and equities of the case.  The rationale for the reducti
must be expressed in writing in the case file and in any memoranda
accompanying the settlement.  See the discussion on pages 12 and
13 for further specifics on adjustments appropriate on the basis
of either compelling public policy concerns or the strengths and
equities of tr<* case.

II.  Alternative Payments

     In the past, the Agency has accepted various environmentally
beneficial expenditures in settlement of a case and chosen not to
3/ if a firm fails to pay the agreed-to penalty in an adminis-
trative or judicial final order, then the Agency must follow
the Federal Claims Collection Act procedures for obtaining t
penaltv a'-cu-.t.


pursue more severe penalties.  In general, the regulated community
has been very receptive to this practice*  In many cases,
violators have found "alternative payments* to be more attrac-
tive than a traditional penalty.  Many useful projects have been
accomplished with such funds.  But in some instances, EPA has
accepted for credit certain expenditures whose actual environ-
mental benefit has been somewhat speculative.

     The Agency believes that these alternative payment projects
should be reserved as an incentive to settlement before litigation,
For this reason, such arrangements will be allowed only in preliti-
gation agreements except in extraordinary circumstances.

     In addition, the acceptance of alternative payments for
environmentally beneficial expenditures is subject to certain
conditions.  The Agency has designed these conditions to prevent
the abuse of this procedure.  Host of the conditions below applied
in the past, but some are new.  All of these conditions must be
met before alternative payments may be accepted:^/

          *  No credits can be given for activities
             that currently are or will be required
             under current law or are likely to be re-
             quired under existing statutory authority
             in the forseeable future (e.g., through
             upcoming rulemaking).

          •  The majority of the project's environmental
             benefit should accrue to the general public
             rather than to the source or any particular
             governmental unit.

          •  The project cannot be something which the
             violator could reasonably be expected to do
             as part of sound business practices.
4/ in extraordinary circumstances, the Agency may choose not to
pursue higher penalties for "alternative* work done prior to
commencement of negotiations.  For example, a firm may recall a
product found to be in violation despite the fact that such
recall is not required.  In order for EPA to forgo seeking
higher penalties, the violator must prove that it has met the
other conditions herein stated.  If the violator fails to prove
this in a satisfactory manner, the case development team has the
discretion to completely disallow the credit project.  As with
all alternative projects, the case development team has the dis-
cretion to still pursue some penalties in settlement.

             EPA must not lower the amount it decides
             to accept in penalties by more than the
             after-tax amount the violator spends on
             the project
     In all cases where alternative payments are allowed, the
case file should contain documentation showing that each of
the conditions listed above have been met in that particular
case.  In addition when considering penalty credits. Agency
negotiators should take into account the following points:

          •  The project should not require a large
             amount of EPA oversight for its comple-
             tion.  In general the less oversight
             the proposed credit project would
             require from EPA to ensure proper
             completion, the more receptive EPA
             can be toward accepting the project
             in settlement.

          '  The project should receive stronger
             consideration if it will result in the
             abatement of existing pollution,
             ameliorate the pollution problem that
             is the basis of the government's claim
             and involve an activity that could be
             ordered by a judge as equitable relief.

          •  The project should receive stronger
             consideration if undertaken at the
             facility where the violation took place.

          *  The company should agree that any publicity
             it disseminates regarding its funding of
             the project must include a statement that
             such funding is in settlement of a lawsuit
             brought by EPA or the State.
5/ This limitation does not apply  ,D public awareness activities
'such as those employed for fuel sv .tching and tampering violatic
under the Clean Air Act.  The purpose of the limitation is to
preserve the deterrent value of the settlement.  But these violc
tions are often the result of public misconceptions about the
economic value of these violations.  Consequently, the public
awareness activities can be effective in preventing others from
violating the law.  Thus, the high general deterrent value of
public awareness activities in these circumstances obviates the
need for the one-to-one requirement on penalty credits.


      Each  alternative payment plan must entail an identified
project  to be  completely performed by the defendant.  Under the
plan,  EPA  must not hold any  funds which are to be spent at EPA's
discretion unless the relevant statute specifically provides
that  authority.  The final order, decree or judgment should
state what financial penalty the violator is actually paying and
describe as precisely as possible the credit project the violator
is expected to perform.

III.  Promoting Consistency

      Treating  similar situations in a similar fashion is central
to the credibility of EPA's  enforcement effort and to the success
of achieving the goal of equitable treatment.  This document has
established several mechanisms to promote such consistency.  Yet
it still leaves enough flexibility for settlement and for tailor-
ing the  penalty to particular circumstances.  Perhaps the most
important  mechanisms for achieving consistency are the systematic
methods  for calculating the  benefit component and gravity compo-
nent  of  the penalty.  Together, they add up to the preliminary
deterrence amount.  The document also sets out guidance on unifor
approaches for  applying adjustment factors to arrive at an initie
penalty  target  prior to beginning settlement negotiations or an
adjusted penalty target after negotiations have begun.

     Nevertheless, if the Agency is to promote consistency, it
is essential that each case  file contain a complete description
of how each penalty was developed.  This description should cover
how the preliminary deterrence amount was calculated and any
adjustments made to the preliminary deterrence amount.  It should
also describe  the facts and  reasons which support such adjustment
Only  through such complete documentation can enforcement attorney
program staff  and their managers learn from each others' experier.
and promote the fairness required by the Policy on Civil Penaltie

     To  facilitate the use of this information, Office of Legal
and Enforcement Policy will  pursue integration of penalty infor-
mation from judicial enforcement actions into a computer system.
Both Headquarters and all Regional offices will have access to
the system through terminals.  This would make it possible fcr
the Regions to compare the handling of their cases with those of
other Regions.  It could potentially allow the Regions,  as well
as Headquarters, to learn from each others'  experience and to
identify problem areas where policy change or further guidance
is needed.


Use of ?ena tv Figure in Sett eirent Discussions

    The Policy and Framework do not seek to constrain negotiations
Their goal is to set settlement target figures for the internal
use of Agency negotiators.  Consequently, the penalty figures
under negotiation do not necessarily have to be as low as the
internal target figures.  Nevertheless* the final settlement
figures should go no lower than the internal target figures unless
either: 1) the medium-specific penalty policy so provides or
2) the reasons for the deviation are properly documented.

                PROTECTION AGENCY f
                             Iw , t IN-
           EFFECTIVE DATE:  	__

"Headquarters Approval of Proposed Civil Penalties'*, dated Hay 31, 1985.

                       WASHINGTON, D C. 20460
                          MAY 3 f 1985
                                                      OFFICE OF FSFORCEMENT
                                                       AND COMPLIANCE

SUBJECT.  Headquarters Approval of Proposed Civil
          Penalty Settlements in Water Cases
FROM.     Glenn L.
          Associate Enforcement Counsel
            for Water

TO.       James Moore
          Regional Counsel, Region X
     This memorandum addresses what I understand to be the
belief of certain Regional staff that, if preliminary settlement
penalty figures in water cases are cleared with this office,
any final settlement submitted with a higher figure may be
disapproved by Headquarters as too high.

     Let rae clarify Headquarters policy in this area   OECM's
explicit approval of a Regional preliminary settlement figure,
whether in a Headquarters referral to the Department of Justice,
a separate OECM letter to DOJ following a direct referral, or
during negotiations with a water defendant, will not under any
circumstances preclude the Region from negotiating or accepting
a larger penalty settlement.  What OECM approves is a minimum
settlement amount, not a maximum or an exact amount.  This
office, for example, readily approved a $10,000 per day of
violation settlement in the 1983 Mobil Oil case, and we would
be happy to approve other settlements with similarly successful

     In order to facilitate clear and timely feedback from my
office on proposed minimum settlement amounts,  I strongly
encourage Regional staff to include those proposed amounts in
all litigation reports and to discuss informal settlement
proposals with my staff prior to raising them with defendants,
as called for by Agency policy.  Under these circumstances,
the Regional attorney can negotiate with a defendant confident
that all elements of the Agency will stand behind his or her
penalty proposals, so long as (1)  they are at or greater than
the figure previously approved by OECM and (2)  no new, material


infonnacion surfaces thac requires a reconsideration of the
Agency's minimum civil penalty settlement figure.  The Regiona
attorney should routinely keep this office well informed on th
progress of negotiations or litigation.

     If new informatior  indicates that a Headquarters-approved
penalty settlement figure should be adjusted, the Region should
inform this office to receive advance approval of a new figure
before negotiations with the defendant continue.

     I hope that this explanation will answer any questions
Region X may have had on this subject.  If you have any
questions, please call me at 475-8180 or David Drelich of my

cc: Richard H.  Mays, OECM
    Robert Burd,  Water Division Director,  Region X
    Jim Dragna, DOJ
    John Hohn,  Region X

"Division of  Penalties with State and Local Governments", dated October 30,

   "                     WASHINGTON, D c. 20460
                                                      OFF1CS OF ESFORCTMEVT
                                                        AND COMPLIANCE
 SUBJECT:   Division of Penalties with State and Local Governments
 FROM:      Courtney M.  Price
           Assistant Administrator for Enforcement
             and  Compliance Monitoring

 TO:        Regional Administrators
           Associate Enforcement  Counsels
           Program  Enforcement  Division Directors
           Regional Counsels

     This  memorandum provides  guidance to Agency enforcement
 attorneys  on the division of civil penalties  with state  and
 local governments,  when appropriate.   In  his  "Policy  Framework
 for State/EPA Enforcement Agreements"  of  June 26 , 1984,  Deputy
 Administrator Al Aim stated that  the  EPA  should  arrange  for
 penalties  to accrue  to states  where permitted by law.  This
 statement  generated  a number of  inquiries from states  and  from
 the Regions.  Both  the states  and the  Regions were particularly
 interested in what  factors EPA would  consider in dividing
penalties  with state and local governments.   In  addition,  the
 issue was  raised in  two recent cases,  U.S. y  Jones & Laucthlin
 (N,D. Ohio) and U.S. v Georgia Pacific Corporation (M.D. La.).
 In each case, a state or local governmental entity requested a
significant portion  of the involved penalty.   Consequently, OECM
and DOJ jointly concluded that this policy was needed.

     EPA generally encourages  state and local participation in
federal environmental enforcement actions*  State and  local
entities may share in civil penalties  that result from their
participation, to the extent that penalty division is permitted
by federal, state and local law, and is appropriate under  the
circumstances of the individual case.   Penalty division advances
federal enforcement goals by:

     1)  encouraging states to develop  and maintain active
         enforcement programs,  and

     2)  enhancing federal/state cooperation  in  environmental


However, penalty division should be approached cautiously because
of certain inherent concerns, including:

     1}  increased complexity in negotiations among the
         various parties, and the accompanying potential
         for federal/state disagreement over penalty
         division; and

     2}  compliance with the Miscellaneous Receipts Act/ 31
         U.S.C. §3302, which requires that funds properly
         payable to the united States must be paid to the U.S.
         Treasury.  Thus any agreement on the division of
         penalties must be completed prior to issuance of and
         incorporated into a consent decree.

     As in any other courc-ordered assessment of penalties under
the statutes administered by EPA, advance coordination and
approval of penalty divisions with the Department of Justice is
required.  Similarly, the Department of Justice will not agree
to any penalty divisions without my advance concurrence or that
of my designee.  In accordance with current Agency policy,
advance copies of all consent decrees, including those involv-
ing penalty divisions, should be forwarded to the appropriate
Associate Enforcement Counsel for review prior to commencement
of negotiations.

     The following factors should be considered in deciding if
penalty division is appropriate:

     1}  Tne state or local government must have an indepen-
         dent claim under federal or state law that supports
         its entitlement to civil penalties.  If the entire
         basis of the litigation is the federal enforcement
         action, then the entire penalty would be due to the
         federal government.

     2)  The state or local government must have the authority
         to seek civil penalties.  If a state or local govern-
         ment is authorized to seek only limited civil
         penalties, it .s ineligible to share in penalties
         beyond its statutory limit.

     3)  The state or local government must have partici-
         pated actively in prosecuting the case.  For example,
         the state or local government must have filed com-
         plaints and pleadings,  asserted claims for penalties
         and been actively involved in both litigating the
         case and any negotiations that took place pursuant
         to the enforcement action.


      4)   For  contempt  actions,  the  state  or  local  government
          must have  participated in  the  underlying  action
          giving  rise to  the  contempt  action/  been  a  signatory
          to the  underlying consent  decree, participated
          in the  contempt  action by  filing pleadings  asserting
          claims  for penalties,  and  been actively involved
          in both litigating  the case  and  any  negotiations
          connected  with  that proceeding.j/

      The  penalties  should be divided  in a proposed consent
decree based  on  the level of participation and  the penalty
assessment  authority of  the  state or  locality.  Penalty division
may  be accomplished more  readily if specific  tasks are assigned
to particular entities during  the course of  the litigation.
But  in all  events,  the division should  reflect  a fair apportion-
ment  based  on the technical  and legal contributions  of the
participants, within the  limits of  each participant's statutory
entitlement to penalties.  Penalty  division  should not take
place until the  end of settlement negotiation.  The  subject
of penalty  division is a matter for discussion  among the
governmental  plaintiffs.  It is inappropriate for  the defendant
to participate in such discussions.

cc:   F. Henry Habicht II, Assistant Attorney General
      Land and Natural Resources Division
I/ If the consent decree contains stipulated penalties and
specifies how they are to be divided, the government will
abide by those terms.

"CLEAN WATER ACT CIVIL PENALTY POLICY", dated February 11, 1986.  Also see
Addendum at III.B.9.

PENALTY ASSESSMENT", dated November 5, 1984.  See GM-33.

                       WASHINGTON, D.C. 20460
                                                     OFFICI OP C\FO«CEMCVT
                                                       AfcD COMPLIANCE

SUBJECT:  Guidance for Calculating the Economic Benefit of
          Noncompliance for a. Civil Penalty Assessment

FROM:     Courtney M. Price 	__
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Regional Administrators
          Associate Enforcement Counsels
          OECM Office Directors
     This guidance amplifies the material  in the Appendix of
GK-22, "Framework for Statute-Specific Approaches to Penalty
Assessment."  The Appendix presents a description of how to
calculate the economic benefit of noncompliance as part of
developing a civil penalty.  A new computer model* BEN, is a
refinement of the methodology for calculating the economic
benefit of noncompliance. •

     By refining the methods by which we calculate the economic
benefit of noncompliance* we will:

     1.  Respond to the problems that enforcement and program
offices identified concerning methods for  calculating the
economic benefit component of a civil penalty;

     2.  Ensure among the media programs appropriate consistency
in calculating the economic benefit component of a civil penalty;

     3.  Ensure that the economic benefit  of noncompliance con-
tinues to be a fairly valued, reasonable component of a civil
penalty; and

     4.  Ensure that the assumptions and data used in BEN to
calculate the economic benefit component can be defended at
either an administrative hearing or a judicial proceeding.



     This guidance describes BEN* the new computer model* in
terms of how this model resolves the identified problems related
to the use of CIVPEN.  EPA personnel can use BEN to calculate  .he
economic benefit a violator gains from delaying capital expendi-
tures for pollution control equipment or from avoiding the costs
of operating and maintaining pollution control equipment.
Exhibit I summarizes BEN.

     EPA personnel cannot use Bttf to calculate the economic
benefit component of a civil penalty if a violator's action
does not involve a delayed or avoided expenditure.  Under
these circumstances* program offices may elect to develop
statute-specific formulas as provided in GM-22 for calculating
the economic benefit component of a civil penalty.  These
formulas would be used to develop civil penalties in response
to actions such as certain TSCA marking/disposal violations or
RCRA reporting violations.  The rule of thumb in the general
penalty policy would not be appropriate fcr these types of

     OPPE is considering the feasibility of developing a second
computer model or rule of thumb formula that could be applied
uniformly to violations that do not involve delayed or avoided

     Regional personnel may use the rule of thumb described in
GM-22 to develop a preliminary estimate of the economic benefit
component of a civil penalty.  The rule of thumb is for the
convenience of EPA and is not intended to give a violator a lower
economic benefit component in a civil penalty.  Regional personnel
should consider whether an estimate of economic benefit derived
with the rule of thumb would be lower than an es - imate calculated
with BEN.  For example, the longer the period of noncoapliance,
the -store the rule of thumb underestimates the economic benefit
of noncompliance.

     If EPA proposes and a violator accepts the rule of thumb
calculation* Regional personnel can develop the civil penalty
without further analysis of economic benefit^.  If a violator
disputes the economic benefit figure calculated under the rule
of thumb, a more sophisticated method to develop the economic
benefit component of the penalty is required.


      In  general,  if  the  estimate under  the  rule  of thumb is
 less  than  $10,000, the economic benefit component is not needed
 to  develop a civil penalty;1  the other  factors in GM-22 still
 apply.   If the  rule  of thumb  estimate is more than $10,000,
 Regional personnel should use BEN  to develop an  estimate of
 the economic benefit component.


      EPA personnel should use the  revised computer model BEN

           1.  the rule of thumb indicates that the
              economic benefit of  noncompliance  is
              greater than $10,000» or

           2.  the violator rejects the  rule of thumb

      BEN uses 13  data variables.   At the option  of the user,
 BEN substitutes standard values for 8 of the 13  entries, and
 the user only provides data for 5  variables.  (See Exhibit X.)

      BEN also has the capability for EPA personnel to enter
 for those  8 variables the actual financial data  of a violator.
 In appropriate cases, EPA should notify  a violator of the
 opportunity to submit actual  financial data to use in BEN
 instead  of the B  standard values.  If a  violator agrees to
 supply financial  data, the violator must supply  data for all
 the standard values.

     The computer model BEN has advantages over previously
used methods for calculating the economic benefit component
of a civil penalty.  BEN does not require financial research
by EPA personnel.  The five required variables are information
about capital costs, annual operation and maintenance costs,
and the dates for the period of noncompliance.  Further, BEN
has the flexibility to allow a violator who cooperates with
EPA to provide actual financial data that may affect the penalty
V Although the general penalty policy cut off point is $10,000,
each program office may establish a cut off point for the
program's medium-specific policy.


     An economic benefit component calculated with BEN can be
defended in an administrative or judicial proceeding on the
grounds that the standard values used in BEN are derived from
standard financial procedures and the violator had an opportu-
nity to provide financial data to help develop the civil penalty.

     The use of BEN or statute-specific formulas when appro-
priate gives the Regional Offices flexibility in determining
the economic benefit of noncompliance.  Regional personnel
have a consistent method for developing a civil penalty under
several statutes for multiple violations that involve delayed
capital costs and avoided operation and maintenance costs.

     BEN is easy for a layman to use.  The documentation is
built into the program so that a Regional user always has
updated documentation and can use the program with minimal
training.  States are more likely to follow EPA's lead in
pursuing the economic benefit of noncompliance through civil
penalty assessments because the method available from EPA to
serve as a model does not require extensive financial research.

cc:  Regional Enforcement Contacts
     Program Compliance Office Directors

                          Exhibit I
A.  Accessed  via  terminal to EPA's  IBM  computer  in Durham, N.C.
B.  Can  be  run  in either  of  two  modest
    1.   Standard  mode:
         a)  Requires  5  inputs:
            i.  Initial Capital  Investment
            ii.  Annual  Operating and Maintenance Expense
          iii.  First Month  of Noncompliance
            iv.  Compliance Date
            v.  Penalty Payment  Date
         b)  Relies on realistic  standard values for
            remaining variables:
            i.  A set of  standard values for private
            ii.  A set of  standard values for munici-
                pally-owned  or not-for-profit companies
         c)  Would be used for final calculation of economic
            benefit unless the violating firm objected and
            supplied all  its own financial data
    2.   Specific  mode:
         a)  Requires 13 inputs
         b)  Would be used if violating firm supplied data or
            if EPA staff  researched data
C*  Is easy to use
    1.  Optional on-line documentation will guide inexperienced
        users through each step  of the model
    2.  Written documentation will be available by December
D.  Is based on modern financial principles

"Penalty Calculations Compliance Schedule for Pretreatment Enforcement
Initiative", dated February 19, 1985.  (See Also IV.C.lO)

                       WASHINGTON, O C 20460
                         FEE I 9 ;SS5

SUBJECT:  Penalty Calculation and Compliance Schedules  for
          Pretreatment Enforcement Initiative

FROM:     J. William Jordan, Acting Director
          Enforcement Division  (EN-338)
          Glenn L. Unterberger   .i~* J- cC^,C^
          Associate Enforcement Counsel
            for Water  (LE-134W)

TO:       Water Management Division Directors
            Regions I, III, V, and VI

          Regional Counsels, Regions I, III, V and VI

     During the week of February 4, staff from the Office
of Water Enforcement and Permits, the Office of Enforcement and
Compliance Monitoring, and the Deoartment oC Justice met
with you to discuss the potential referral candidates and the
scope of the referral packages for the Pretreatment Enforcement
Initiative.  We are pleased with the results of those meetings
and expect to receive your referral packages shortly, and in all
cases by February 28.  Ue have committed to expedite our normal
review process.

     Two aspects of the referral package may need to be clarified.
During the visits we distributed a draft penalty policy.  The
final version is attached for your use in calculatina the penalty.
As we noted in our visits and conference calls, we would advocate
a penalty of at least 520,000.00 in these cases.  Since this is
an interim penalty oolicy, please feel free to call us if you
have any questions as to its use for your cases.  We also dis-
cussed the compliance schedule that should be sought in settlement.
We would expect the POTW to submit a complete and approvable
pretreatment program in six months or less.  In addition, we
recommend that you plan to negotiate milestones and stipulated

                              - 2 -
penalties for failure by the POTWs to prepare an annual
report and for failure to implement the program (examples are

     If you have questions, please contact Ed Bender, OWEP,
(475-8331) or Kim Pearson, OECM (475-8185).
cc: Ross Connealy, DOJ

                                                                   Attachment A

                  Penalty  for Failure to Submit a Complete and Approvable
                                    Pretreatment Program

     The basis  for assessing a penalty in the Pretreatment Enforceront Initiative
 is  to be determined by two factors.  The first factor is the economic saving that
 a POTW received by failing to develop all or oart of an adeouate oretreatment
 program and the avoided costs of not implementing the program. The second factor
 is  the penalty  for the gravity of the failure to develop and inclement a nretreatnent
 program.  This  preliminary penalty figure can then be increased or decreased bv
 considering appropriate adjustment factors.  The basis for calculatina the oenaltv
 for pretreatnent violations is summarized by the eouation below.  If specific POT.-'
 costs are available for the economic or gravity component they should be used.

 Settlement amount*(Economic ccmDonent)+(Gravity component)* (adjustments)
                         I                       II              III
 NOTE: A minimum upfront penalty of $20,000 is advocated for all

 I.  Economic benefit component3{savings from delaying costs for program develoonent)+
                              (avoided costs of program implementation)

     A. Savings from delaying program development*(Program Development cost){interest
          rate)(percent of program not yet developed)

        1. Total cost to develop a complete program (including grants)
           a. Small POTW ( 1-5 MGD, IU flew 10% or less)         $5,000 to 525,000
              Depends on the sanding needed for the I Oar and
              whether developed in house or by consultant.
           b. Medium POTrf  (5-15 MGD, IU flow 10-20%, 50 lUs)     $25,000 to 75,000
              same considerations as a. Needs local limits.
           c. Large POTW   (over 15 MGD, 50 or more IDs, needs    $50,000 to $300,000
                    local limits, multijurisdictional)

         2. Cost to develop each program element

                                                 Typical Percent- of Total Cost*
            Program Element                      Small       Medium        Larce

             1. Industrial Waste Survey           30           25            20
             2. Legal Authority                    857
             3. Technical/Local limits            11            6             6
             4. Compliance Monitoring Plan         8            5             7
             5. Administrative Procedures          7            8            10
             6. Resources                         36           51            51

         3. Interest rate assumed to be .12 annually for one year on borrowed

         4. Example calculation: POTW-10 MGD,  15% III Flow, 30 Ills
              Incomplete oroqram elements 2, 3,  and 5 (19% of total)
              Program cost=$50,000;  interest rate=.12;

                 Economic benefit comDonent=(550,000)(.12)(,19)=$11AO.OO

*JRB Associates. 1982.  "Funding Manual  for Local  Pretreatment Programs" EPA Contract
 No. 68-01-5052.  Tables 2.7 (manpower  and GC/MS costs dropped)  and Table 3.7.


     B.  Avoided Implementation costs'^annual salaries and operating costs)
            (number of years delayed)(percent of program not implemented)

         1. total Annual Implementation cost-range 310,000 to 5250,000
            - Salaries based on work years shown under resources bv the POTW
            - Can be drawn directly from the POTW proaram submission estimates.
            - Monitoring costs depends on number of XL's, inspections, and analyses.

         2. Number years delayed-assume implementation by reouired Julv, 19R3 unless
            other deadline is justified based on the permit.

         3. Cost to implement each program activity
            - In some cases, a POTW may have implemented some oretreafent practices
              even though their proaram is not approved bv the approval authoritv.

                      Activity              Typical Percent of Implementation Cost*
                                                     Small     Medium    Large
             1. Sampling and Industrial Review         22         19        18
             2. Laboratory Analysis                    34         34        39
             3. Technical Assistance                   17         26        20
             4. Legal Assistance                       13         09        13
             5. Program Administration                 14         11        10

          4. Example calculation

                Annual cost to unplement=S60,000; activities not implemented
                3 and 4; assume same POTW as A-4. Delayed 18 months.
                Avoided costs=(S€0,000)(.35)(1.55=531,500.00

II. Gravity Component
s   ^^^^^^^^^^^^^^^^^^^^^^^

     This component considers damage done to the POTW and its collection system, or
potential harm to the environment that may have been allowed to continue as a result
of the POTW not having an approved and implerented pretreabnent program.  Therefore,
this aspect of the penalty should include any known costs which the POTW is incurring
for O&M, sludge disposal, and collection system renovation which will be eliminated
by implementing the pretreatment program.  In addition, the penalty policy for the
multi-case initiative includes the factor of "importance to the regulatory svstem."
Penalties in these cases should reflect the importance that the Agency attaches to the
prompt submission of approvable pretreatment programs.  This factor would justify a
minimum gravity component of 55,000 or 10% of the economic benefit, if it is higher,
where actual environmental harm, significant risk of harm, or damage to the POTW is
not shown.  The factors that should be considered in this calculation are included in
the eguation below:

Gravity Component-($5000)*( (length) (:-K> impact))+(Loss of plant useful 1 ife)+(Increased
                  costs for O&M and sludge disposal)+((Length of violation)(Nature of
                  IU wastewater?))

     A. Length of Violation-this value is used to weight toxic and water guality
        impacts, which are expressed as cost factors.  The length of violation in
        months should be divided by 3.

     B. Loss of useful life of the treatment plant that could be avoided by i
        pretreatment.  Any cost saving should be entered directly.

     C. Excess costs for O&M and Sludge Disposal which could be avoided by unolementir
        pretreatment.  Include these costs directly.

     D. Nature of the IU wastewaters that will be controlled.

        1, Toxics
        2. Corrosives-low/hiah OH
        3. Exolosives-oraanic solvents, history of in-olant problems, sentic haulers,
           Multiply the percent IU flow times SlOOf) if no data are availanle.  T^ese
           data may include the costs of TU treatment, workmans coroersation, or
           ot!-er damages from toxics.

     E. vsater Oualitv impacts, e.g.,

        1. fish kills -economic value + replacement and maintenance costs
        2. loss of habitat-cost/acre or cost/strea-i mile
        3. drinking water contamination - cost of treatment

     F. Example calculations

        Length of violation=18 months/3 = 6 units
        Loss of useful life- 1 year lost of desian life, 20 years  =.05
                             cost=.05(cost of damaged comDonent=S10000)=5500
        IU waste controlled=.2(1000);

        Gravity component* $5000+5500+{6(S200)=S6700

III. Adjustments

,     If the POTW has demonstrated qood faith, the ?OTW rav be penalized to recover
a minimum of economic benefit plus 10% or 55,000, whichever is hiaher.  The penalty
should also consider other factors which are favorable to the POTW.  "^lese mav
include delays by EP^, ambiauous information given to the POTtf by =:?*, and other
factors as may be appropriate, such as including inability to pay-

     Example Calculations

     No equities for the POTW. Peaio^ oro"idea written auidance and issued an a,O
     which POTW violated.

              Recalcitrance (e.g., failure to comply with           510000
                a previous administrative order)

Total Penalty for Example POTH
                 Component                            ,             Amount
                 Economic                                           532640
                 Gravity                                            $ 6700
                 Adiustrants                                        S10000
                  Total                                             549340

                                                                 Attachment B

                             Compliance Schedule Elements

        Milestones                                      Deadl me

1. Submit complete program                   Six months (maximum) after settlement
2. Submit program implementation             Six months after approval
   status report
3. Advise approval authority of              30 davs after change occurs
   program cnange
4. Respond to noncotnpl lance of               Based on trre frame for an appropriate
   industrial users through                  enforcement response
   enforcement activities
5. Inspect all major industrial users        Within six months after settlement

Examples of Stipulated Penalties for Compliance Milestones for a Small POT^

1. Failure to submit complete program        S200 day   day 1-15
                                             S400 day   after day 15
2. Failure to submit annual report           $200 day
3. Failure to notify approval authority      $200 day
   of program changes
4.- Failure to address IUs noncompliance      S150/informal action
   through enforcement activities*           $200-$750/formal action
5. Failure to inspect major industrial       $100/lnsoection

* The control authority should, as part of its approved program, have procedures and
  time frames to respond to instances ci. IU noncompliance.  The control authority must
  contact the 10 for all instances of noncomoliance {e.g., failure to report, failure
  to monitor, or violations of effluent limits and compliance schedules).  The POTW
  should start with telephone calls for the initial minor violations and proceed to
  initiate formal written enforcement activities (i.e., NOVs, administrative orders,
  penalties,  and lawsuits)  for continued noncompliance.  The PCTW must maintain a loq
  of IU violations and enforcement responses.  When the IU noncompliance occurs and
  the control authority fails to initiate appropriate and timely enforcement action,
  the control authority has failed to enforce its pretreatment program and is subject
  to penalties.  Additional guidance on appropriate and timely enforcement responses
  will be provided later in the guidance to Control Authorities.

"Enforcement Settlement Negotiations",  dated May 22,  1985.  See GM-39.

   /    ,                WASHINGTON. D.C.
                                             I I  1986
                                                       OFFICE OF ENFORCfMf N*
                                                         *ND COMF1 *%<"£
  SUBJECT:  New Clean Water  Act  Civil  Penalty Policy

  FROM:     Lawrence J. Jensen \fajMnt J -JtfUtfU'
            Assistant Administrator  for Water
            Courtney M. Price     	
            Assistant Administra"Ebr~fof  Enforcement
              and Compliance Monitoring

  TO:       General Counsel
            Regional Administrators
            Regional Counsels
            Regional Water Management  Division  Directors

       Attached is the Agency's new Clean Water Act civil  penalty
  policy to be used by EPA in calculating the penalty  that the
  Federal government will seek in settlement of judicial  actions
  brought under Section 309 of the CWA.  This policy supersedes
  the CWA Civil Penalty Policy issued  on July 8,  1980  and  repre-
  sents the Office of Water's guidance in response  to  EPA's
  Policy on Civil Penalt_ie_s (GM-21) and  A Framework for Statute-
  Spec ifj,c Approaches to Penalty Assessments (GM-22) issued  on
  February 16, 1984.  This policy is effective  as of the  date of
  this memorandum and shall be applied to future  enforcement
  actions and to pending enforcement actions in which  the
  government has not transmitted to the  defendant a proposed
  settlement penalty.

       The attached document consists of the following three
  parts: (1) the CWA Penalty Policy; (2) the policy "methodology",
  which is a one-page description of each of the  steps to  be
  taken in a penalty calculation, along  with one  page  of  footnotes;
  and (3) the "worksheet", a proposed model sheet to be used to
  record the different numerical components of  the  final penalty.

       This penalty policy is designed to promote a more consistent,
  Agency-wide approach to the assessment of civil penalties  while
  allowing substantial flexibility for individual cases within
  certain guidelines.  We believe that this penalty policy,  when
  effectively applied, will promote the  goals of  increasing

                            - 2 -
recovery of economic benefit of non-compliance, providing
substantial deterrence to noncompliance, providing a more fair  ""
and equitable treatment of the regulated community, and achieving
a more swift resolution of environmental problems and of
enforcement actions.  In order to support the goals of this
policy and EPA's enforcement efforts generally, application of
this policy may result in EPA seeking higher civil penalties
than it has in the past.

     This CWA penalty policy tracks the basic concepts and
procedures embodied in the general penalty policy and Framework.
For example, the CWA policy directs the Regions to calculate
the economic benefit of noncompli  ce, calculate the "gravity"
(or seriousness) component, and t-«n calculate adjustments to
consider ability to pay, litigation factors, and other factors.

     This policy includes the following minor deviations from
the general penalty policy and the Framework which we believe,
based upon our past experience with Clean Water Act enforcement,
are reasonable:

     (1)  The first adjustment factor is "History of Recalci-
trance."  We believe that this factor should only result in an
increase in the proposed penalty amount;
     (2)  The remaining t«*o adjustment factors ("Ability to
Pay" and "Litigation Considerations") should only be used to
reduce the p-oposed penalty;

     (3)  A proposed section on "mitigation projects" has
been included, although the Department of Justice and the
\gency may make some additional refinements on this issue in
the near future; and

     (4)  The economic benefit component will not be deleted
merely because the component involves an "insignificant amount."

     Substantial thanks are due to the Clean Water Act Penalty
Policy Work Group for an excellent job in developing an initial
draft, collecting comments, carefully considering all comments,
and reconciling and balancing often disparate viewpoints
regarding penalty assessment.  Thanks also to staff in the
Regional Offices and in a number of Headquarters offices and
the Department of Justice for considerable assistance in
providing review and comment on drafts.

     During the upcoming months, we will carefully analyze
and evaluate the application and effectiveness of this penalty
policy.  After, that, we will issue appropriate refinements to
the policy.

                            - 3 -
     In the near future, we will publish the policy in the
Federal Register.  In addition, we will soon distribute some
example calculations and hold training workshops to
provide further guidance on the application of this policy.

     If you have any questions or comments on this policy,
please contact Anne Lassiter, at 475-8307, or Jack Winder, at

cc:  Clean Water Act Penalty Policy Work Group
     Associate Enforcement Counsel for Water
     OECM Office Directors
     OW Office Directors
     Department of Justice, Environmental Enforcement

                CLEAN WATER ACT

                         UNITED STATES
                                            FEB 11
                            EFFECTIVE DATE:

                        Clean Water Act
                Policy  for Civil Settlement Neaotiations
I.   Introduction

     Under Section 309 of the Clean Water Act (CWA), the
Administrator is authorized to bring civil actions to enforce
certain requirements of the Act and related regulations.  In
such actions, the Administrator may seek a civil penalty not to
exceed $10,000 "per day of such violation."  The Agency will
vigorously pursue penalty assessments in judicial actions to
ensure deterrence and to recover appropriate penalties.

     In order to guide settlement negotiations on the penalty
issue in actions under Section 309 of the CWA and Section 113
of the Clean Air Act for failure to meet statutory deadlines,
the Agency issued a Civil Penalty Policy on July 8, 1980.
During the next few years, the Agency identified the following
four goals for improving its civil penalty assessment practices:
(1) penalties should, at a minimum, recover the economic benefit
of noncompliance; (2) penalties should be large enough to deter
noncompliance; (3) penalties should be more consistent throughou
the country in an effort to provide fair and equitable treatment
to the regulated community; and (4) there should be a logical
basis for tne calculation of civil penalties for all types of
violations, industrial and municipal, to promote a more swift
resolution of environmental problems and of enforcement actions.

     In an effort to address these and related penalty issues,
on February 16, 1984, the EPA Office of Enforcement and Com-
pliance Monitoring (OCCH) issued the following two civil penalty
guidance documents:  The Policy on Civil Penalties (f GM-21),
and the companion document entitled A Framework for Statute-
Specific Approaches to Penalty Assessments, {f GM-22), as
general guidance for settlements for violations of all statutes
which EPA enforces.  Although the 1984 penalty policy documents
do provide basic conceptual guidance for penalty calculations,
they were designed to be implemented further through medium-
specific penalty guidance.   The "Policy" document states in
part, as follows:

          Each EPA program office, in a joint effort with
     [OECM], will revise existing policies, or write new
     policies as needed.  These policies will guide the
     assessment of penalties under each statute in a manner
     consistent with this document and,  to the extent
     reasonable, the accompanying Framework.  [Policy,
     at 1, 2]

                             -  2  -
 II.  Purpose

     Thlft penalty  policy  and  attached methodology  is  the water-
 specific-penalty guidance for certain CWA  violations.  This
 policy  follows  the major  principles  set  out  in  the general
 penalty policy  documents  and  also  reflects considerations
 unique  to CWA enforcement.

     As the Framework  directs,  this  CWA  Penalty Policy provides
 "a system for quantifying the gravity of violations of the laws
 and  regulations .  .  .  ."   Moreover,  this policy provides a logica
 structure and a number of different  ways (number of violations,
 duration, etc.) to quantify the severity of  a defendant's
 noncompliance with the CWA.   The policy  also provides a number
 of ranges of weighting factors in  order  to allow the  Regions
 flexibility in  exercising their experienced  judgment.
     The calculated  penalty figure should  represent a reasonable
 and  defensible  penalty which  the Agency  believes it can and
 should  obtain in a settlement in compromise  of  its claim for  the
 statutory maximum  penalty.  This figure, and a  discussion of
'the  basis of calculation, must be  included in all  litigation
 reports.  After referral, as  more  information becomes available,
 the  penalty calculation should be  modified to reflect relevant,
 new  information.   In those cases which proceed  to  trial, the
 government should  seek a  penalty higher  than that  for which
 the  government  was willing to settle, reflecting considerations
 such as continuing noncompliance and the extra  burden placed
 on the  government  by protracted litigation.

 III. Applicability

     This penalty  policy  applies to  Federal  CWA civil judicial
 enforcement actions  commenced after  the  effective date of this
 policy  and to pending  judicial enforcement cases in which the
 government has  not transmitted to  the defendant an approved oral
 or written proposed  penalty.   The  policy applies to civil
 penalties sought under CWA Section 309 for violations including
 the  following:  violations of  MPDES permits by industrial and
 municipal facilities;  discharges without an  NPDES permit!
 violations of general  and categorical pretreatment requirements
 and  local limits;  monitoring  and reporting violations; viola-
 tions of Section 405 sludge use or disposal  requirements; etc.
 The  policy also applies to violations of Section 308  information
 requests and  to violations of Section 309  administrative orders.
 This policy shall  not  be  applied to  CWA  civil enforcement
 actions brought exclusively under  S311  ("hazardous substance
 spills") or for violations related to requirements in $404
 (disposal of  "dredged  or  fill" material).  The  CWA and imple-
 menting regulations  provide unique enforcement  procedures and
 penalty provisions for $311 and $404 violations which are
 currently being followed  in pursuing these types of cases.

                            - 3 -
IV•  Penalty Calculation Methodology

     Th«"initial calculation shall be an estimate of the
statutory maximum penalty in order, for comparison purposes,
to determine the potential maximum penalty liability of the
defendant.  The penalty which the government seeks in settle-
ment may not exceed this statutory maximum amount.

     The Regional office shall then calculate a civil penalty
figure for settlement purposes based upon the following
formula: "Civil Penalty * (Economic Benefit Component) + (Gravity
Component) +/- (Adjustments).*

     The civil penalty settlement calculation involves the
following four consecutive steps:  (1) calculate the "Economic
Benefit" of noncompliance; (2) calculate the monthly and total
"Gravity Components"; (3) calculate the "Adjustment Factors";
and (4) calculate the total penalty.

     (1)  Economic Benefit.  Consistent with the Agency-wide
"Policy and Framework", every reasonable effort shall be made
to calculate and recover the economic benefit of noncompliance.
Note that the economic benefit should be calculated from the      ]
start of noncompliance up to the point when the facility was or   I
will be in compliance.  In a limited number of cases, based       *
upon a defendant's inability to pay or "litigation practicalities",
application of the "adjustment factors" may justify recovery of
less than the calculated economic benefit.  The economic benefit
component shall be calculated by using the EPA computer program
— "BEN."  This program produces an estimate of the economic
benefit of delayed compliance, which is calculated to be the
sum of the net present value of: delayed capital investment,
one-time, non-depreciable expenditures, and avoided operating
and maintenance expenses.  (See "BEN Users Manual," OPPE/OECM,
January 1985.)

     (2)  Gravity Component.  The gravity calculation methodology
is based upon a logical scheme and criteria which relate the
gravity of the violations to the Clean Water Act and its regula-
tory scheme.   Every reasonable effort should be made to calculate
and recover a "gravity component" in addition to the economic
benefit component.   As the penalty Policy states:

          The removal of the economic benefit of
          noncompliance only places the violator in
          the same position as he would have been
          if compliance had been achieved on time.
          Both deterrence and fundamental fairness
          require that the penalty include an
          additional amount to ensure that the
          violator is economically worse off than
          if [he] had obeyed the law.   [Policy, at 3]

                            - 4 -
     The following four gravity weighting factors should be
considered for each month during which there was one or more
violations and assigned values according to the attached "CWA
Penalty Policy Calculation Methodology":

     "A" —  "Significance of Violation."  This factor is to
reflect the degree of the exceedance of the most significant
effluent limitation violation each month, and is weighted more
heavily for exceedances of toxic effluent limitations.  The
attached outline contains a table indicating the range of
"significance of violation" factor values for exceedances of
effluent limitations (% over permit effluent limitation).
Note that all exceedances, and all other violations of permit
conditions in a given month, should be accounted for under
gravity weighting factor "C" - "Number of Violations."

     "B" — "Health and Environmental Harm."  A value between
1 and a value that results in the statutory maximum penalty may
be applied to each month in which one or more violations present
actual or potential harm to human health or to the environment.

     "C" — "Number of Violations."  This factor allows
consideration of the total number of violations each month,
including all violations of permit effluent limitations,
monitoring and reporting requirements, and standard and special
conditions.  It is important to account for each violation in
assessing the significance of a defendant's violations, and
this factor allows for flexibility in assessing penalties for
multiple violations.  Violation of a monthly average effluent
limitation should be counted as 30 violations, a weekly average
effluent limitation violation should be counted as 1 violations,
violations of different parameters at the same outfall are to
be counted separately, and violations at different outfalls are
to be counted separately.  The attached outline contains a
range of weighting factor values between 0 and 5 to account for
the total number of violations.  In addition, this "number of
violations* factor may be weighted more heavily to account for
serious or significant violations other than the most signifi-
cant effluent limit violation which was accounted for under
factor "A."

     "D" — "Duration of Noncompliance."  This factor allows
consideration of continuing, long-terra violations of an effluent
limitation or other permit condition, and for extended periods
of discharge without a permit.  The attached outline contains
a range of values between 0 and 5 for the "Duration of Noncom-
pliance" factor which should be applied to each month of
continuing violation of the same requirement.  Generally, "long-
term" violations are those which continue for three or more
consecutive months.

                            - 5 -
     Th« gravity component should be calculated from the date
on which the violations at issue began up to the date when the
violations ceased or the date of anticipated filing of the
enforcement action.  The monthly gravity component is the sum
of the gravity weighting factors, plus one, multiplied by
$1,000.  The total gravity component is the sum of all monthly
gravity components.

     (3)  Adjustment Factors.  After the economic benefit
component is added to the sum of all the * monthly gravity
components,* this total may be modified by the application of
"adjustment factors."  The consideration of "history of recalci-
trance* may only result in an increased penalty.  In addition,
in some cases and when justified in writing, the following two
factors may be applied for a penalty reduction: ability to pay
and litigation considerations.

          (A)  History of recalcitrance (to increase penalty).
The "recalcitrance" factor will allow for higher penalties for
bad faith, unjustified delay in preventing, correcting or
mitigating violations, violations of prior administrative orders
or consent decrees, failure to provide timely and full informa-
tion, etc.  This factor should also be used to account for the
relationship of the violations to the regulatory scheme, i.e.
the significance of the recalcitrance.   For example, higher
values for this factor may be used to account for municipal
violations which continue beyond July 1, 1988.  This factor is
to be applied one time, by multiplying a percentage (0 to 1501}
times the sum of the "total gravity component" plus the economic
benefit calculation and then adding this figure to the benefit
and gravity total.  The resulting figure is the 'preliminary
total," which shall not exceed the statutory maximum.  The
application of the recalcitrance factor to the total figure
allows for a more logical relationship between recalcitrance
and the actual significance of the violations.  The recalci-
trance factor may also be increased during negotiations if
defendant continues to be recalcitrant with the remedy or with
settlement efforts.

          (B)  Ability to pay (to decrease penalty).  The
Regional-offlee should evaluate the ability of the defendant to
pay the proposed civil penalty and to pay for the proposed
injunctive relief.  The government should carefully analyze
this factor where it appears that the defendant can convincingly
demonstrate an inability to pay a given penalty.  The defendant
has the principal burden of establishing a claim of inability
to pay.  The government typically should seek to settle for as
high an amount which the government believes defendant can
afford without seriously jeopardizing defendant's Ability to
continue operations and still achieve compliance, unless the
defendant's behavior has been exceptionally culpable, recalci-

                            - 6 -

trant, or threatening to human health or the environment.  The
government should carefully assess the accuracy of the actual
or anticipated claim.  Evaluation by an outside expert consultant
may be necessary to rebut the inability to pay claim.  If
securing an outside expert is impractical or impossible, the
Region shall make its best estimate of ability to pay.

     Many factors often have a significant impact on ability to
pay and may justify a reduction of a penalty.  For example, the
Region may consider high user fees, high percentage of local
funds spent on a POTW, low bond rating, low per capita income,
low total of population served by the POTW, bankruptcy, etc.,
in evaluating an "inability to pay" claim.

         (C)  Litigat i on considerations (to decrease penalty).
The government should evaluate every penalty with a view toward
the potential for protracted litigation and attempt to ascertain
the maximum civil penalty the court is likely to award if the
case proceeds to trial.  The Region should take into account
the inherent strength of the case, considering for example, the
probability of proving questionable violations, the probability
of acceptance of an untested legal construction, the potential
effectiveness of the government's witnesses, and the potential
strength of the defendant's equitable defenses.  (Also see
GM-22, pp. 12 - 13; discussion of "compelling public concerns".}

     Examples of equitable considerations which may lead to
ad}ustment of the penalty amount include the following: whether
the defendant reasonably, conclusively, and detrimentally
relied on EPA's or state or local agency's representations or
actions; whether the defendant has requested modification of
its final effluent limits (related to, for example, pending
S301(h) decisions, pending industrial variance decisions, or
new wasteload allocations); whether the defendant's violations
are clearly attributable to accepting new discharges from nearby,
noncomplying jurisdictions; and whether the defendant's compliance
has been delayed in an unusual or unreasonable manner by other
Federal requirements through no fault of the defendant.

     These equitable considerations will justify mitigation only
to the extent that they directly caused or contributed to the
defendant*s violations.  The government may reduce the amount
of the civil penalty it will accept at settlement to reflect
these considerations where the facts demonstrate a substantial
likelihood that the government will not achieve a higher penalty
at trial.

V.   Mitigation Projects

     In the past, in a few cases the Agency has accepted consen
decree provisions which allow the reduction of a civil penalty
assessment in recognition of the defendant's undertaking an
environmentally beneficial "mitigation project."

                             -  7 -
     The  following criteria  are provided  to guide the use of
mitigation projects  in settlements.

     (1)  The activity must  be initiated  in addition to all
regulatory compliance obligations.

     The  project may not be  an activity which is otherwise
required  by law.  The project may not be  a substitute for full
compliance -- it must be designed to provide an environmental
benefit beyond the benefits  of full compliance.

     (2)  The activity is most likely to  be an acceptable
basis for mitigating penalties if it closely addresses the
environmental effects of the defendant's  violation.

     Preferably, the project will address the risk or harm
caused by the violations at  issue.  In general, qualifying
activities must provide a discernible response to the percep-
tible risk or harm caused by defendant's  violations which are
the focus of the government's enforcement action.

     (3)  The defendant's cost of undertaking the activity,
taking into account the tax  benefits that accrue, must be
commensurate with the degree of mitigation.

     In order to attain the deterrent objectives of the civil
penalty policy, the amount of the penalty mitigation must
reflect the actual cost to the defendant.  With consideration
of tax benefits, the actual cost of the project may exceed
the value of the mitigation.

     (4)  The activity must demonstrate a good-faith commitment
to statutory compliance.
     One  test of good faith  is the degree to which the defendant
takes the initiative to identify and commence specific,  potential
mitigation projects.  In addition, the project must be primarily
designed  to benefit the environment rather than to benefit the

     (5)  Mitigation based on the defendant's activity must not
detract significantly from the general deterrent effect of the
settlement as a whole.

     The government should continue to consider mitigation
projects  as the exception rather than the rule.   Efforts should
be made to eliminate any potential perception by the regulated
community that the government lacks the resolve to impose
significant penalties for substantial violations.  The government
should seek penalties in conjunction with mitigation activities
which deter both the specific defendant and also the entire
regulated community.   Accordingly, every settlement should
include a substantial monetary penalty component.

                            - 8 -
     (6)  Judicially-enforceable consent decrees must meet the
statutory and public interest criteria for consent decrees and
cannot contain provisions which would be beyond the power of
the court to order.

     A proposed consent decree should not include provisions
which would be beyond the power of the court to order under
the particular statute which had been violated.  Additional
guidance on the appropriate scope of relief might be found in
the statute, the legislative history or the implementing

     The Agency should exercise case-by-case judgment in deciding
whether to accept a mitigation project based upon the above
criteria and, in addition, based upon consideration of the
difficulty of monitoring the implementation of the proposed
project in light of the anticipated benefits of the project.

VI.  Intent of Policy; and Information Requestsfor
     Penalty Calculations

     The policies and procedures set out in this document are
intended solely for the guidance of government personnel.  They
are not intended, and cannot be relied upon, to create any right
substantive or procedural, enforceable by any party in litigatio
with the United States.  The Agency reserves the right to act
at variance with these policies and procedures and to change
them at any time without public notice.  When the Regions
deviate from this policy they shall include in the litigation
report a brief description of the nature of and justification
for the deviation.  In addition, any penalty calculations under
this policy made in anticipation of litigation are likely-to be
exempt from disclosure under the Freedom of Information Act.
As a matter of public interest, the Agency may release this
information in some cases.

             Clean Water Act Penalty Policy;  Calculation Methodology
                         i (ADJUSTMENTS)
Step 1:  Calculate the Statutory Maximum Penalty

Step 2:  Calculate the Economic Benefit Using "BEN"3*4

Step 3i  Calculate the Total Gravity Component5
         - Monthly Gravity Component » ($1,000) x (1+A+B+C+D)
         - Total * Sum of Monthly Gravity Components
     A.  Significance of Violation6
% Exceedence
Monthly Ayg.
21 - 40
41 - 100
101 - 300
301 - >
% Exceedence
7-Day Avg.
31 - 60
61 - 150
151 - 450
451 - >
% Exceedence
Daily Max.
51 - 100
101 - 200
201 - 600
601 - >
10 - 20
     B.  Health and Environmental Harm7
         (i)   Impact on Human Health; or
         (ii)  Impact on Aquatic Environment
            10 - Stat. Ma>
     C.  Number of Violations8
     D.  Duration of Noncompliance9
Step 4:  Include Adjustment Factors
     A.  History of Recalcitrance1-0 (Addition)
         - Penalty may be increased by up to 150 percent based upon the past
           and present recalcitrance of the defendant.
     B.  Ability to Pay (Subtraction)
         - Penalty may be adjusted downward to  represent the defendant's
           ability to pay.
     C.  Litigation Considerations (Subtraction)11
         - Penalty may be adjusted downward to  reflect  the maximum amount
           which the court might assess if the  case  proceeds to trial.


1.  In general, the Settlement Penalty amount shall be at least the
    Economic Benefit of Noncompliance plus a gravity component.

2.  The maximum Settlement Penalty shall not exceed the amount
    provided by Section 309(d), $10,000 per day of such violation.

3.  Calculate all economic benefits using BEN.  There is no minimum
    amount triggering the use of BEN.

4.  Economic benefit is to be calculated as the estimated savings
    accrued to the facility; i.e., it is to be based upon the total
    amount which should have been spent by the facility.  (All
    capital and expense costs, direct and indirect, are to be

5.  The Total Gravity Component equals the sum of each Monthly
    Gravity Component for a month in which a violation has occurred.

6.  The Significance of Violation is assigned a factor based on
    the percent by which the pollutant exceeds the monthly or
    7-day average or daily maximum permit limitation and whether
    the pollutant is classified as toxic, non-toxic or conventional.

7.  Where evidence of actual or potential harm to human health
    exists, a factor from "10" to a value which results in the
    statutory maximum penalty should be assessed*  Where the
    identified impact relates only to the aquatic environment, a
    factor from "1" to "10" should be used.

8.  The Region has the flexibility to assign a high penalty factor
    where an excessive number of violations occur in any month
    (effluent limit, reporting, schedule, unauthorized discharge,
    bypass, etc.).

9.  The Duration of Noncompliance factor allows the Region to
    increase the monthly gravity component for continuing, long-
    term violations of the same parameter(s) or requirement(s).
    Generally/ a "long-term" violation is one which continues for
    three or more consecutive months.

10.  A factor ranging from "0" (good compliance record, cooperation
    in remedying the violation) to 150 percent of the total of the
    Economic Benefit and Gravity Component may be added based upon
    the history of recalcitrance exhibited by the violator.

11.  In addition, the penalty should.be reduced by any amount which
    defendant paid as a penalty to a State or local agency on the
    same violations.

CWA Penalty Summary Worksheet
(1)  No. of Violations
       x 910,000 - stat. max.

(2)  Economic Benefit ("BEN")
      (period covered/
      months)         *

(3)  Total of Monthly Gravity
     Components                   $

(4)  Benefit + Gravity   TOTAL

(5)  Recalcitrance Factor 	%
     (0-150%) x Total (Line 4) »  $
(6)  Preliminary        TOTAL (Line 4 + Line 5)

(7)  Litigation Considerations
       (Amount of reduction)      $
(8)  Ability to Pay
       (Amount of reduction)
Name and Location
  of Facility
Date of Calculation

"Letter of the Administrator to James Borberg, President of the Association
of Metropolitan Sewerage Agencies", (concerning penalties against
municipalities), dated October 21, 1986.

                       WASHINGTON, DC. 10460

                        OCT £11986
                                             TMl ADHIMISTMATO*
Mr. James R. Borberg, President
Association of Metropolitan Sewerage Agencies
Suite 1002
1015 18th Street, N. W.
Washington* D.C*  20036

Dear Mr* Berbergt

     Than* you for your letter of September 22*  1986,  which
reiterates some of the issues that you and other members of
the Board of the Association of Metropolitan Sewerage  Agencies
(AMSA) raised during our meeting on September 10, 1986.   He
at the Environmental Protection Agency (EPA) thought the
session was a productive exchange of ideas, and we certainly
appreciate your endorsement of our proposal on stormwater and
your willingness to communicate that support to Congress.  1
also welcome this opportunity to continue our dialogue.

     The first issue you raise involves EPA's practice of
assessing penalties for a municipality's past and future
violations in conjunction with Federal judicial actions under
the National Municipal Policy (NMP).  You are correct  that the
NMP does not explicitly require us to seek penalties.   However,
the NMP—although it is*a clear statement of Agency policy--
is not intended to stand alone.  All Agency policy documents,
including the NMP, serve as a 'master plan,* and are buttressed
by other policy and guidance; collectively, they direct our
day-to-day activities to reach our goals.  The NMP states our
position with respect to the relationship between the Clean
Water Act (CWA) provisions for Federal funding and for munici-
pal compliance, and provides a general framework for accom-
plishing the Agency's goal of achieving as much compliance as
possible by July 1, 1988.

     Since your concern relates to what AMSA perceives as an
•inconsistency" between penalties and the NMP, Z will  mention
the three main foundation documents that we use in conjunction
with the Policy statement to guide the NMP enforcement effort.
First, we rely on the NMP Guidance (March 1984), which sets
out our detailed action plan, includingt 1) the use of judicial
enforcement actions to establish schedules that extend beyond
the July 1, 1988, deadline in the NMPi and 2) the use of
appropriate civil penalties.

     The second document that undergirds oar municipal complianc
program -is the Agency's Uniform Civil Penalty Policy (February >
1984)i which superseded an earlier version (July 1980).  Thie
Policy is a statement of the Agency'e position on the use of
penalties*  It sets out guideline* covering, among other
things* the application of our statutory authority to afeeae
penalties under §309 of the CMA.  It also affirms our obligation
to exercise that authority to ensure a consistent* common
effort to deter violations of the laws of the United States
and to promote equity and voluntary compliance among all
parts of the regulated public.

     Moat recently* we have issued a third policy document!  the
Clean Water Act Penalty Policy  (February 1986)* which providee
a detailed methodology on how to determine the appropriate
amount of each penalty.  It is  important to note, however *
that the CWA Penalty Policy in  no way alters the Agency's
policy on whether to seek penalties from municipalities* as
originally enunciated back in 1980; both $309 of the CMA and
EPA's CWA Penalty Policy simply do not distinguish between
industrial and municipal violators.  Rather* the 1986 CWA
Penalty Policy provides techn  -»1 guidance on how to best carry
out the Agency's policy in an   /en-he  -ed manner*

     If you look at the law and at these expressions of Agency
policy and guidance* Z am confident y
                            - 3 -

     After nearly three years of work end negotiation, however,
we •till have about 100 major Municipalities that have not
agraad to an anforeaabla schedule for achieving compliance,
including some pending final |301(h) deciaione.  Every day that
passes reducea the likelihood that theee municipalities  can
neet the etatutory deadline, which increaaee the prospetfte that
we will have to eatabliah their achedulee in Court Ordere
including penaltiea for violationa of the Act.   Overall, how-
ever. Court Ordere that aaaeaa penaltiea have constituted only
a email part of our total effort, and penalty amounts are a  very
email percent of total construction coeta (rarely in excess  of
one percent and often below that figure).

     The second issue you raise-on behalf of AMSA is the
relationship between the Construction Granta program and the
HMP.  As we have said consistently, we sse no conflict  between
the Construction Granta program and the municipal compliance  '
effort under the BMP.  Both are intended to achieve the sane
goalt  municipal compliance with the requirements of the CKA*
Moreover, we have provided clear guidance to the Regions and -
States that, where a municipality ia ready and willing to
initiate conetruction before ita name cornea up on the priority
liat for a grant award, thie does not necessarily preclude  that
municipality*a grant eligibility for the remainder of the pro-
ject.  Thie le intended to provide an incentive for communities
to start construction as soon as possible so they can retain
their grant eligibility and avoid Court Ordere and associated

     In summary, we have worked cooperatively with affected
municipalities for the nearly three years since ieeuance of
the NMP, and we will continue to do so*  However, EPA hae an
obligation to Congress and to the public to carry out and
enforce the law that protecta the nation's waters, and we fully
intend to do eo through all the mechaniams the Act provides.

     Moving to your final iasue of EPA*a response to the Third
Circuit Court'e decision on removal credite, I want to  let you
know that an appeal to the Supreme Court ie atill under con-
sideration.  Just recently, at  EPA*a requeet, the Department
of Justice aeked the Supreme Court for an extension of  time
to allow ua to further consider the merite of an appeal.  2
know this is an important issue to AMSA membere and to  other

                          - 4 -
•unicipalitiaa that adminiatar local prctraatraant program*,
and I aaaura you that tha Aganey will contlmta to work with
your raaoval eradita aubconmittaa ao that AMSA'a viawa will
ba incorporatad into our daeiaion-making.
     Again, I valuad our raeant diacuaaiona and appraeiata
haaring tha viawa of your organisation.
                           Laa N. Thomaa

"Guidance on Calculating after Tax Net Present Value of Alternative
Payments", dated October 28, 1986.  See also GM-51.

Vr***!/                WASHINGTON. O C 20460



 SUBJECT:  Guidance on Calculating After Tax Net Present Value
           of Alternative Payments
\      VjLo
 **^  •~*>a - ^-
 FROM:     Thomas L. Adams,  Jr.
           Assistant Administrator for
              Enforcement and Compliance Monitoring
 TO:       Assistant Administrators
           Regional Administrators

      This guidance provides a methodology for calculating the
 after tax net present value of an environmentally beneficial
 project proposed by a violator to mitigate a portion of a civil
 penalty.   We developed this guidance in reponse to requests from
 both the Regions and Headquarters on how to evaluate a project's
 real cost to a violator.   The Associate Enforcement Counsels,
 Regional Enforcement Contacts.  Regional Counsels,  and the Chief
 of the Environmental Enforcement Section at Department of Justice
 have reviewed this guidance.   In addition,  the Tax Litigation
 Division  of the Internal  Revenue Service and the Corporate
 Finance Division of the Securities and Exchange Commission
 reviewed pertinent language in this document.   We hope it will
 be useful.  The policy on alternative payments is set forth in
 the February 16, 1984, uniform civil penalty policy.


      The 1984 civil penalty policy provides flexibility for EPA
 to accept, under specified conditions, a violator's investment in
 environmentally beneficial projects to mitigate part of a civil
 penalty.   The policy allows the use of these alternative payments
 as an incentive for settlement.  The policy does not contemplate
 a dollar-for-dollar reduction in the civil penalty equal to the
 cost of an acceptable alternative payment project.  Furthermore,
 EPA will not accept more  than the after tax net present value


of an alternative payment project.  The Agency also can choose
to accept less than that amount. £/

     EPA must carefully balance the benefits of fostering settle-
ments by approving alternative payment projects against the benefits
of achieving the broadest deterrent impact from enforcement actions.
Allowing these projects to mitigate part of a penalty may reduce
the deterrent effect of an action on the regulated community.

     A civil penalty is not tax deductible under 26 U.S.C.
$162(f); therefore, the full amount of the penalty is a
liability to a violator.£/ Conversely, if a violator invests
in an alternative payment project, that investment may be tax
deductible.  EPA must use the after tax value of a proposed
investment when determining .whether and by how much to mitigate
a civil penalty.3
     •                                   ^
     In addition to considering the tax effects of an alterna-
tive payment project,  EPA must evaluate the cost of the project
in terms of its present value.  An alternative payment project
usually requires expenditures over time.4/ Th  efore, the Agency
also must reduce the after-tax value of the casn flows invested
in an alternative payment project to its net present value at
I/ Proposed alternative payment projects may not be used to
mitigate the entire amount of a civil penalty.  The Agency
plans to issue further policy clarifying the use of alter-
native payments in settlement negotiations.

2/   A written agreement speciflying the tax implications of the
civil penalty is essential.  The agreement should be a legally
binding contract.  The agreement should state that the civil
penalty is punitive and deterrent in purpose and is a non-
deductible expense.

3/   In addition to -.ax benefits, a firm also can generate
positive, image-enhancing publicity from the project developed
for the alternative payment; however, the -»enalty policy requires
that any publicity a violator generates a  at the project must
include a statement that the project is undertaken in settlement
of an enforcement action by EPA or an authorized state.

4/   A dollar today is worth more than a dollar a year from now
for two reasons:  1) if a dollar today is held in a no-interest
checking account, inflation erodes the value of that dollar over
the year; and 2) if a dollar today is invested at a rate higher
than the rate of inflation, that dollar increases in value by
the amount of earnings in excess of the inflation rate.


     The BEN computer model can calculate the atter tax net
present value of a violator's proposed alternative payment.
Appendix A of the BEN User's Manual provides the procedure tor
calculating after tax net present value of capital investment,
operation and maintenance costs, and one-time costs.


     To use BEN to calculate after tax net present value of an
alternate payment project, respond to the BEN questions as

     1.  Enter the case name (variable 1);

     2.  For variables 2 through 4, enter the incremental
         costs for the alternative payment project of:

         a.  Pollution control equipment;

         b.  Operation and maintenance;

         c.  One-time expenditure;

     3.  Substitute the date of settlement of the enforcement
         action tor the first month of non-compliance
         (variable 5);

     4.  Enter the compliance date or completion date of the
         alternative investment for variables 6 and 7;

     5.  Select standard values for variables 8 through 13;V

     6.  Select output option 2.
5/ Decreasing the tax'rate used in BEN increases the amount of a
civil penalty ana also increases the atter-tax cost ot an
alternative investment.  Therefore, a violator has an incentive
to provide a lower marginal tax rate tor an alternative payment
project than the one used to calculate the civil penalty.
Both the civil penalty calculation and the alternative payment
calculation must use the same tax rate.  The annual inflation
rate and the discount rate should be the same as the rates used
in the civil penalty calculation.


     Calculation C in output option 2 expresses the after tax
net present value ot the alternative payment on tne date of
settlement, which is the date substituted for the first month
ot noncompliance t vanaaie 5).  This tigure is tne maximum
amount by which EPA may mitigate a civil penalty.  Attachment
A is an example ot a proposed alternative payment project with
the BEN output sho  ig the after tax net present value of the

     If you have any questions about calculating the afte*- tax
net present value ot a proposed alternative payment, call Susan
Gary Watkins of my staff (FTS 475-8786).


cc:  Regional Counsels
     Associate Enforcement Counsels
     Compliance Office Directors

                          ATTACHMENT A


      Suppose  a  violator offers  to  invest over the next 20 months
 $500,000  in pollution control equipment.  The equipment will
 provide environmental benefits  beyond those that result from
 meeting legal requirements  for  compliance.  The after tax net
 present value in  1986 dollars of a $500,000 investment over a
 period of 20 months  is $299,562.   Therefore, the value of the
 alternative payment  in this example is $299,562, although the
 violator  must commit to investing  $500,000.  Exhibit 1 shows
 how the BEN model displays  the  data.

      If EPA approves the alternative payment project in the
 example,  the Agency may propose an adjusted penalty target figure
 that  is as much as $299,562 less than the initial penalty target
 figure.V Other adjustment factors also may reduce the initial
 penalty target  figure.

      The  effects of  inflation and  return on a dollar are smaller
 over  shorter periods of time.   Consequently, the difference
 between the after tax net present value of an alternative payment
 and the total amount of the alternative payment decreases as the
 time  between the date of settlement and the date of the final
 alternative payment decreases.  If the violator in the example
 could invest $500,000 in pollution control equipment in less
 than  2 months after settlement, the net present value of the
 investment would be $76,742 greater (See Exhibit 2).

      For  using the BEN model to calculate the after tax net
 present value of the proposed alternative payment for this
 example the data required are:

      1.   Case Name:   Alternative Payment Example

      2.   Capital investment:           500000  1986 dollars

      3.   One-time nondepreciable expenditure:   0

      4.   Annual O&M expense:             7000  1985 dollars

      5.   Month of settlement:                   4, 1986
     6.  Compliance date:

     7.  Penalty payment date:
12, 1987

12, 1987
I/ The Agency is never obligated to mitigate a civil penalty by
the full amount of the after tax net present value of an alter-
native payment project.  For example, EPA might mitigate a civil
penalty by only half of the after-tax net present value of the

                             EXHIBIT I

                                OPTION 2
                                                  APRIL 16, €1986
pni i i ITT nisi rnisiTpni  FEHUPHFNT ON TTMg
if f.-
                     _irIT OF A  2O MONTH  DELAY

                  TMF PQI I OWING VARIABLES*



* 1
i IAC _ A
Jnb " 9
* 7000

iO.C«' 7.
50. '• '/.
18 0" */

                               EXHIBIT 2

                            OUTPUT OPTZQIi 2
••--'•- *IN*fL:24f 1986
" -  -* ft«*t...  ».
     rOLLUTlUN ftBMfRBL EBUlPllgHT OK Til 1C ftKP


x x V 7LJP P^^UAM T f* 6 All T IkJRO f* Al ^1 II AT T f>KI A

* ** •

* — * < f ™

9 0
11, 1987
12, 1987
• / *
•r -
10.00 */.
6.0O %
9 O

"Guidance on determining Violator's Ability to Pay a Civil Penalty", dated
December 16, 1986.  See GM-56.

"Addendum to the Clean Water Act Civil Penalty Policy for Administrative
Penalties", distributed August, 1987.  (This document is reproduced at
III.B.9., this compendium).

"November 4, 1987 Congressional Testimony on Proposed Amendments to the
Clean Water Act", dated November 24, 1987.  Includes DOJ and EPA Testimony
on "Environmental Improvement Projects".

to S'«v


    r                 WASHINGTON, 0 C 20460

 SUBJECT*  Voverber t,  1337,  Congress lonal Testinory
           Proposed Asenaraents to the Clean Water Act
 FROM:      Thomas L.  Adams,  Jr.
           Assistant Administrator for Enforcement
             and Compliance  Monitoring

 TO:        Regional Enforcement  Contacts
           Regional Counsels
           Associate Enforcement Counsels '
           Director,  Office  of Compliance Analysis
             and Program Operations
           Director,  Office  of Criminal Enforcement
      Attached are copies of Agency and Department of Justice
 testimony on environmental improvement projects as used «-
 'vater enforcement case settlements.   The testimony was given
 at a November 4 hearing before the House Subcommittee on
 Fisheries, Wildlife Conservation,  and the Snviron-ent.
      Jonathan Z. Cannon,  Deputy Assistant Administrator for
 Enforcement and Compliance Monitoring - Civil,  testified for
 the Agency.  Raymond 3. Ludwiszewski, Associate Deputy
 Attorney General, testified for DOJ.   Other parties wno
 testified were the Mai or °f *tew Bedford, MA; a representative
 from the California Environmental Trust; Patrice Parenteaa,
 Commissioner of the Vermont Department of Natural Resources
 and former Regional Counsel for Region I; and Donald Ste^er,
 law professor and former DOJ environmental enforcement

                            - 2 -
     Also attached is a copy of proposed bill H.R.  3411 which
addresses environmental improvement projects.  I hope you
find this material helpful.


cc:  Susan Lepow, OGC
     Jim Elder, OWEP
     Dave Davis, owp
     Tudor Davies, OMEP
     Tai-Ming Chang, OCAPO
     CECM-Water Attorneys

                           STATEMENT  OF
                        JONATHAN  2, CANNON
                            BEFORE  THE
                             OF THE
                 U.S. IQl'SE OF REPRESENTATIVES
                        WASHINGTON,  O.C.

                        November 4,  1937

     Good afternoon, Mr. Chairaan  and Meabers of the Subcommittee.

It ia a pleasure to appear  before  you to discuss aspects of che

Agency's water enforcement  program and H,R. 3411, now before

che Subcommittee.    I aa Jonathan Z.  Cannon, Deputy Assistant

A.dainis tracer for Civil Enforcement  ia the Office of Enforcesene

and Compliance Monitoring  (OECM) at  the Environmentai Protection

A,gency.  Seated beside ae  is Glenn L. Unterberger, Associate

Enforcement Counsel for Water.  Among other things, ay office

is responsible for  approving settlements on behalf of EPA for

civil enforcement cases to  ensure  they support  national enforce-

ment goals and policy before transmitting  thea  to the Deparc-aenc

of Justice (OOJ) for final  approval  and lodging  in court.   My

office works cloeely with  the  Department of Justice and EP^'s

Regional' off ices to encourage  prompt case  filings by OOJ and to

ensure proper resolution of cases.

     More specifically, my  responsibilities  under the Clean

Jater \ct include national  ^anage-aent of ^P\'s  legal enforcement


prograa implementing Section 309(d) and Section 309(g).   Those

sections authorize Che Agency Co bring judicial or adatinis c rati /e

enforcement actions seeking civil penalties against owners and

operators of facilities, both municipal and industrial,  that

violate the Clean Water Act.  1y office also provides legal

•»-.£ or cement counsel to EP< program officials charged with

administering the Marine Drotection, Research and Sanctuaries

Act (MPRSA), including Section 105(a) of that Act, which autho-

rizes the Agency to assess civil penalties administratively

for violations of that statute.  I will focus on the Clean

«'ater Act today, but che same general principles also apply to   '

:ne MPRSA.

£0A.'s Present Policies on "Environmental Improvement Projects

     As background for considering H.R. 3411, I want to review

:ie Agencv's current policies for approving environmental

mitigation projects as part of settlement  agreements in judicial

or adainistrative enforcement actions.  vany of the Agency's

enforcement actloia are settled without litigation or full

administrative penalty proceedings.  The Agency developed  t-fo

civil penalty settlement policies  to assist in  treating che

regulated community fairly  and consistently during settlement
       s, f

-egoctaciong and to ensure  that settlements achieve a proper

4e:errenc iapact an potential violators.   The  Uniform Civil

Penalty Policy (issued February  16,  1984)  applies  to  all  of


the eaviroa««ntal statutes che \geic/ enforces.  This policy

provides » framework  for developing policv and guidance for

settlement negotiations.  The Cleaci Water *cc Penalty Policy

(issued ffebrjary 11,  1986) applies specifically to settlements

of Clean Water \ct enforcement accioas.  The two policies were

developed in consultation rfith che Department of Justice, vhicn

strongly supports then.

     Soth policies contain provisions for considering "environ-

mental improvement projects  as part of a settlement agreement.

The Uniform Civil Penalty Policy calls these projects 'aiternati7<

payment projects," while the Water Penalty Policy calls these

projects "mitigation  projects."  Both policies contain specific

criteria that the Agency applies to a defendant or respondent's

proposed environmental project to determine whether  to accept

the project as pare of the settlement agreement.  I  will focus

on the criteria in the Clean Water Act Penalty Policy thac ^e

use to evaluate proposed mitigation projects during  settlement

negotiations.  There  are six criteria.  Comparable criteria

apply to settlements  of EPA's administrative penalty actions

under the HPRSA pursuant to our Jniform Civil Penalty Policy.

     First, mitigation projects •aust not significantly reduce

the deterrent effect  of a settlement.  Therefore, the Agency

policy establishes an expectation of a substantial up front

cash penalty co Che U.S. Treasurv as part of any settlement,

    h might also Include a mitigation project.  I cannot


emphasite too atrongly chat any mitigation project is only one

element of * settlement that should Include a  requirement for a

cash penalty payment by a violator.

     Second, the project oust provide an environmental benefit

in addition to the benefits of fall compliance vith the lav.

For example, a proposal to upgrade a wastewater treatment plant

•roald noc be acceptable as a mitigation pro'ject if the upgrade

vere required to meet permit limitations.

     Third, the project should correct or reverse the environ-

mental harm caused by the violation.  For example, a proposed

project to install equipment that would result in a discharge

of pollutants significantly belov  the permit requirements and

thus reduce the pollutant load in  the receiving waters might

se allowed if the effect of the project also included a net

improvement in the quality of the  receiving -raters which were

affected by the violations.

     Fourth, the Agency's evaluation of the effect the cost

of a mitigation project will have  on an acceptable penalty

settlement amount must take into account the tax  canseque-ces

of the project that can reduce the deterrent effect of the

enforcement action.'  For example,  an  investment  in pollution

control^'equipment provides tax deductions  for  depreciation  and

operation and maintenance  O&M) costs.  On occasion,'  violators

see* tax deductions for payments  to environmental trust  funds.

3art of the deterrent  effect  of a  civil  penalty  is, chat  tc  is

not rax deductible.

                              - 5 -
other public relations benefits.   Polluters have also displa^e^ a
natural eagerness to avail themselves of the potentially
significant tax deductions possibly associated with credit
projects.  When violators take deductions for these "projects",
they essentially force the United States' taxpayer to subsidize
their unlawful pollution.  Finally, an unrestrained statutcr,
endorsement of environmental projects as substitutes for
penalties nay encourage the courts sua sponte to order
undesirable credit prosects, even where the expert technical
agency, the Environmental Protection Agency, has rejected such
pro}ects as an appropriate component of a settlement agreement.
          For these reasons, the extensive use of credit projects
nay have the damaging effect of undercutting the civil
enforcerent program, rather than supporting it.  In light of
these adverse effects, any mitigation of statutory penalties
through credit projects must be carefully structured to preserve
and enhance the operation of an effective judicial enforcement
program and support the four basic goals discussed above.
          The February 11, 1986,  Clean Water Act civil penalty
policy, issued by the Environmental Protection Agency (EPA) after
extensive review and coordination with the Department of Justice,
carefully delineates criteria to be used in considering
'environmental improvement projects* as part of a settlement
agreement.  This policy is working.  To date, according to
information provided by the EPA,  approximately 15% of our
judicially-approved CWA settlements with publicly-owned treat-e-c

                              - 6 -
works contain some kind of environmental improvement project.
Any settlement which includes a mitigation project must have a
substantial upfront monetary payment to the United States
Treasury.  The following discussion highlights the other criteria
used by the EPA and the Department in determining whether to
accept a credit project as part of a settlement agreement:
          1.  Mitigation of the penalty amount based on the
defendant's activity must not detract significantly from the
deterrent effect of the settlement as a whole.  The Department of
Justice  is especially  concerned that the expanded use of credit
projects will undermine the deterrent impact of our environmental
enforcement efforts.   To avoid this, these projects should be the
exception, rather  than the rule.  Moreover, any settlement
including a credit project must also contain a substantial cash
penalty  component  payable to the United States Treasury.
          2.  The  credit project should closely address the
environmental effects  of the defendant's violations.  The goal of
all  enforcement  efforts  is to prevent, remedy, and punish
environmental pollution.  Credit projects, to serve the ultirate
enforcement objectives,  should address the environmental risk or
harm resulting  from the  defendant's violations.
          3.  The  polluter's cost of undertaking the activity,
taking into account any  tax benefits that may accrue, must be
commensurate with  the  degree of mitigation.  Defendants often
exploit  tax benefits,  corporate  filing benefits and other
advantages  from  credit projects   To maintain the proper

                              - 7 -
incentives, the violator's real costs,  rather than the value of
the project, must be considered.
          4.  The activity roust demonstrate a good-faith
commitment to statutory compliance.  A defendant's commitment to
future compliance is extremely relevant to a civil penalty
calculation.  It is appropriate to consider the type of
mitigation project, the initiative of the defendant in
identifying and commencing the project, and the environmental
benefit provided by the project as demonstrating the defendant's
          5.  The activity must be initiated in addition to all
regulatory compliance obligations.  That is, the credit project
nust provide a benefit to the environment beyond those provided
by full compliance with the law,  and cannot be substituted for
full compliance.
          6.  Under the CWA, the Department cannot accept, and
the court cannot approve, provisions in a consent decree that are
beyond the power of the court to order.
          These criteria provide for a fair and equitable
assessment of an environment improvement project in the context
of the settlement decision.
          First and foremost, the amendment is not necessary.
While civil and criminal penalties and injunctive relief are the
only presently authorized remedies under the CWA, the United
States Attorney General, in settling claims for penalties, has

                              - 8 -
the inherent authority to consider a polluter's willingness and
commitment to undertake activities that mitigate the harm caused
by his violations.  This authority is derived from the broad
discretion vested in the Attorney General to settle and
compromise litigation involving the United States. IS Since this
authority is already being used in appropriate situations, the
amendment may have the undesirable effect of fostering a much
greater number of credit project proposals, many of which would
prove to be unacceptable.  Consideration of these proposals may
delay settlement or prosecution of the government's case.  In our
cases, delay only helps the polluter at the expense of the
environment.  Moreover, the regulated community understands and
abides by the existing civil penalty policy — the "ground
rules."  This amendment will upset the existing s_tatus quo and
provide incentives for violators to avoid civil penalties and
engage in protracted negotiation and litigation until the new
ground rules are again established.
          At this point, let me clarify my earlier statement on
the Attorney General's legal authority to use mitigation under
the Clean Water Act.  As indicated earlier, the CWA and MPRSA do
not clearly authorize the use of credit projects as substitution
for civil penalties.  However, the government has broad
discretion to 'mj-tigate civil penalties and permits this
I/  The Attorney  General's settlement authority  is both  inherent
in the creation of his office, eg,^. Confiscation Cases.  74 U.S.
at 457-459,  and derived  from the client agencies' authority  to
settle cases.  United States v. Newport News Shipbuilding. 571
F.2d  1283,  1287  (4th Cir.}, cert, denied. 439 U.S. 875  (1978).

                              - 9 -
mitigation on the basis of a defendant's environmentally
beneficial activities.  Such authority roust be exercised
consistent with the terms of the Miscellaneous Fees Act, 31
U.S.C. § 3302, which provides that money received for the
government must be deposited in the United States Treasury.  We
have interpreted this section to mean that the government is
constrained in its ability to accept direct substitutes for civil
penalties, but the Miscellaneous Fees Act does not entirely
eliminate the authority of the government to mitigate the civil
penalty based on an environmentally beneficial credit project.
Thus, the United States currently has the legal authority to
accept "credit projects" in certain circumstances as mitigation
of civil penalties.
          Direct substitution of a project for civil penalties,
as well as unlimited credit projects, raise difficult enforcement
issues.  First, the amendment is unclear with respect to the
Department's role in the approval of these credit projects under
the amended section 309(d).  As currently drafted, it has no role
for the Attorney General.  Yet, the Administrator or the
Secretary alone cannot accept credit projects in settlement of
federal enforcement actions without the involvement of the
Attorney General, since ultimately the Attorney General must
approve all consent decrees under the CWA to which the United
States is a party.  Therefore, the amendment should reflect the
Attorney General's involvement.

                             - 10 -
          Second, section 4(b)  is most troubling as it raises tne
specter of judicially-imposed environmental improvement projects
in situations where the EPA and the Department believe such
projects are inappropriate.  The courts and the defendants
shouldn't be in business of selecting environmental improvement
projects.  That should be left to the Congress and the EPA.
If Congress does not want these monetary recoveries to go into
the United States Treasury, then it is incumbent upon Congress to
establish a procedure that gives the Administrator some guidance
in determining how and where the monies should be spent.  A
system that puts the polluter in the driver's seat unwisely
rewards the outlaw for his illegal activity.
          In conclusion, achieving compliance with environrental
requirements in the first  instance is the goal of our enforcerer>r
program   Any amendment that provides incentives to the regulated
community to avoid compliance should be rejected.  We all share
the same goals — quick, effective, and complete compliance with
the nation's environmental laws — the only question is the best
means to reach them.
          The Department of Justice looks forward to working
closely with Members of this Subcommittee and the Environmental
Protection Agency in this  important area.  I would be pleased to
answer any questions you might have.

                           STATEMENT OF
                     RAYMOND B. LUDWISZEWSKI
                    U.S.  DEPARTMENT OF JUSTICE
                            BEFORE THE
                       AND THE ENVIRONMENT
                              OF THE

                         NOVEMBER 4, 1987

Mr. Chairman and Menbers of the Subcommittee:

          On behalf of the Department of Justice, I an pleased tc

have this opportunity to present our views on issues related to

H.R. 3411 and "environmental improvement projects* under the

Clean Water Act (CWA) and the Marine Protection, Research and

Sanctuaries Act (MPRSA).  I am Raymond B. Ludwiszewski, Associat<

Deputy Attorney General, from the Department of Justice.  For a

period of two years, I was Special Counsel to the Assistant

Attorney General, in the Land and Natural Resources Division.  A<

Special Counsel, I was involved in all aspects of our civil

environmental enforcement program, including enforcement under

the CWA and the MPRSA.  I am committed to helping the Congress

work through these important issues and  achieving our mutually

desired goals of a forceful environmental protection program.  I

wish to stress at the very outset that the Justice Department,

and the Lands Division in particular,  is strongly committed to

achieving the most effective environmental enforcement program

possible.  My testimony today will focus on the current federal

                              - 2 -
enforcement program under the CWA and the MPRSA,  and the effects
this amendment would have on those efforts.
          In the last six years we have successfully prosecuted
more people and corporations for criminal violations of the
environmental laws than ever before, obtaining over 262 guilty
pleas and convictions since 1931.  The prosecutions have resulted
in over $6 million in fines and over 175 years in jail sentences
Since 1981, we have also filed more than 1400 civil environmental
enforcement suits — more than ever before.
          Specifically, with respect to the Clean Water Act, we
have initiated over 225 cases and concluded more that 197 since
FY 1985.  Also, since FY 1965, we have recovered approximately
$15 million in civil penalties paid to the United States Treasu.
under the Clean Water Act.
          These civil penalties play a critical role in the
Government's strong enforcement program.  They are the foundation
and the cement of the private compliance structure.  It is often
the fear of these penalties  (which can be as high as $25,000 per
day per violation) that discourages potential violators fron
polluting the environment.  The  imposition of civil penalties
against the polluters of our nation's waterways, combined with
the perseverance and aggressiveness that the EPA, the States, and
the Department of Justice bring  to bear on these problems, makes
for a most effective and efficient enforcement program.

                              - 3 -
          Enforcement actions initiated under the Clean Water Act
use the Clean Water Act Civil Penalty Policy as the basic
framework to calculate penalties which the United States would
seek to recover in settlement in these actions.  This policy,
most recently amended in February 1986, reflects the four basic
goals of an effective civil penalty enforcement program:  (1)_
penalties should disgorge the econonic benefits that the violator
obtained through non-compliance; (2)  penalties should act to
deter non-compliance, not }ust for the individual violator
subject to the penalty, but for the regulated ccraunity as a
whole; (3) penalties should be applied throughout the nation
consistently to provide fair and equitable treatment to all in
the regulated community; and (4) penalties should promote s*ift
resolution of environmental problems and enforcement actions by
being rationally based and easily discernable to the regulated
          At this point, I think it would be helpful to clear up
any confusion over the scope of the United States' existing
authority to accept "credit projects* in settlement of
enforcement cases.  The CWA and the MPRSA do not clearly
authorize the use of credit projects as substitution for civil
penalties.  Nor do I believe that any such endorsement is
necessary.  The Acts do, however, allow the government to
exercise its historically-recognized discretion to mitigate civil
penalties where appropriate and permit this mitigation to be
based on a defendant's environmentally beneficial activities

                              - 4 -
Thus, the United States already has the legal authority to accept
•environmental improvement projects* in certain circumstances as
mit10ation of civil penalties.
          Where exercising our discretion to mitigate penalties
because of environmentally beneficial activities by the
defendant, the Department and EPA proceed with caution and
attempt to keep the overarching  interests of our enforcement
programs  in mind.  In our view,  the unfettered use of these
projects  would present serious potential dangers to the overall
efficacy  of the Department's civil enforcement program.   First,
such a practice circumvents the  Congressional appropriations
process.  Second, with "credit projects", the polluter is ofte
in the position of ultimately determining the need for, the
appropriateness of, and the proper funding  level for the  specific
project.  This approach yields the anomalous result of having the
violator  determine the type of punishment it will suffer  for
breaking  the  law.  Third, the use of credit projects, especially
without clear standards, makes it more  difficult to treat
similarly-situated defendants  in a consistent fashion.  They lack
the  easy  comparability of penalty assessments.  Accordingly,
settlement  and resolution of  the litigation may be prolonged and
become more difficult.  Fourth,  the  linchpin of the enforcement
program  —  voluntary  compliance  resulting  from the deterrent
effects  of  federal enforcement — may  be seriously undermined  by
allowing  the  violator falsely to cast  the  mage  of  a  "respcrsibi
environmental actor*  or  "model citizen*,  and by  affording hir


      Plfth, *  proposed  project aust show che defendant's gosi

 faith  commitment  to  statutory  compliance and aust  be designed

 priaarily  to benefit  che environment rather than the defendant.

 ror  exaaple, adding  additional treataent capacity  to a vaste-

 water  treataent plant beyond what Is required  to achle/e aeral:

 eomollance niay  provide  aore production capacity  for  the defanda-:

 without  generating additional  water quallt/ benefits cor the

 local  community as a  whole.

     Sixth, our policy  Is  chat the Agency cannot accept

 provisions In  judicial  Consent Decrees or administrative Consent

 Agreements that are  beyond the equitable power of  a  cour:  to     '


     EPA uses  the criteria in the 1986 Water Penalty Polic.

for evaluating proposed mitigation projects ^hen negotiating

settlements in enforcement actions brought under the authoritv

of the Clean Water Act relating to the National Pollutant

Discharge Eliaination System (VPDES)  program.   Where the 'Jnited

States has, on occasion, accepted mitigation projects in recenr

years, most have been associated with settlements  of cnforceaei:

actions against municipalities for Clean Water Act ^lolatio-.s

at publicly owned wastewater treataent works (POTWs).  

ACC pollution control requireaenca.   From chat time through

June of this year, the United States has filed 73 actions

against POTWs.   We have concluded 46 of those actions during

that time period*  Seven of those concluded cases (about 15

percent) included mitigation projects.  Examples of these

projects include a $130,000 stream restoration and a $625,000

l-ivescnent in pollution control equipment to reduce degradation

of Lake Erie.

     There are a number of enforcement policy reasons why SPA

applies the criteria in our penalty policies in determining the

acceptability of a mitigation project  in settlement of an       '

enforcement case.  The most important  reason is to maximize the

iapact of the enforcement  case in deterring  future violations

by che defendant or other  members of  the regulated community.

Consistent with  the goals  of the  statutes the Agency administers,

E?\'s enforcement program  not only seeks to  abate existing

violations but also takes  steps  to prevent  future violations.

     To the extent that undertaking an environmental improvement

project has some bearing on a defendant's good  faich, and  thus

serves as som* justification for  accepting  a  lower cash  penalty,

settlement »tlll snould leave  the defendant  worse  off economi-

cally .fhan if it had complied  in  the  first  instance.  Thus, we

are not receptive to proposals in which  a  defendant  seeks  to  perfor:

projects which the defendant would  be  required  to  do  by  law or

Jould otherwise  choose  to  do on  i:s own, or to  pecform  projects


vnose benefits accrue co tne defendant rather chan tne public

ac large.  Further, «*e are not recepcive to proposals, nowever

beneficial Che project,  chat allow a defendant co avoid civil

penalties entirely, nor  do «*e believe tnac it is appropriate

for a defendant to receive mitigated penalties and to benefit

:roa the favorable publicity or organizational goodwill cnat

tne defendant aignc gain from performing tne mitigation projects

it proposes, particular!/ wnen it was defendant's probaole tac<

of responsibility on environmental matters which engendered tue

enforcement action ii the first place.

     There are other policy reasons for being careful about che|

kinds of mitigation projects which the government should accept

in an enforcement case,  specifically

          1.  Some proposed mitigation projects raise serious
              questions  about whether the project actually will
              produce any direct oc indirect environmenatal1y
              beneficial result;

          2.  Accepting  a proposed credit project creates a
              resource burden on EPA to monitor and enforce
              performance of the project, and

          3.  Certain proposed projects aay raise fairness or
              propriety  questions (e.g., agreeing to payments  co
              one designated trust fund or organisation as
              opposed to another).

     Even with tlreae reservations, I believe chat the Agency

has developed a policy to ensure that any environmental

improvement projects proposed during settlement negotiations

are given fair consideration and evaluated  in terms of  how  the

projects rflll further tne intent of the Clean Water Act.

ObaervacioOB on H.R. 3&11

     la Ch« context of our present policies on environmental

improvement projects, I have reviewed H.R. 3411.  It appears

that we are already fulfilling the objectives of H.R. 34H

under the existing \gency penalty policies that I earlier

described by giving consideration to proposed mitigation projects

in appropriate situations.   I understand the intent  of H.R.  3M1

is to provide  legal support  for  the use of environmental iaprave-

sent projects  as part of  civil enforcement settlements.  We  are

already using  our policies in the judicial context.  Mitigation

projects also  are included as part of settlements of judicial

actions for illegal dredge and fill activities, and  are  available

in settleaent  of EPA's penalty claims under HPRSA il05(a),

which authorizes the Administrator to mitigate  penalties "for

good cause shown.' The relationship of H.R. 3411 to  administra-

tive penalty litigation under §309(g) of  the Clean Water \ct

would require  further study  if the bill were enacted, particu-

larly in light of Congress'  intent that administrative  penaltv

proceedings serve as an expeditious vehicle for civil penalty

as sessmeac•

     It appears  co'us  that H.R.  3411 would  not  require  any  signi-

:leanexchange  to our  existing reasoned approach to  evaluating

environmental  Improvement projects.  Therefore,  we  believe

H.R. 34M  is not necessary.   Should  the  Subcommittee proceed

wich this  legislation, we have  a faw  farther  observations

/ou may  wish  to consider.

           l.  You mav wish to clarify whether H.R. 3*11 31 e-s
               a courc the authority unilaterally :o order a
               defendant to perform an environmental laproveaei:
               project, or slmplv to ratlf- the agreement between
               the parties to the action.  Our experience suggests
               that these projects are most ll/cely to succeed If
               defendants, rather than EPA or a court, are
               clearly aade responsible both for devising and
               Implementing an acceptable project.

           2.  Y.OU may wish to provide explicit authority for
               the government to enforce compliance «ri:h t"e
               terms of an eavironraental laproveoeat project
               to ensure that the Intended results of the
               inlclal enforcaaent action actually are acnie/ed.

           3.  You aay vlsh to ensure that EPA retains the
               authority to determine In its discretion what
               environmental Improvement projects are acceptable
               so as to avoid litigation over that issue in
               individual cases.  Our concern is the effect on   j
               the efficiency of our national enforcement program
               if defendants could propose mitigation projects
               directly to a court without approval by the

      We would be happy to provide more specific language 01  r^eae

 points  if it would help the Subcommittee in its deliberations.

      In closing, I want to assure the Subcoaaittee that the

 Agency  supports the use of appropriate environmental taoro.eaent

 orojects which are consistent with our overall enforcement g-sals

 as  part of selected case settlements.  At the same else, ve

 believe ie appropriate to continue to rely on the up front cash

 oenalty to tba U.S. Treasury as the principal deterrent la

 environmental cases,  including those settled and those  tried.

      Again,  thank you for this opportunity to testify.  I

 would be happy to respond :o aiv questions the Subcommittee

aay  have.

                                    DC :«460

 SUBJECT:  Use  of  Stipulated  Penalties  in EPA Settlement
 FROM:      James M.  StrocW
           Assistant Administrator

 TO:        Addressees

     Attached  is  final guidance on the use of stipulated
 penalties  in EPA  settlement agreements.  This guidance was
 developed  with the  help of a workgroup, which consisted of
 representatives from other Headquarters offices, Regional Counsel
 offices, and the  Department of Justice.  It also reflects
 comments made  on  a  draft of the guidance which was circulated for
 review on  August  16, 1989.

     Several commenters made procedural suggestions such as
 recommending an expedited referral process for referring cases
 for collection of stipulated penalties to DOJ, requesting more
 specifics  on the  role of OECM, ORC, and DOJ in decisions to
 compromise stipulated penalties, and requesting specific regional
 procedures for demanding and compromising stipulated penalties.
 All these  issues  will be addressed in the Manual on Monitoring
 and Enforcing Administrative and Judicial Orders, to be issued in
 final form soon.

     Several commenters objected to the language in section I of
the guidance cautioning against attaching stipulated penalties to
violations of the consent agreement which are also violations of
a statute  or regulation.  This language has been modified in the
final vertffBB.  The guidance now states that agency attorneys
should cooBlder the advantages and disadvantages of attaching
stipulatedF^fnalties to a requirement for which the agency could
get statutory maximum penalties.


     Several commenters also disagreed *ith the language in
section IV discouraging caps.  This language has been revised to
reflect these comments.  Only caps on the amount of penalties are
no* discouraged.  Caps on the number of days for which stipulated
penalties can accrue combined with a reservation of all,
enforcement responses available to the government for violation
of the consent agreement eliminate the problems associated with
caps on penalty amounts and are now mentioned as an option to

     One commenter asked that the guidance address the practice
of forgiving stipulated penalties for violation of interim
milestones where the final deadline for compliance is met.  It is
now addressed in section VI of the guidance and allowed in
situations where minimal environmental degradation results from
missing the interim milestones and the accrued penalties are kept
in escrow until compliance is achieved.

     Two commenters objected to the language in the first
paragraph regarding the applicabilty of the guidance to
administrative cases.  This language has not been changed because
in fact the agency does not have legal authority to assess
stipulated penalties in all administrative cases.  The legal
determination of whether the government has authority to assess
stipulated penalties in a given administrative case is a
threshold issue to be determined by ORC, OECM, and OOJ based on
their legal expertise concerning the particular statute involved.

     Finally, one commenter suggested that the language in
section VI restricting compromise of stipulated penalties to
"rare, unforeseen circumstances" was too strong.  The intent of
this section and the guidance in general is that stipulated
penalties should be set at levels and attached to provisions that
the government is ready to vigorously enforce dollar for dollar
except in "rare, unforeseen circumstances."  Stipulated penalties
should never be set at levels higher than we intend to enforce or
attached to provisions we are not prepared to enforce.  This
practice ••ndo the regulated community the wrong message, namely
that accrued stipulated penalties are only a starting point or
opening offer and are subject to negotiation.

     If you have any questions concerning this guidance, please
contact Elise Hoerath of the Air Enforcement Division of OECM,
FTS 382-4577.


     Regional Administrators
     Regions I-X

     Deputy Regional Administrators
     Regions I-X

     Regional Counsels
     Regions I-X

     Associate Enforcement Counsels

     Headquarters Enforcement Office Directors

     Mary T. Smith,  Acting Director
     Field Operations and Support Division
     Office of Mobile Sources

     E.  Donald Elliott
     General Counsel

     David Buente, Chief
     Environmental Enforcement Section
     U.S.  Department of Justice

     Workgroup Members

LOCAL PRETREATMENT PROGRAMS", dated December 22, 1988.  Displayed at
VLB. 30.

"Guidance on the Distinction Among Pleading, Negotiating and litigating
Civil Penalties for Enforcement Cases under the Clean Water Act", dated
January 19,1989.

       f                WASHINGTON. D C 20460
                                  9 J989
           Guidance  on  the Distinctions Among Pleading,  '
           Negotiating, and Litigating Civil Penalties
           for  Enforcement Cases Under the Clean Water Act
          Edward E. Reich<
                            "~   ^  V     fcT
           Deputy Assistant"~Kafiinistrator'for
             Civil Enforcement, OECM  _
          'James R. Elder, Director  / ,.<
          Office of Water Enforcement
             and Permits, OW
          David G. Davis, Diretato
          Office of Wetlands Protection, OW
          Deputy Regional Administrators
          Regional Counsels
          Water Management Division Directors
          Environmental Services Division Directors,
            Regions III and VI
          Assistant Regional Administrator for Policy
            and Management, Region VII

     Attached you will find a major guidance on the subject of
how to develop CWA civil penalty demands under many different
circumstances.  We have found a certain amount of confusion in
this area, with the creation of new administrative remedies and
subsequent use of the CWA penalty settlement policy in
inappropriate situations.

     Upon circulation of a draft of this guidance to NPDES
contacts, a few commenters noted that they believed the CWA
penalty policy should be applied in setting penalty amounts in
administrative complaints, and that the CWA penalty policy should
also be explained to and considered by administrative judges in
their assessment of penalties,  we understand this approach,
which the Agency does follow in other enforcement programs, but
have decided to follow the majority sentiment that we place
ourselves in a stronger negotiating position by pleading for
penalties without direct reference to our bottom-line settlement
calculations and retaining the option of litigating for civil
penalties well in excess of settlement policy amounts. (We have

                              - 2 -

found that administrative judges more often lover a penalty
policy amount requested in an administrative complaint than
maintain it, even though in these other programs judges are to
take such policies into account when assessing civil penalties
under 40 C.F.R. §22.27[b].)

     We also received a number of comments noting some ambiguity
in the draft's discussion of how high a penalty to plead for in
an administrative complaint.  The final guidance clarifies that
we cannot plead for a penalty greater than we could justify to an
administrative judge under the relevant statutory assessment
factors, but that in many, if not most cases, this amount will be
the same as the statutory maximum "cap."

     Because the points discussed in this guidance apply in
principle equally to the §404 program, we have widened the scope
of the guidance to encompass wetlands judicial and administrative
enforcement cases.


cc:  Regional Counsel Water Branch Chiefs
     Regional Water Management Division
        Compliance Branch Chiefs
     Regional Wetlands Coordinators
     OECM-Water Attorneys
     Susan Lepow, OGC
     David Buente, DOJ
     Margaret strand, DOT
     Administrative Law Judges

                 CLEAN WATER ACT


                          UNITED STATES

                          Effective Date:  	

                         Clean Water
           Distinctions Among Pleading.  Negotiating and
         Litigating Civil Penalties for Enforcement Cases
      This policy provides guidance on some of the distinctions
 for determining appropriate penalty amounts to pursue at three
 different stages of a Clean Water Act enforcement action —
 pleading for  penalties  in a judicial or administrative complaint,
 settling penalty claims in a judicial or administrative action,
 and litigating for penalties in a legal proceeding before a judge
 or hearing  officer where a case does not settle.

      Specifically, this guidance emphasizes the following points:

      1.  EPA's Clean Water Act civil penalty policy governs only
 the bottom-line dollar  amount which EPA will accept in settlement
 of civil penalty claims in a judicial or administrative NPDES
 enforcement case.

      2.  The  CWA civil  penalty policy is not intended to be used
 to calculate  either the amount which EPA requests a judge or a
 hearing officer to assess in a judicial or administrative
 complaint,  or the amount which EPA argues a judge or hearing
 officer should assess in a litigated proceeding where a case does
 not settle.   Those amounts will be significantly higher than the
 CWA penalty policy indicates for settlement purposes.

      3.  In litigating  a claim for CWA ci/il penalties either
 judicially  or administratively , counsel representing EPA
 typically should argue  for assessment of a penalty amount which
 is well above the internal bottom-line settlement amount derived
 through application of  the CWA penalty policy.

      4.  Counsel should support its arguments for the "litigation
 amount" based upon reasoned application of the statutory penalty
 assessment  criteria and citation of precedent, not through
 arithmetic  calculations derived according to the CWA penalty
 settlement  policy.

      5.  In judicial complaints, as has been the practice to
date, ths United States typically will continue to request civil
penalties of  "up to $10,000 per day of such violation for
violations  occurring before February 4, 1987, and up to $25,000
per day per violation for violations occurring thereafter."

      6.  In an administrative penalty complaint initiating a
Class I or  Class II proceeding, EPA enforcement officials should
request assessment of a penalty amount which is:

      a) Within statutory ceilings;

                              - 2 -
     b) Justifiable based on the statutory penalty
     assessment criteria of CWA §309(g)(3); and,

     c) Set at a level which will facilitate negotiation of
     an appropriate settlement amount and recovery of an
     appropriate amount through litigation if the case does
     not settle (since we cannot litigate for a higher
     figure than we request in the administrative

     Application of these principles should, among other things,
help EPA obtain adequate CWA civil penalty judgments if judicial
or administrative cases do not settle.  At the same time, they
will help preserve EPA's leverage to obtain satisfactory civil
penalties through settlement of these enforcement actions.

     Effect of Guidance

     To the extent there may be any conflict with existing Agency
CWA policy, this guidance supersedes any such policy regarding
the pleading, negotiating, or litigating of Clean Water Act civil
penalties in NPOES and ft404 judicial and administrative
enforcement cases.  This guidance does not apply to cases brought
under S311 of the Clean Water Act.  This guidance does not apply
to CWA administrative or judicial enforcement cases in which a
complaint or equivalent document has been served, but shall apply
to every case initiated after the date of this guidance.

     Pleading Civil Penalties

     An administrative complaint1 typically only opens and
describes the Agency's case, just as a complaint in federal
     1  These are sometimes titled per the August 28, 1987,
guidance as "Administrative Complaint, Findings of Violation,
Notice of Proposed Assessment of a Civil Penalty, and Notice of
Opportunity to Receive a Hearing Thereon."  In order to avoid
confusion over the role of the complaint in an administrative
penalty action, Regional enforcement officers have the discretion
to modify the caption of the §309(g) pleading to read
"Administrative Complaint."

     Although the longer caption accurately recites the statutory
functions the Agency implements in an enforcement action, that
title may contribute to the existing confusion over the
particular role we play as Agency prosecutors initiating a case.
A change in caption will more accurately describe to the general
public our action, which is often described in press releases as
the actual imposition of a fine.

                               -  3  -

 District Court opens a judicial  enforcement case.  To the extent
 possible, we intend to treat administrative and judicial
 enforcement complaints the same, both  procedurally
 and substantively.

      It is Agency and Department of Justice practice in civil
 judicial cases to paraphrase the Clean Water Act in pleading for
 penalties.  At the present time, our Prayers for Relief typically
 include the request for "$10,000 per day of such violation before
 February 4,  1987,  and $25,000 per  day  per violation thereafter."
 This formulation has worked well and will continue as our usual
 -judicial policy.    At the  outset of a  case, the government often
 does not have complete information on  the number or extent of
 violations,  but as a litigant, it  preserves its rights by
 pleading for the statutory maximum penalty by using this

      Similarly,  EPA'3 interests  as a plaintiff in an
 administrative penalty complaint are best served by pleading for
 an  administrative  penalty  which  is high enough to facilitate
 negotiation  of a settlement which  is based on the CWA penalty
 policy  for settlements or  an approved  $404 settlement amount.
 Moreover,  the penalty amount pled  in the administrative complaint
 also must be high  enough to permit the Agency to obtain an
 appropriate  penalty under  statutory assessment criteria if the
 case must be litigated.

      In  many cases,  it will be necessary to name the statutory
 maximum  amount (i.e.,  $25,000  for  Class I cases and $125,000 for
 Class II cases)  in  the administrative  complaint to preserve EPA's
 ability  to negotiate and litigate  for  as high a penalty as is
 possible under the  facts of the  case.  Nevertheless, EPA Regions
 have  discretion to  plead for a lesser  amount by weighing other
 case-by-case considerations such as what amount is likely to
 produce  an adequate settlement,  as well as a duty to consider
 what  amount,  talcing into account the statutory penalty factors,
 is supported by the facts.

      To  ensure that CWA administrative complaints comply with the
 statute  and  present Class  II rules of  practice by explaining the
 basis for the penalty sought, Agency water enforcement staff are
 to follow the August 27, 1987, guidance by pleading:
        For reasons peculiar to the present administrative
penalty process, EPA staff should not use this formula  in
administrative complaints, but instead request a specific dollar
amount (as more precisely described below).  In case of a
default,  using a specific dollar amount  in the complaint will
result in a more enforceable penalty assessment.

                              - 4 -
        Th« proposed penalty amount was determined
     by EPA after taking into account the nature,
     circumstances, extent and gravity of the violation
     or violations, and Respondent's prior compliance
     history, degree of culpability for the cited
     violations, any economic benefit accruing to
     Respondent by virtue of the violations, and
     Respondent's ability to pay the proposed penalty,
     all factors identified at Section 309(g)(3) of
     the Act, 33 U.S.C. $1319(g}(3).

This statement should satisfy the requirement of 40 C.F.R.
§22.14(a)(5) that "Each complaint for the assessment of a civil
penalty shall include ... [a] statement explaining the
reasoning behind the proposed penalty."  The Agency staff which
drafts the administrative complaint in fact should consider the
statutory penalty factors.  This consideration satisfies the
requirements of 1309(g)(3) of the Act, in case the respondent
defaults and the requested Class II penalty becomes an
assessment.   In this context, EPA will best preserve its
negotiation and litigation position by pleading for a civil
penalty based on the statutory penalty factors and resolving all
discretion in favor of the highest defensible penalty amounts.
The facts supporting the reasoning — but not itemized arithmetic
calculations — underlying the requested penalty (e.g., facts
showing extent and history of violations, environmental impact,
economic benefit, or good faith) should be incorporated in the
case file which becomes part of the administrative record.  These
materials will form the basis for EPA penalty arguments before an
Agency ;judge if the matter is litigated4 and will form part of
the necessary administrative record to support the assessment of
the proposed civil penalty if the respondent defaults and the
proposed penalty becomes final through operation of law.

     In the event that an administrative judge in a Class II
proceeding requires under 40 C.F.R. §22.14(a)(5) more information
from EPA than the recitation of the statutory penalty factors,
Agency enforcement personnel should provide those elements of the
        Under the present default procedures for Class II
penalties (see 40 C.F.R. §22.17), the administrative complaint
can become an assessable order without the  intercession of  an
administrative law }udge.

     4  The materials are not directly applicable, however,  to
settlement negotiations, which are governed by  the methodology  of
the CWA penalty policy.  See discussion  below.

                               -  5 -

 case fil« which support  the  penalty pleading based upon the
 statutory factors  in  §309(g)(3).

     This analysis  to  support EPA's administrative penalty
 pleading based  on  the statutory  penalty assessment factors should
 not  be derived  by  applying the Clean Water Act penalty policy,
 which EPA uses  specifically  for  determining appropriate penalty
 settlement amounts for NPDES cases.  Unlike other Agency
 enforcement programs,  such as  FIFRA or TSCA, which operate under
 penalty policies that control  Agency administrative'pleading
 practices,  the  NPDES  program's penalty policy does not encompass
 how  to plead administrative  penalty complaints.  The Agency's
 settlement position,  although  based on concepts similar to the
 Agency's or a district court's assessment criteria, almost always
 will differ from (and presumably will be less than) the figure or
 formulation requested in a complaint.  These two calculations we
 make in an administrative case serve entirely different purposes,
 and  should not  be  confused.

      Negotiating Civilpenalty Settlements

      The February  11,  1986,  Clean Water Act penalty policy, as
 amended for administrative penalty cases in the August 18, 1987
 guidance,  governs  Agency negotiators in settling both
 administrative  and judicial  NPDES enforcement cases.  The
 principles  of the  policy and its use are well known, and we will
 not  repeat  them here.  We believe this policy has succeeded both
 in raising  Agency  penalty settlements consistent with the policy
 and  goals  of deterrence  and  providing incentives for quick
 correction  of violations, and  in achieving a greater national
 consistency.  Agency  negotiators should continue using this
 policy  in all NPDES settlements.  Similarly, Agency negotiators
 should  continue to use approved  bottom-line settlement amounts in
 wetlands cases.
       It the request comes at the outset of the administrative
enforcement action, before the parties have exchanged information
or even before the respondent has answered the complaint, Agency
prosecutors often will not possess complete information on  some
relevant issues.  Such an incomplete  information base is usual
and normally sufficient for pleading  and charging purposes, but
may be of limited use to an administrative judge making decisions
during contested litigation.   Under these circumstances,
enforcement staff should consider whether it is advantageous  to
EPA to urge the judge to delay the inquiry until a  later stage  in
the litigation when all available information can be considered.
See discussion below on Litigating Penalties.

                              - 6 -

     Litigating Civil Penalties

     When EPA or DOJ attorneys provide written or oral arguments
to a federal District Court judge or an administrative judge on
the issue of an appropriate civil penalty,  they are not governed
by the calculation methodology of the 1986  Clean Water Act
penalty policy or the 1987 addendum.  The 1986 policy itself

        In those cases which proceed to trial, the
     government should seek a penalty higher than
     that for which the government was willing to
     settle, reflecting considerations such as
     continuing noncompliance and the extra burden             *
     placed upon the government by protracted

CWA Penalty Policy at p.2.  It is inherent to the concept of
settlement negotiations that respondents will risk a higher civil
penalty in the event settlement talks fall through.  Without this
leverage, defendants or respondents will not have strong
incentive to settle on terms acceptable to the government under
the penalty policy.  Agency negotiators then would either have to
agree to civil penalties lower than those presently being
attained, or spend a lot more time litigating cases that are
currently being settled.  In order to promote settlements, it is
necessary to restrict the scope of the penalty policy and its
specific calculation methodology to settlements alone.

     Government litigators are to argue for the highest civil
penalty appropriate under the law, considering the applicable
statutory factors,  our ability to prove the allegations in the
     6 These are, for judicial actions,

      "the seriousness of the violation or violations, the
     economic benefit (if any) resulting from the violation,
     any history of such violations, any good faith efforts
     to comply with the applicable requirements, the
     economic impact of the penalty on the violator, and
     such other matters as justice may require."

CWA § 309(d).  The virtually identical statutory factors in
administrative enforcement proceedings are

      "the nature, circumstances, extent and gravity of the
     violation,  or violations, and, with respect to the
     violator, ability to pay, any prior history of such
     violations, the degree of culpability, economic benefit

                               - 7  -

 complaint,  and whatever financial  burdens may be placed upon the
 government  by continuing litigation.

      Government litigators  must provide legal arguments and may
 introduce testimony or other evidence supporting facts related to
 the application of  statutory penalty  criteria to a violator's
 conduct to  advance  EFA's claims for civil penalties.  We  should
 draw on favorable civil penalty precedents,  such as Chesaeeakg
 Bav Foundation v. Gwaltnev  of Smithfield. 611 P. Supp. 1542
 (E.D.Va.  1985),  aff.,  791 F.2d 304 (4th Cir. 1986), rev.  on other
 grounds and remanded,  108 S.Ct.  376  (1987)  (for the total amount
 assessed),  sierra Club v. Simkina  Industries. Inc. 617 F.Supp.
 1120 (D.Md.  1985),  aff.,  847 F.2d  1109 (4th  Cir. 1988) or United
 States  v. C^"**?***pjland Farms  of Connecticut. Inc.. 647 F. Supp.
 1166 (D.Mass.  1986),  aff.,  826 F.2d 1151 (1st Cir. 1987)(§404
 case in which defendant was assessed  a civil penalty of $150,000
 and required to pay an additional  $390,000 if restoration of
 wetlands not carried out).   See also  Attachments A and B.  We
 strongly advise you to adopt the approach used in the attached
 Regional  materials  — recommend a  total penalty amount, after
 discussion  of  the appropriate statutory factors,   but do not
 provide specific amounts (other than  for economic benefit, where
 applicable)  for each factor.   Attachments A  and B.  The penalty
 we  recommend should be one  supportable by the evidence and
 available legal  arguments,  but also one that resolves any penalty
 discretion  or  factual  ambiguity in terms most favorable to the
 United  States  or the  Environmental Protection Agency.  The amount
 that we recommend to  a judge should in all instances be more than
 we  were proposing in  settlement  negotiations.  In administrative
 penalty cases  in which there is  a  significant record of
 violations,  it is likely  that the  facts of a case will often
 justify EPA  seeking the maximum penalty authorized by the Act —
 either  $25,000 or $125,000  ~ assuming also that EPA requested
 that maximum assessment in  its administrative complaint.  An
 important distinction  to  note here is that in pursuing a  Clean
Water Act civil  penalty in  litigation,  the government should
 support its  claim through application of the statutory penalty
 factors rather than the Agency's civil penalty policy
     or savings  (if any) resulting  from  the violation,  and
     such other matters as justice  may require."

CWA §309(g)(3).

     7  At this point in an  enforcement  case,  such financial
costs will typically be minimal.

     8  The -judges in our enforcement cases need  this  information
to support their decisions imposing civil  penalties under the
Water Quality Act amendments.

                              - 8 -

methodology.  Indeed, government litigators shall  not, arcrue
before a 1-udqe or neutral deciaionmaker for a civil  penalty based
ugoji the •Pacific methodology set gu^ in the CWA panaltv policy,
nor should they offer evidence, including expert testimony, as to
how specific CWA penalty policy gravity component  calculations
apply to a given case.

     The analysis of the economic benefit accruing to the
violator remains the same (after accounting for a  potentially
longer period of noncompliance if settlement is not reached), and
is to be considered according to the terms of 5309(d) *and  (g) of
the Act, so the BEN program may and should be used in litigating
penalties.   The existence and extent of economic  benefit is a
factual matter which may be objectively measured in dollar terms.
Therefore, to support the United states' figure on economic
benefit government litigators may introduce a witness expert in
the application of financial analysis as used in the BEN program.

     The penalty policy's settlement gravity analysis, however,
must be abandoned in favor of a more stringent, statutorily-
grounded approach if penalties in a case are litigated.
Specifically, the government should then offer into evidence
facts that are related to the gravity-oriented statutory
criteria, such as the magnitude and duration of the violations,
the actions available to the defendant to have avoided or
mitigated the violations, or any environmental damage.  The
government should argue as an advocate that the presence of these
facts warrant assessment of a civil penalty of a given amount.
     9 Although the application of BEN to the facts of violation
will remain the same in settlement or litigation, government
prosecutors may well take a more stringent position in litigation
than settlement regarding, for example, days in violation.  This
tactical shift may influence the economic benefit analysis by
changing material inputs into the computer program.  We do not
address here special issues that may arise over how to apply the
BEN program to a given set of facts.

     The BEN program generally does not apply to wetlands cases
under 9404 of the Act.

     10  This amount should correspond to the penalty requested
in the administrative or judicial complaint, adjusted to reflect
any new information received since the filing of the case
(keeping in mind that the government cannot argue for penalties
higher than initially requested), and should always be
significantly greater than the bottom-line penalty derived  from
application of the CWA penalty policy.

                               -  9  -

      The results of our gravity  analysis of the Clean Water Act
 penalty policy,  although applicable  in NPOES settlement
 discussions,  are irrelevant  to our litigation approach and should
 never be introduced into evidence  by the United States or
 advanced as representing Agency  litigation penalty policy.  This
 is  the case because the penalty  policy quantifies gravity
 calculations  in  a way which  takes  into account government
 resources and priorities relevant  to deciding whether to litigate
 or  settle a case.

      If the defendant in a judicial  case attempts to depose EPA
 personnel on  the gravity calculations for settlement purposes
 under the CWA penalty policy,  either in the case at hand or other
 cases,  this should  be vigorously opposed by government counsel
 under Rule 26(b)  as not "being reasonably calculated to lead to
 the discovery of admissible  evidence."  If the defendant in a
 judicial case attempts  to introduce  the CWA Penalty Policy into
 evidence,  this snould be opposed as  irrelevant.    In
 administrative litigation in which formal rules of evidence may
 not apply, EPA prosecutors should  resist the respondent's
 introduction  of  the policy as  irrelevant and potentially

      40 C.F.R. §22.27(b)'s mandate that administrative law judges
 "consider any penalty guidelines issued under the Act" when
 assessing a penalty does not apply in Clean-Water Act cases,
 because there are no applicable  guidelines.14  The February 1986
 NPOES settlement policy,  as  amended, does not and cannot govern
 or  even apply to the decision  which  an ad.udicator must make to
 resolve an administrative or judicial claim for civil penalties.
 If  it did, the policy most likely  would be designed to quantify
 penalties differently so as  to produce acceptable amounts to
 achieve through  litigation,  rather than settlement.  Furthermore,
 if  the  settlement policy governed  adjudications respondents cculd
 have  too little  incentive to settle  with Agency negotiators and
 administrative judges would  face much lengthier dockets.  EPA
 litigators should make  this  point  to any administrative judge who
 misconstrues  the scope  of the  NPDES  penalty policy.

     11  Tactically, exceptions may apply here.   But  in no  case
should government prosecutors represent to the Court  that the  CWA
penalty policy binds the Court, the hearing officer,  or the
United States in litigating civil penalties.

     12  The Agency has not issued §404 program penalty
guidelines applicable to administrative judges.

# "Use of Stipulated Penalties in EPA settlement Agreements", dated January
11,  1990.

                                     o c :o46«

                                !'. 2 4 J990

 SUBJECT:  Use of Stipulated Penalties in EPA Settlement
 FROM:     James M. Strock^ '
           Assistant Administrator

 TO :        Addressees
      This memorandum provides guidance on the use of
 stipulated penalties in settlement of enforcement actions.
 For each issue discussed,  a preferred approach is stated
 along with its rationale.   These preferred approaches should
 be followed absent unusual circumstances dictating an alter-
 native approach.   The guidance applies to judicial settle-
 ments except that it does  not supersede the September 21,
 1987 Guidance on  the Use of stipulated Penalties in Hazardous
 Waste Consent Decrees.   It also applies to administrative
 cases where EPA has legal  authority to assess stipulated

      Stipulated penalties  are penalties agreed to by the
 parties to a settlement agreement for violation of the agree-
 ment's provisions.   These  penalties are then made a part of
 the  agreement,  and are  enforceable if it is violated.   In EPA
 settlement  agreements,  the primary goal of a stipulated
 penalty is  to act as an effective deterrent to violating the
 settlement  agreement.

      I.   Tvpaa of  Requirements to Which Stipulated Penalties
     Any clearly definable  event  in  a  settlement agreement
may be appropriate for stipulated penalties in a given case.
Such events include testing and reporting requirements,
interim and final milestones  in compliance schedules,  and
final demonstration of compliance.   The government litigation
team assigned to a case should carefully  consider which


consent agreement provisions are appropriate for stipulated
penalties and be prepared to vigorously enforce them.  Stipu-
lated penalties can even be attached to consent agreement
provisions requiring payment of up-front penalties so long as
the stipulated penalties are higher than the interest,
computed at the statutory interest rate, on the underlying
amount.  Every consent agreement requirement to which stipu-
lated penalties are attached should be drafted to ensure that
the standards for determining compliance are clear and objec-
tive, and that any information required to be submitted to
EPA is clear and unequivocal.

     In general, stipulated penalties are particularly impor-
tant for requirements of the consent agreement which do not
represent regulatory or statutory violations for which the
agency could potentially get statutory maximum penalties.
Such provisions may include a requirement to install specific
control equipment where the regulations and statute involved
require only compliance with a discharge or emissions stan-
dard, or environmental auditing or management requirements
designed to ensure future compliance.  Without stipulated
penalty provisions, penalties for violation of such provi-
sions in judicial cases are only available at the judge's
discretion in a contempt action under the court's inherent
authority to enforce its own order.

     Attaching stipulated penalties to violations of consent
agreement provisions which are also violations of a statute
or regulation with a specified statutory maximum penalty has
advantages and disadvantages which Agency attorneys should
consider carefully in the context of a particular case.  The
advantage is ease of enforcement.  The Agency can pursue
violations without having to bring a new enforcement action
or, in the judicial context, a contempt action.  The disad-
vantage is where stipulated penalties for such violations are
set at less than the statutory maximum, parties may argue
that the government has bargained away some of its
enforcement discretion.

     If a particularly egregious statutory or regulatory
violation occurs for which the government feels the applic-
able stipulated penalties are not adequate, sources may claim
the government is equitably estopped from pursuing other
enforcement responses.  Sources may argue in the context of  a
contempt action or new enforcement action that the govern-
ment has already conceded in the consent agreement that a
fair penalty for this type of violation is the stipulated
penalty, and therefore, the court should not require  any


 additional penalty   Sources nay make this argument even  if
 the government has reserved all rights to pursue various
 enforcement responses for consent agreement violations.

      II.  Level of Stipulated Penalties

      Because the statutes EPA is charged with enforcing vary
 so widely, penalty schedules for all media or types of viola-
 tions are not practical.   There are, however, several impor-
 tant criteria which should always be considered in  setting
 stipulated penalty amounts.   Each program office, in concert
 with the appropriate OECM Associate Enforcement Counsel,  may
 want to consider providing further, more specific guidance on
 appropriate levels or ranges for stipulated penalties based
 on the criteria below.

      One  key element which applies to setting the levels  of
 all stipulated penalties  for violation of a consent agreement
 provision is that the defendant is by definition a  repeat
 offender  when the provision  is violated.  For this  reason,
 such stipulated penalties should be higher on a per day basis
 than the  initial civil  penalties imposed.   See Guidelines for
 Enforcing Federal District Court Orders in Environmental
 Cases (GM-27).

      The  economic benefit accruing to a source due  to a
 violation should be recovered in order for the stipulated
 penalty to be an effective deterrent.   For some types of
 violations,  such as notice provisions,  the economic benefit
 of  noncompliance may be minimal,  though significant stipu-
 lated penalties may be  appropriate based on other criteria as
 discussed below.   For these  types of violations, no formal
 BEN analysis  is necessary.   For violation of provisions which
 involve quantifiable delayed or avoided costs,  such as
 installation  of control equipment as part of a compliance
 schedule,  the minimum stipulated penalty should be  the
 economic  benefit of noncompliance.   However, the recidivism
 factor  will nearly always justify a penalty well above this
 minimum,  which often serves  as the point of departure for a
 minimum initial penalty.

     The  source's ability to pay can be another important
 criterion to  consider.  How  much of a deterrent a stipulated
 penalty is will depend  on how financially significant it  is
 to the  source.   The same  stipulated penalty may be
     1  In considering whether to attach penalties to violations
uncovered by an environmental audit,  the  November 14,  1986 Final
EPA Policy on the Inclusion  of  Environmental  Auditing  Provisions
in Enforcement Settlements (GM-52)  should be  consulted.


 financially crippling to one source, ^hile nerely a routine
 business expense  for another.  However, the burden is always
 on the defendant  to raise such issues during negotiations and
 to justify lower  stipulated penalties than the government has
 proposed.  Financial ability to pay a penalty can be
 determined using  the ABEL computer program for corporate
 violators and the MABEL computer program for municipal

      It should be emphasized that this factor should not be
 considered a reason for lowering the level of stipulated
 penalties below the level equal to the economic benefit.  It
 would mainly affect the degree to which this base minimum
 amount is increased to account for the recidivist nature of
 the violation.  The Key concern is that stipulated penalties
 should be set at  levels which are significant enough to deter
 violations rather than resulting in a "pay-to-pollute"

      Another criterion which should be considered in setting
 stipulated penalty amounts is the gravity of the violation,
 iTe.. how critical is the requirement to the overall
 regulatory scheme and how environmentally significant is the
 violation.  The environmental significance factor should
 include consideration of potential and actual harm to human
 health and the environment.  In general, consent agreement
 provisions which  are central to a particular regulatory
 scheme should have higher stipulated penalties than
 provisions that are considered less significant.  It is up to
 each  enforcement  program to make judgments about the relative
 importance of respective requirements.  As previously noted,
 some  consent agreement requirements such as notice provisions
 may have little or no associated economic benefit, but may
 nevertheless be critical to the regulatory program in
 question and would warrant high stipulated penalties.

      Another consideration related to the gravity component
 is the source's history of compliance.  If the source has a
 record of previous violations, a higher stipulated penalty
 may be neceewary  because earlier enforcement responses were
 ineffective in deterring subsequent violations.

      Another option to consider whenever setting stipulated
penalty levels is an escalating schedule, in which the
 stipulated penalty increases with the length of the
violation.  For example, violations of up to two weeks might
have  stipulated penalties of $1000 per day while violations
of two to four weeks might have stipulated penalties of  $2000
per day, and so on.


      III. Method ^f Collection

      Settlement agreements should state the method by  which
 stipulated penalties will be collected.  Two options are for
 the settlement agreement to provide that the penalty is
 automatically due upon the occurrence or non-occurrence  of a
 specified event, or it may make the penalty payable only on
 demand by the government.

      Automatic payment is the preferred approach.   It  saves
 resources which would otherwise be devoted to making demands
 for payment and may put the government in a more advantageous
 position should the source declare bankruptcy,  if payment is
 made on demand, the consent agreement should make  it clear
 that the legal liability of the source for the stipulated
 penalty attaches immediately upon violation,  and it is only
 payment of the penalty to the Agency which is not  due  until
 demand is made.

      Settlement agreements should always state where and how
 the penalty should be paid and how the check should be draft-
 ed.   SSS. EPA Manual on Monitoring and Enforcing Administra-
 tive and Judicial  Orders for additional guidance.   In
 addition,  settlement agreements should not agree to pre-
 enforcement review of accrued stipulated penalties.

      IV.   Timing of Enforcement Responses

      Prompt action to collect stipulated penalties due under
 any consent agreement is crucial.   If stipulated penalties
 are due on demand,  it is very important such demands be  „
 timely.   The government encounters significant difficulty
 collecting stipulated penalties if it sits on its  rights.
 Delay allows penalties to increase to levels parties may
 argue are  inequitable.   Sources may also raise equitable
 defenses such as laches or estoppel,  arguing that  the  govern-
 ment cannot fail to exercise its rights for extended periods
 of tine allowing stipulated penalties to continue  to accrue
 and then move to collect unreasonably high penalties.  The
 government,  of course,  can and should always rebut such
 claims by  arguing  it is simply enforcing the decree or agree-
 ment as agr««d to by defendant,  and is not subject to  such
 equitable  defenses.   However,  this unnecessary complication
 should be  avoided.

     A cap on the amount of stipulated penalties which can
 accrue is  generally not a preferred solution to this problem.
The stipulated penalty would lose its deterrent value  once
 the cap is  reached.   Also,  the main goal of any enforcement
action must  be compliance with the law so that public  health
and welfare  is protected.   If consent agreement provisions


 are  allowed to be  violated  long enough for a cap to be reach-
 ed,  serious environmental consequences may have occurred.

      Providing that stipulated penalties only apply for a
 specific, reasonably short  period of time in conjunction with
 reserving to the government all available enforcement respon-
 ses  for violation  of the consent agreement, however, solves
 many of the problems mentioned above.  By its own terms,
 stipulated penalties will not accrue to levels defendants can
 argue are inequitable.  The government will be in a strong
 position when it pursues other enforcement options, such as
 contempt actions or a new enforcement action to get
 additional penalties, because it can argue that the penalties
 in the original consent agreement were not enough to deter
 the  defendant from further  violations and the possibility of
 additional penalties was clearly contemplated.

      V.  Reservation of Rights

      All consent agreements must contain a provision which
 reserves to the government  the right to pursue any legally
 available enforcement response for violation of any consent
 agreement provision.  These enforcement responses would
 include civil contempt proceedings and in^unctive relief, and
 criminal contempt  proceedings for particularly egregious
 violations.  However, for provisions mandated by statute or
 regulation and which have stipulated penalties attached, a
 reservation to pursue statutory penalties is suggested but
 not  required.  For model language, see the October 19, 1983
 Guidance for Drafting Judicial Consent Decrees (GM-17).

      VI.  Collection of Stipulated Penalties

      The government should  be prepared to collect the full
 amount of stipulated penalties due under a consent agreement.
 Ho agreement should ever anticipate compromise by specifying
 instances where it will be  allowed, aside from a standard
 force majeure clause.  In rare, unforeseeable circumstances,
 however, tlM equities of a  case may indicate that the govern-
 ment  may coBproaise the amount it agrees to collect.  For
 penalties payable  on demand, the government may also exercise
 prosecutoriml discretion by declining to proffer a demand for
 stipulated penalties for minor violations of a consent agree-

      It may also be appropriate to provide that stipulated
penalties for violation of  interim milestones in a compliance
schedule will be forgiven if the final deadline for achieving
compliance is met.  This is clearly inappropriate where there
 is significant environmental harm caused by the defendant
missing the interim deadlines.  If such a provision is used,


 the defendant should generally be required to place  accrued
 penalties in an escrow account until compliance by the  final
 deadline is achieved.

      In judicial cases,  the Attorney General and his
 delegatees in the Department of Justice (DOJ) have plenary
 prosecutorial discretion to compromise stipulated penalties.
 This authority stems from 25 U.S.C.  § 516, which reserves to
 DOJ authority to conduct the litigation of the United States,
 including cases in which an agency of the United States is a
 party,  and the cases and regulations broadly interpreting
 this authority.

      In administrative cases handled solely by EPA,
 stipulated penalties should be collected pursuant to the
 enforcement authority granted to EPA under the statute  gover-
 ning the case.  This authority to collect and compromise
 stipulated penalties varies from statute to statute.

      separate from the process for collecting stipulated
 penalties,  EPA must keep track of money owed the federal
 government (accounts receivable)  resulting out of the acti-
 vities  of  the Agency,  including administrative penalty
 assessments.   A stipulated penalty becomes an account receiv-
 able when  the appropriate Agency official determines that a
 violation  of  a consent agreement provision with an attached
 penalty has occurred.  Under Agency  financial regulations and
 policies for  monitoring  accounts receivable, stipulated
 penalties  due and owing  must be reported within three days to
 the  Regional  Financial Management Office (FMO).   The FMO is
 responsible for entering the stipulated penalty as an
 accounts receivable into the Agency's Integrated Financial
 Management  System (IFMS).   The "appropriate agency official11
 who  determines the existence of a stipulated penalty account
 receivable  is responsible for keeping the FMO updated on the
status  of enforcement  penalty collection efforts. A more
 detailed account of these procedures is included in  the
Manual  on Monitoring and Enforcing Administrative and Judi-
cial Orders.

     Regional Administrators
     Regions I-X

     Deputy Regional Administrators
     Regions I-X

     Regional counsels
     Regions I-X

E. Donald Elliott
General Counsel

Headquarters Compliance Program Divisions Directors

Mary T. Smith, Acting Director
Field Operations and Support Division
Office of Mobile Sources

David Buente, Chief
Environmental Enforcement Section
U.S. Department of Justice

Associate Enforcement Counsels

Workgroup Members

# "Multi-Media Settlements of Enforcement Claims", dated February 6, 1990.

'/                WASHINGTON. D C 20460
                        FEB  6" 1990
                                                       LOMP1 ANCt MONITORING

SUBJECT:  Multi-Media Settlemen-ef Enforcement Claims
FROM:     James M. StroOc,  /
          Assistant Administrator

TO:       Regional Administrators, Regions I - X
          Regional Counsel, Regions I - X
          Associate Enforcement Counsel
          Program Compliance Office Directors


     The purpose of this memorandum is to provide guidance which
explains 1) EPA policy strongly disfavoring judicial and
administrative settlements of enforcement cases which include
releases of potential enforcement claims under statutes which are
not named in the complaint and do not serve as the basis for the
Agency bringing the enforcement action, and^ 2) how approval for
any multi-media settlements of enforcement claims should be
obtained in civil judicial enforcement cases in the Region and at
Headquarters .


     As a general rule, a settlement of a hazardous waste
enforcement action, for example, may include a covenant not to
sue providing the settling party with protection from subsequent
civil enforcement action under some or all provisions of CERCLA
and/or RCRA. *  Similarly, a Clean Water Act enforcement
settlement may expressly settle EPA claims under some or all
provisions of the Clean Water Act.  A settlement which extends to
potential EPA enforcement claims under any statute(s) outside of
the program medium under which the case was brought, e.g. . a CWA
release in a CERCLA case, or a release in a CERCLA case under all
     * The United states generally gives covenants not to sue,
not releases, in the CERCLA context.  This guidance, however,
uses the terms "covenant not to sue" and "release"
interchangeably.  Use of the word "release" is not intended to
signify any differing effect of the settlement but is merely used
for ease of exposition.

statutes administered by EPA, should not be given except under
exceptional circumstances, because it is standard EPA policy that
releases, when granted, should be no broader than the causes of
action asserted in the complaint. 2

     Although defendants often seek releases broader than the
specific medium at issue in the case, multi-media releases for
single-medium enforcement cases are strongly discouraged and will
be granted only in exceptional cases.  A proposal to enter into
such a settlement will undergo close scrutiny at both the
Regional and Headquarters level.  When deciding whether to
entertain a request for a multi-media release, the Region should
consider the following factors:

     1)  The extent to which EPA is in a position to know whether
it has a cause of action warranting further relief against the
settling party under each of the statutes included in the
release.  If, after investigation, it is determined that no cause
of action exists, then it is somewhat more likely that the
release might be considered;

     2)  Whether the settlement provides adequate consideration
for the broader release.  If the relief to be obtained under the
settlement includes appropriate injunctive relief and/or
penalties for any actual or potential violation/cause of action
under the other media statutes, then it is somewhat more likely
that the release might be considered; and

     3)  Whether the settling party is in bankruptcy.  If the
relief obtained through the settlement is all the Agency can
obtain from the settling party, and the settling party will be
ceasing operations, then it is somewhat more likely that the
multi-media release might be considered if the settlement is
otherwise favorable to the Government.  This rationale is far
more persuasive in the Chapter 7 or Chapter 11 liquidation
context than in the Chapter 11 reorganization context.

     In addition, the only possible statutory releases or
covenants not to sue that EPA will grant are for statutes
administered by EPA.  Multi-media settlements should not grant
releases phrased in broad terms such as "all statutes
     2  If multi-media causes of action have been asserted
in the united States' complaint, then settlement of and
releases under all statutes involved in the action would not be
unusual, provided that appropriate relief is obtained under each
statute.  Such settlements would, however, require the
concurrence of all Regional and Headquarters media offices
involved, as described in Part C below.

administered by EPA."  Rather, all such releases should
specifically name the EPA statutes included in the release
Further, releases should not include broad statements reaching
beyond EPA-administered statutes such as "all claims or causes
of action of the United States."  A settlement should also not
release any common law claims EPA may have, because it is not
clear what, if any, Federal common law exists in the
environmental area, and thus a release of this kind is of
undefined scope.  Similarly, State law claims should not be
released by the Federal government, since it is unclear what, if
any, Federal causes of action derive from State law.  Moreover,
as a matter of practice and policy, we should not purport to bind
States when they are not directly involved in our enforcement
cases. ^  AS always, releases may be granted only for civil
liability, not for criminal liability. 4


     All settlements involving multi-media resolution of
enforcement claims require the approval of the appropriate EPA
official(s) consistent with Agency delegations of authority.  For
civil judicial enforcement cases specifically, all multi-media
settlements, including all CERCLA settlements resolving claims
under other EPA-administered statutes, require the approval or
concurrence of the AA-OECM. 5  In any case in which the Region
wishes to propose to the AA-OECM that EPA enter into such a
settlement, certain procedures must be followed.
     3  Ordinarily, state claims are independent of Federal
enforcement authorities and are not compromised by settlement
under the Federal authorities.

     4  Releases should also be drafted in accordance with the
policy and practice of each medium involved.  In most enforcement
actions, this means that the release is based upon information
known to EPA at the time of the settlement and does not extend to
undefined future violations or site conditions.

     5  For administrative enforcement cases which include multi-
media releases, the Regions similarly should obtain the
concurrence of all EPA officials (at Headquarters or in the
Region, as the case may be) consistent with the relevant EPA
delegations covering administrative settlements under each
statute included within the release.  (If all authorities
included within the release are delegated to the Regions, then no
Headquarters concurrence is needed.)  Of course, some
administrative settlements with multi-media releases will also
require approval by the Department of Justice when a DOJ role is
established by statute.

     First, cross-media consultation among all affected Regional
program offices and Office of Regional Counsel branches must be
undertaken.  This consultation should involve joint investigation
as to whether there are any actual or potential causes of action
under any statute under which a release is contemplated.  An
appropriate investigation, for example, is likely to include a
check of all relevant files, a determination of whether a field
inspection is warranted, and, if so, an inspection, and an
inquiry to state program and legal counterparts to ensure that
EPA is not unknowingly settling or waiving any potential claims
it may have based upon relevant and available information.  In
the event that an appropriate cross-media investigation cannot be
undertaken, a release for any uninvestigated medium cannot be

     Second, when the settlement is referred to Headquarters for
approval or concurrence, the Regional Administrator's cover
memorandum to the AA-OECM should highlight the existence of the
multi-media settlement or release.  It should also include a
statement by the Regional Administrator (or any other Regional
official delegated responsibility to approve the settlement on
behalf of the Region) that the Region has evaluated all possible
claims under all EPA-administered statutes included within the
release and, after diligent inquiry, has determined that, to the
best of its knowledge, no claims exist, or, if any claims do
exist, that it is in the best interest of the Agency to settle
the claims in the manner included in the proposed settlement.  If
claims do exist, the RA's memorandum should explain why the
settlement is in the best interests of the Agency.

     Lastly, the OECM Division for the program area that has the
lead in the settlement must take certain steps to ensure that
the other affected OECM Divisions and their program counterparts
at Headquarters do not object to the multi-media release.  The
lead Associate Enforcement Counsel should provide a copy of the
settlement, the RA's cover memorandum, and any other relevant
supporting material from the Region (e.g.. in the case of a
CERCLA settlement, the Ten Point Settlement Analysis) to all
other OECM Associates who are responsible for any statutes
included in the release with a request for written concurrence
within 21 days.  Each Associate should in turn consult with, and,
if part of standard procedure, obtain the concurrence of, his/her
Headquarters program counterpart on the settlement.  The lead
Associate and his/her staff should coordinate all OECM comments
or requests for additional information from the Region to help
avoid presenting the Region with conflicting comments or

     After all necessary concurrences have been received, the
lead Associate Enforcement Counsel will transmit the settlement
to the AA-OECM for final action, with a copy of all Headquarters
concurrences attached to the package.  Although OECM will strive

to meet its standard 35-day turnaround time for civil judicial
settlement referrals, because multiple Headquarters offices are
involved, the Regions should expect that multi-media release
settlements may take greater time to be reviewed and approved by
Headquarters than single-medium settlements.  To assist OECM in
obtaining concurrences as expeditiously as possible, the Region
should actively consult with the lead OECM Division during
negotiations so that OECM will have advance notice of the cross-
media release issue and will be able to consult with other OECM
Divisions before the settlement is referred to the AA-OECM.


     This memorandum and any internal office procedures adopted
for its implementation is intended solely as guidance for
employees of the u S. Environmental Protection Agency.   It does
not constitute a rulemaking and may not be relied upon to create
a right or a benefit, substantive or procedural, enforceable at
law or in equity, by any person.  The Agency may take action at
variance with this memorandum or its internal implementing

     If your staff has any questions on this matter, please ask
them to contact Sandra Connors of OECM-Waste at 382-3110.

cc:  Richard B. Stewart, Assistant Attorney General, Land and
       Natural Resources Division, U.S. Department of Justice
     David T.  Buente, Chief, Environmental Enforcement  Section,
       Land and Natural Resources Division, U.S. Department of

# "Documenting Penalty Calculations and Justifications in EPA Enforcement
Actions", dated August 9, 1990.

\^¥S>*                     WASHINGTON, 0 C  20460
                                    9  :T3
   SUBJECT:  Documenting Penalty Calculations and Justifications  in
             EPA Enforcement Ac
   FROM:     James M. SfrqcJs/"
             Assistant Administrator

   TO:       Addressees

        This memorandum institutes a uniform system for documenting
   penalty calculations and explaining how they are consistent with
   the applicable penalty policy in all EPA enforcement actions.  It
   expands on the September 14, 1987 Guidance on Processing of
   Consent Decrees (GM-64) and requirements in several media
   specific penalty policies.  The system will allow regional and OE
   management to assure that EPA settlement agreements comply with
   applicable penalty policies, and will provide documentation for
   our actions for purposes of oversight review.  The memorandum
   sets out the information regarding the penalty which must be
   discussed at each stage of litigation.  The exact format of the
   discussion is left to the discretion of each program.  All
   discussions of the agency's settlement position regarding
   penalties are, of course, strictly enforcement confidential
   workproduct, should be clearly labeled as such and should not be

        Effective immediately, every settlement package transmitted
   from the Regional Administrator or Regional Counsel to
   Headquarters for concurrence must include a written "Penalty
   Justification."   This should include an explanation of how the
   penalty, including the economic benefit and gravity component,
   was calculated.  The Region should then discuss in detail the
   justification for any mitigation of either component.  In
   particular,  reference should be made to the factor or language in
   the penalty policy that is relied upon to justify the mitigation,
   and a discussion must be included detailing why mitigation is
   warranted in the particular case.  For administrative cases, a
   Penalty Justification should be prepared for circulation within
   the Office of Regional Counsel with a final consent agreement or
   order.   It may not be circulated to the agency official who signs
   the final order as the presiding agency official, usually the
   Regional Administrator, because it could constitute ax t»rte
   communication which would have to be shared with defendants under
   40  C.P.R. Part 22.                            _-,- -  ~\
                                               _—<•—C3Vt    '
                                                           Pnmrt on fl«ycte* Pap*v

                              - 2 -
     When the factor relied upon to justify mitigation  is
litigation risk, the Region should state the ..probable outcome of
litigation along with legal and factual analysis which  supports
its conclusion.  For judicial cases, this should be done in
consultation rfith the Department of Justice.  Specific  discussion
of the evidentiary problems, adverse legal precedent, or other
litigation problems in the case should be included.  If the
required discussion of the penalty is contained in the  litigation
report or subsequent correspondence between the ORC and OE, the
settlement package from the Region may reference this discussion
along with an attachment of the previous documentation.

     A similar discussion of Penalty Justification should also be
included in every settlement package transmitted from the
Associate Enforcement Counsels for the signature of the Assistant
Administrator.  The Headquarters staff may, however, reference
the discussion in the regional memorandum when it is sufficient.
Seriously deficient Penalty Justifications will be returned to
the Region to allow a proper analysis to be prepared before the
Assistant Administrator for Enforcement reviews a consent decree
for signature.

     In addition, each Office of Regional Counsel case file and
all OE files in cases in which OE is involved should contain at
all times during the course of an enforcement action
documentation of the current bottom line agreed upon by the
litigation team.  For civil administrative cases, this will begin
with the filing of the administrative complaint.  For civil
judicial cases, this will begin with the litigation report, which
should include the penalty proposed by the Region initially.  The
litigation report should clearly indicate how the gravity and
economic benefit components were calculated under the applicable
penalty policy and discuss in detail any mitigation that is
proposed.  Significant uncertainties which could result in
further mitigation should also be identified.

     The OE attorney assigned to the case will then determine if
OE concurs with the penalty proposed by the Region in reviewing
the referral.  OE concurrence will be documented in writing,
placed in the OE case file and provided to the Region.  If OE
does not concur with the penalty proposed by the Region in the
referral, the assigned OE attorney will prepare a memorandum to
the Region stating with specificity the basis(es) of the

     Once the enforcement action is initiated or pre-filing
negotiations begin, the litigation team should document any
agreed upon changes to the bottom line penalty based upon new
infomation or circumstances which arise during the course of the
enforcement action.  This documentation oust, at a minimum,

include a memorandum to the file recording how both the gravity
and economic benefit components were calculated, the basis in the
applicable penalty policy and in the specific facts of the case
for any -litigation, and the changed circumstances or new
infor-'at.cn vhich ]ustify modification of the bottom line.  This
Aill be 25peCi3liy beneficial in cases where there are changes in
the litigation team over time.  It will enable new attorneys
assigned to the case to know what the current bottom line penalty
is and how that has been determined over the course of the case.

     These requirements will serve several functions.  It will
ensure that management has adequate information to judge
consistency with the applicable penalty policies in specific
cases and in the various enforcement programs overall.  It also
will ensure that every regional case file and all OE files in
cases in which OE is involved have written documentation of how
the penalty obtained was calculated and justified in terms of the
penalty policy.  This is essential for reviews or audits of our


     Regional Administrators
     Regions I-X

     Deputy Regional Administrators
     Regions I-X

     Regional Counsels
     Regions I-X

     £.  Donald Elliott
     General Counsel

     Headquarters Compliance Program Division Directors

     Associate Enforcement Counsels

     Richard B. Stewart
     Assistant Attorney General
     Environment and Natural Resources Division
     U.S.  Department of Justice

'»     '                      WASHINGTON DC 10460

    SUBJECT:  Documenting Penalty Calculations and Justifications  in
             EPA Settlement Agreements
    FROM:     James
             Assistant Admnistrator
             Office of Enforcement

    TO:       Addressees

        Attached is final guidance on documenting penalty
    calculations and justifications in all EPA enforcement actions.
    We have made several revisions to the draft memorandum in
    response to Regional comments.

        Two Regions pointed out that the requirement to include the
    discussion of the penalty in settlement packages which go to the
    Regional Administrator in administrative cases violates the
    prohibition against ex parte communication in 40 C.F.R. Part 22
   where the Regional Administrator is acting as the presiding
    agency official.  The memorandum has been changed to reflect
   this.  The penalty documentation requested is still required in
   administrative cases.  However, it should be circulated only
   within the Office of Regional Counsel and the program office
   where the Program Office Director is not the presiding agency
   official.  This discussion should not be circulated to the
   Regional official who acts as the presiding official.

        Some commenters expressed concern as to the level of detail
   and length of explanation required.  What is contemplated by the
   memorandum is a document which calculates the unmitigated penalty
   and discusses the factors relied upon for any mitigation.  This
   should generally take only a page or two.  It is not acceptable
   to simply say,  for example, that the gravity component was
   mitigated by 30% due to defendant's inability to pay without some
   explanation of what the Region did to ascertain the defendant's
   financial status, consistent with the ABEL program and agency

        One Region expressed concern that, with regard to mitigating
   penalties with reference to municipalities, there is no agency
   guidance on this issue and, therefore, no policy they can
   reference to justify mitigation.  We are not addressing this

                              - 2 -
issue in this memorandum, but OE will consider future guidance on
this topic.  Several commenters expressed concern that the
required penalty documentation be marked and treated as
enforcement confidential work product.  A caution to this effect
has been added.

     Several conunenters were also concerned that the memorandum
will cause a significant paperwork burden with its requirement
that every time a bottom line penalty changes, a new
justification needs to be drafted.  What is required by the
memorandum is only that changes since the last penalty
justification be discussed.  Points which are already adequately
discussed in previous documentation need not be repeated.
Previous documentation which fully discusses an aspect of the
penalty can simply be referenced.  One commenter suggested that
penalty documentation only be required at the end of the
litigation in the settlement package.  This is not acceptable
because it invites post hoc rationalizations.

     Finally, one commenter suggested that a similar requirement
be applied to injunctive relief.  This is not a subject which
will be addressed in this memorandum, but OE will consider it for
future guidance.

     If you have any questions concerning this memorandum, please
contact Elise Hoerath of the Air Enforcement Division of OE at
FTS 382-2843.


     Regional Administrators
     Regions I-X

     Deputy Regional Administrators
     Regions I-X

     Regional Counsels
     Regions I-X

     Associate Enforcement Counsels

     E. Donald Elliott
     General Counsel

     Headquarters compliance Program Division Directors

                         - 3 -
Richard B. Stewart
Assistant Attorney General
Environment and Natural Resources Division
L S. Department of Justice



"Guidelines for Enforcing Federal District Court Orders", dated April 18,
1984.  See GM-27.

"Procedures for Assessing Stipulated Penalties", dated January 11, 1988.
See GM-67.

"Guidance on Certification of Compliance with Enforcement Agreements",
dated July 25, 1988, see GM-74.

I "Manual on Monitoring and Enforcing Administrative and Judicial Orders",
dated February 6, 1990.  Transmittal Memorandum, Summary Introduction, and
Table of Contents only.

                      WASHINGTON, 0 C  20460
                                6 1990

SUBJECT-  Manual on FK>n' rorinq  and  Enforcing
          Aditunistrar t -. e and  Judicial Orders
FROM      James M   s»-rock,
          Assisran*-  Administrator

TO        Assistant  Admt rusr rafors
          Regional  Administrators,  I-X
     This memorandum  rransmits  the  EPA Manual on  Monit-oring  and
inforcing Administrative  and  Judicial Orders   The  Manual
provide*; general en IK!,-me0 to  EPA  enforcement staff  on  their  roles
and responsibiIif ies  HI monitoring  and Qnforcing  final order
roquirements    The Manual  applies to all  regulatory enforcement
programs with  the »vception of  the  CERCT A (Superfund)  Program
The t-erm "order"  includes judicial  consent  decrees  and
administrative consent- orders  The Manual  also outlines a
process for working with  the  EPA  Financial  Management  Offices
(FMOs) and  the Department  of  Justice for  monitoring and
collecting  penalties

     The Manual was prepared  in response  to recommendations  in
several Office of  Inspector General (OIG) audit reports  that OE,
the Program Offices and the OARM  Financial  Management  Division

     The Manual has received two Agency-wide reviews,  in May  1987
and October 1988   Both reviews surfaced gaps and deficiencies  in
the Manual's attempt to designate areas of responsibility and
information sharing   The final Manual contains procedures
designed to address the deficiencies.

     The OARM FMD has drafted revisions to Chapter Nine of its
Resource Management Directives to conform with the guidance
agreed to in this Manual   These Directives will soon  undergo
green border review and may require some adjustments to the FMD-
related sections of the Manual   Accordingly, the Manual will be
updated as necessary   A summary of the major provisions of the
Manual, including the latest revisions, is contained in
Attachment A

     OE is available to assist you in implementing the revised
procedures   Questions should be directed to Renelle Rae, Chief-
of the Program Development Branch, at 475-8777.

cc*  Deputy Regional Administrators
     Regions I-X

     Regional Counsels,
     Regions I-X

     Regional Financial Management Offices

     Associate Enforcement Counsels

     Associate General counsels

     Headquarters Enforcement Office Directors

     Financial Management Division Director

     Deputy Assistant Administrator for Criminal Enforcement

     Acting Director, National Enforcement Investigations Center

     Chief, Environmental Enforcement Section, DOJ

                                                    Attachment *.



     Chapter  1  -  Monitoring  and Reporting  the Status of Orders

     Roles and  Responsibilities

     The  Regional Program Office  (RPO)  is  responsible for
 monitoring (i e.  routinely checking) compliance with the
 technical requirements  in administrative and judicial orders
 The  Regional  Financial  Management Office (FMO) is responsible for
 monitoring and  collecting administrative penalties as "accounts
 receivables"    The Department  of Justice (DOJ) is responsible for
 monitoring and  collecting judicial  penalties and  for reporting
 the  status of penalty collection to the EPA Headquarters
 Financial Management Division  (HQ-FMD).

     Reporting  on Penalty Payments

     While the  RPO is not responsible  for  monitoring collection
 of administrative or  judicial  penalties, RPO is responsible for
 verifying that  penalties have  been  paid before terminating an
 order or  reporting a violator  in full  compliance.  Therefore, RPO
 data systems  should include  the amount of  penalties assessed in a
 final order and be able to report on a "yes/no" basis whether the
 total amount  of the administrative  or  judicial penalty has been
 collected.  The OE Docket also will report the amount of the
 judicial  penalty  assessed and  contain  a yes/no statement on
 whether the total amount assessed has  been collected.  The
 Integrated Financial Management System (IFMS) maintained by the
 Headquarters and  Regional FMOs will be the official EPA system
 for  reporting tne numerical  (dollar) amounts of enforcement
 penalties collected.

     EP&  ttifarc*oment Pavment Accounts  Receivable  Control Number
     In order to cross-walk between program office systems and
the IFMS, tfte Manual recommends that all programs enter  into
their program data system the assigned  IFMS accounts  receivable
control number for the penalty assessed in each  final order
When the Regional FMO receives a copy of a final order and
establishes the accounts receivable in  IFMS,  the FMO  win provide
the RPO, the ORC and the Regional  Hearing Clerk  with  the accounts
receivable control number   The goal is to have  the IMFS accounts
receivable control number be the common identifier number in  all
data systems that report penalty information.

     Several of the comments received on the Manual expressed
concern that some program office data systems do not have the
ability to report penalty payments on a. "yes/no" basis or to
include the IFMS accounts receivable control number.  These
additions «/ould require modifications to their systems.  Program
Offices should follow the Manual's guidance, wherever possible
including these penalty tracking modifications as they make other
improvements to their system   OE will work with the Program
Offices to ensure that these changes are made.  As of the date of
the issuance of the Manual, the IMFS will be recognized as the
official EPA record of the total amount of dollars collected on
every penalty assessed in a final order.

     Chapter 2 - Collecting Administrative Penalties.

     Roles and Responsibilities

     The RPO (or the ORC in some Regions) is responsible for
sending a copy of the final order assessing a penalty to the FMO.
The FMO is responsible for monitoring and collecting the penalty
as an accounts receivable for the first 120 days.  The ORC is
responsible for collecting the penalty after 120 days in defau
The Regional Hearing Clerk is responsible for keeping the
official administrative record for the case and including any
penalty payment information received from the RPO, ORC or FMO in
the record.
     Notifying the FMO of Assessed Administrative Penalties

     The 1989 OIG audits of the Regional Financial Management
Offices found that the FMOs still are not receiving from
enforcement offices all copies of final orders that assess
penalties.  Tne Manual adds a documentation procedure for
ensuring that the responsible enforcement office sends to the FMO
a copy of the order and the transmittal letter to the violator.

     A MM form entitled:  "EPA Enforcement Payment Accounts
Receivable Control Number Form", hereafter referred to as the
Form (3+9 laat page of Attachment *1), will provide a record that
the responsible EPA office has sent a copy of the final order to
the FMO.  The Form also will document that the FMO provided the
offices designated on the Form with the IFMS accounts receivable
control number for each assessed penalty.  Under most enforcement
programs, the RPO has been delegated the responsibility for
administrative enforcement, so the Manual presumes the RPO is the
responsible party ("originating office") for filling out the
Form, and sending the Form with a copy of the  final order and
transmittal letter to violator to the FMO.  In some Regions, th
ORC may have assumed the  "originating office"  responsibility   A
copy of the completed Form that includes the IFMS accounts

receivable control number should be included in the case file and
available for review in the context of an audit.
     CoJ.lecting. Enforcing and Terminating Administrative Penal;: x

     The procedures for coordinating among the FMO, RPO and ORC
 in collecting, enforcing and terminating administrative penalty
 payments also have been refined.  At the request of FMD, the time
 frames have been added for ORC review of enforcement options
 regarding penalties that have not been paid within 120 days.
 The process for collecting, enforcing or terminating orders is as

     Once the FMO receives a copy of the final order and
 establishes the accounts receivable, the FMO win monitor and
 collect the receivable using standard debt collection practices
 The FMO will send the RPO, ORC and Regional Hearing Cleric a. copy
 of payments received   These payments will be identified by the
 IFMS Accounts Receivable Control Number.

     Uncollected penalties, at the end of 120 days and after
 three demand letters have been issued, will be referred by the
 FMO to the ORC for review and option selection.  The ORC, after
 consulting with the RPO, must notify the FMO, in writing within
 30 days from receipt of debt from the FMO, of the collection
 option the ORC will pursue   Options include referring the
 penalty debt to DOJ for judicial collection, pursuing additional
 FMO collection activities such as outside collection agencies, or
 requesting termination of the debt.  However, to uphold EPA's
 enforcement authority, administrative penalty debts should be
 terminated only under exceptional circumstances.  The ORC's
 written response to the FMO should be included in the official
 case file.

     Several reviewers of the draft Manual suggested that EPA and
 DOJ institute a direct referral process from the ORC to the U.S.
Attorney** Office (USAO) for administrative penalty debt
collection  The current delegation of authority by the Attorney
General Mr the Land and Natural Resources Division precludes a
direct referral to the USAO of EPA enforcement cases including
 administrative penalty collection cases.

     Chapter 3 - collecting Judicial Penalties.

     Roles and Responsibilities

     The Manual recognizes that the DOJ Land and Natural
Resources Division, Environmental Enforcement  Section,
hereinafter referred to as LNRD-EES, is responsible  for

monitoring judicial penalty payments and the U s  Attorneys'
Office is responsible for collecting payments through the DOJ
lockbox system and pursuing uncollected debts   While EPA is "ot
responsible for collecting judicial penalty payments, it is the"
policy of EPA Financial Management Division that all judicial
penalty payments that are r.ne result of an EPA enforcement action
be recorded in the IFMS as "accounts receivables".  As EPA
receivables, these debts must be monitored by the Regional FMO
until collected or terminated   This requires all DOJ offices and
all EPA offices involved with the penalty to have a common
identifier number — the IFMS accounts receivable control number

     Superfund cost recovery payments (debts) obtained through
judicial actions (court orders or consen-. decrees) are collected
differently than judicial penalties.  All cost recovery payments
(administrative or judicial) are collected by the EPA Regional
FMOs through the EPA Regional Superfund lockbox depositories.
Even though a judicial cost recovery case has been handled by the
USAO, Agency resource management directives (RMDS 2550) governing
financial management of the Superfund Program require that EPA
FMOs monitor and collect Superfund debts.

     Obtaining copies of Final Orders a/id Motif vina the FMp of
     Pen«|ltie5 Assessments and Super fund Cost Recovery Payments

     A major concern raised in the review on the draft Manual is
that the ORC and the Regional FMOs do not consistently get
copies of the final (entered) judicial orders (enforcement
penalty or Superfund cost recovery) from the USAO.  Under the
guidance specified in Chapter Three, the LNRD-EES win be
responsible for ensuring that the USAO sends a copy of the
entered final order including all consent decrees to the
appropriate ORC.   The ORC is responsible for following up with
the LNRD-EES or USAO if an order is not received.  Unless another
office is designated in a Region, the ORC is responsible for
sending to the FMO a copy of the final order with the attached
EPA Enforcement Payment Accounts Receivable Control Number Form.

     Th« FM> will fill in the IFMS accounts receivable control
number on tli« Form and send a copy of the Form to the parties
designated on the Form, including the DOJ LNRD-EES.  The Form
containing the IFMS accounts receivable control  number will  be
retained in the case file as documentation.
Reporting the Status of Pen
                                 alty  Payments
     DOJ LNRD-EES will enter  the  IFMS  accounts  receivable  contro
number in its Lands Docket  Tracking  System (LOTS)  and will
provide quarterly reports  to  the  Headquarters FMD  on the status

of EPA penalty payments using the IFMS number   The Headquarters
FMD will distribute copies of these reports to the Regional FVOs
Tie FMOs will update the IFMS with the data received from LMRD-
EES.  The IFMS v-iii be the official EPA system for reporting the
dollar amounts of judicial enforcement penalties collected.
Other EPA data systems -ill, as Jith administrative penalty
payments, provide information on judicial penalty collection in a
"yes/no penalty paid" format only   To interface with the IFMS,
other EPA program offices can include the IFMS accounts
receivable control number in their data systems.

     Chapter 4 - Enforcing Orders

     This chapter remains unchanged and contains existing
guidance on available enforcement tools such as motions for
specific enforcement, contempt actions, contractor listing, etc
The Appendix contains procedures for working with 3OJ Land and
Natural Resources Division on modifying judicial orders or
collecting stipulated penalties under judicial consent decrees.

      -    ON
      January 1990

     Office of Enforcement
U S Environmental Protection Agency

This Manuai provides guidance to EPA enforcement staff on monitoring
and enforcing administrative and judicial orders.  The procedures
described in this Manual apply to all EPA statutes that provide
authority to issue administrative and judicial orders requiring
compliance with Agency requirements with the exception of the CERCL.A
(Superfund) program.  The procedures set forth herein will supersede
general guidance in program case development manuals that address the
topics in this Manual   Each program, however, may have more specific
guidance on monitoring and tracking orders that supplements this

The Manual focuses on the activities of Regional Offices in monitoring
and enforcing penalties since the majority of the cases are initiated
by the Regional programs.  Some Headquarters offices, such as the
Office of Toxic Substances, have national programs where enforcement
cases are initiated, concluded and settlements monitored by
Headquarters staff   These Headquarters offices have program, legal,
administrative hearing clerk and financial management functions
comparable to the Regional structure described in this Manual.
Headquarters offices involved in monitoring and enforcing orders
should substitute their office functions for the comparable Regional
functions described and follow the guidance set forth in this Manual

                           Table of Contents

Chapter One - Monitoring and Reporting the Status of Final Orders
                     and Judicial
Final Administrative
Drafting Enforceable
Monitoring Systems
Reporting Requirements
Additional Oversight Requirements
Additional Oversight Requirements
                                  for Administrative Orders
                                  for Judicial Orders
Authority for Administrative Penalty Collection
Roles and Responsibilities
Financial Management Collection Procedures

Chapter Three - Collection of Judicial Penalties

Payment Depositories
Distributing Copies of Final Orders
Monitoring Penalty Payments
EPA Enforcement Reporting of the Status of Penalty Payments
Coordination of DOJ and EPA Accounts Receivable Reporting Systems
Pursuing Outstanding Penalty Debts
Compromising, Suspending or Terminating Judicial Penalty Debts
Enforcing Mfcftnistrative Orders
Enforcing JpHcial Orders
  -- Modifications
  — Stipulated Penalties
  -- Motions to Enforce
  — Contractor Listing

"Agency Judicial Consent Decree Tracking and  Follow-up Directive11,  dated
January 11, 1990.

                                 M "£«*-.. -a OTECTION AGENCY

 SUBJECT   Agency Judicial Consent Decree Tracking and Follow-up Directive

 FROM      James M. StrocTTf ^L^
            Assistant Administrator

 TO:        Assistant Administrators
            Regional Administrators, I-X
     This memorandum transmits the Agency Judicial Consent Decree Tracking
and Follow-up Directive The Directive specifies Agency requirements for how EPA
Regional Offices track compliance with judicial consent decree requirements and for
how Regions select and document decisions on appropriate Agency follow-up
responses to consent decree violations (for the purposes of this Directive, the use ot
the term "consent decree" also includes judicially imposed court orders). Each
Region should develop and execute a plan to implement this Directive so that all
elements will be in place by Apnl 30,1990.  By no later than May 30, each Region
should submit to me a memorandum detailing the steps they have taken to
implement the Directive. In addition, we intend to review its implementation
dunng this year's audits of the Offices of Regional Counsel

     Tte Directive was developed after an extensive review of current Agency
requinvMS and practices conducted, over the last rune months, in consultation
with 'f iBl'ifi I   "*""» Management Council and the Enforcement Office Directors
We appndate the efforts of the Regional and Headquarters offices, which made
significant contributions to the study and to the development of the requirements
outlined in this Directive  The resultant Directive outlines the basic requirements
that are necessary  to effectively manage our consent decree tracking and follow-up
responsibilities and should be used as a supplement to the Agency "Manual on
Monitoring and Enforcing Administrative and Judicial Orders", which OECM will
soon be publishing.

     There are a few requirements from the Directive that I would like to highlight
The Directive emphasizes the need tor adequate documentation ot each violation
and the selection of the Agency s enforcement response in response to a violation
The documentation requirement is handled through the use of a form which has
been kept basic so as to not cause a resource drain on Regional resources  The
Directive also lays out a requirement for database management but provides each
Region with maximum flexibility on selecting the appropriate method of
maintaining its database based on its caseload and computer capabilities  Finally, the
Directive requires that the Regional Program  Division and the Office of Regional
Counsel jointly select the Agency response to a consent decree violation, with the
decision made at the Branch Chief or higher level in keeping with the seriousness
associated with consent decree violations

      Fulfilling the requirements of the Directive should allow us to successfully
address the increasing workload associated with the growing number of judicial
consent decrees.  We will soon be discussing with the Headquarters Enforcement
Office Directors the appropnateness of applying elements of these judicial Directive
requirements to at least some classes of administrative enforcement orders.

     Each Region currently reports quarterly on the status of each active consent
decree as part of the Agency's STARS system. OECM would like to move to
oversight of Regional consent decree tracking and follow-up implementation
through our existing Regional audits, rather than through the STARS system. We
will assess the Regions' success in implementing this Directive with the goal of
dropping this activity as a STARS reporting measure in FY1992. We will also be
working with the Headquarters Enforcement Office Directors to include consent
decree tracking and follow-up activity in their Regional audit programs. As we
move to drop the STARS reporting requirements. Regions must assure mat their
consent decree tracking systems have the capacity to provide timely information or
reports on the compliance status of their consent decrees to respond to information
requests mat might occasionally be made by Agency management or in response to
outside inquferie*

     OECM is available to provide assistance to vou in implementing this Directs e
Rick Duffy, Chief of the Compliance Evaluation Branch, or Bill Watt of his stajf are
available to assist the Regions on the technical and management requirements and
can be reached at 382-3130  Regions interested in explonng the option of using the
consent decree tracking database management system developed by the National
Enforcement Investigation Center (the NEIC-CDETS) should contact Rob Laidlaw at


cc   Headquarters Enforcement Office Directors
     Deputy Regional Administrators, I-X
     Regional Counsels, I-X
     Associate Enforcement Counsels
     Acting Director, NEIC
     Regional Program Division Directors, I-X

Judicial Consent Decree Tracking
     and Follow-up Directive

           January 1990
  Office of Enforcement and Compliance Monitoring
    US Environmental Protection Agency

                                Questions concerning tfm Directive or requests
                                   for additional copies am be directed to.

                                  Chief, Compliance Evaluation Branch
                           Office of Compliance Analysu and Prognun Operations
                             Office of Enforcement and Compliance Monitoring
                              US Environmental Protection Agency

                                       Washington.DC 20460
                                           1202 - 382-3130)

                                      L S  EPA Mail Code LE-133




           This directive is provided to cla. :ty and supplement existing Agency
      requirements and guidance for judicial consent decree tracking and follow-up
      Agency managers responsible for consent decree tracking and follow-up activities
      must implement the requirements of this directive Managers are also responsible
      for fulfilling any additional requirements for consent decree tracking and follow-up
      that are issued by National Program Managers  This Directive is effective April 30,
      1990  For purposes of this Directive, the term "consent decree" includes judicially
      imposed court orders

          This directive prescribes judicial consent decree tracking and follow-up
      re oirements for the following areas

          1  Implementing the Agency Guidance on Certification of Compliance with
             Enforcement Agreements
          2  Regional consent decree tracking and follow-up database management
          3  File documentation of consent decree violations
          4  Decisions on Agency follow-up to violations
             A. Responsibility for decision
             B  General criteria for making follow-up decisions
             C File documentation of follow-up decisions
          5  Maintaining data on the current status of EPA consent decrees
          6.  Termination of consent decrees and dosing cases


      Consent Decree Tracking Responsibilities:

          Consent decree tracking and follow-up is conducted by each Regional Office
      under the direction  of the Regional Administrator  Within each Region, most
      responsibilities are shared between the Office of Regional Counsel (ORQ and the
      Regional Divisions responsible for program compliance activity. Generally, the
      responsibilities are divided within each Region as follows:

      Regional ftegram Divisions

          Regional Program Divisions are responsible for the overall management and
      direction of the Regional compliance program in accordance with the policies and
      procedures of the Agency and each National Program Office.  In that role, they are
      responsible for the following regional consent decree tracking and follow-up

          1.  Assuring, along with ORC that proposed consent decree agreements contain
          provisions/milestones that maximize the Region's ability to determine
          compliance status.

Of CM - EPA                                                                      January

          2  Determining compliance with the consent decree requirements throug- — ^
          use of announced and unannounced inspections and the receipt and rev.eu o

          3  Determining whether there are violations of the consent decree and
          notifying the ORC of each violation.

          4  Maintaining a database of consent decree status which tracks completion or
          consent milestones and denotes violations. (Can be a component of a
          Region-wide consent decree database system )

          5  Determining (jointly with the ORC) the appropriate Agency response to each

          6  In concert with the ORC, maintaining complete file documentation of
          consent decree violations and the subsequent follow-up activity, including
          documentation of all consent decree violations and follow-up decisions (File
          documentation must be maintained in whatever file or files the Region uses as
          the official case file, whether in a separate Program file, ORC file or a common
          Program-ORC file)

          7  Notifying the ORC when all the requirements of the consent decree have
          been met so that the ORC can track and assist in the termination of the
          decree according to the terms of the decree.

      Offices of Regional Counsel:

          The Office of the Regional Counsel in each Region is responsible for the
      following Regional Office consent decree tracking and follow-up activities-

          1  Assuring that each settlement agreement complies with the "Guidance on
          Certification of Compliance with Enforcement Agreements" (July 25,1988
          memorandum from Htomas L Adams to AAs, RAs, and RCs)

          2. Obtaining a copy of the entered decree and providing it to the appropriate
          regional program compliance office and to the NEIC Central Depository in a
                manner. A copy must also be provided to the Financial Management
                I (FMO) in the Region when the decree requires a penalty payment
              tT1» regional FMO. after receiving a copy ol the entered decree, will enter the
            penalty amount into the Integrand Financial Management System (EFMS). EPA policy
            requires that all judicial penalty amount* be recorded in the IFMS as "accounts
            receivable" and that they be tracked as receivable* until collected or terminated. The
            Land and Natural Resources Divwon at DOf is the responsible endty for monitoring
            judicial penalty debts and notifying EPA s Financial Management Diviswn of the
            status of penalty payments. This information is placed in the IFMS so that Regions can
            determine if penalties requirements of the decree have been met The program
            database as weU as the Enforcement DOCKET database should contain a
            milestone/requirement for tracking penalty payment I
OECM-EPA                                                                         UP.J-V

           3  Determining (jomtiv with the Regional Program Divisions) the appropr.av*
           follow-up action the Region will take in response to a violation of the decree

           4. Providing legal support and services to the programs, as necessary, to en-orce
           the consent decree

           5  In concert with the Program Division, maintaining complete file
           documentation of consent decree violations and the subsequent follow-up
           activity, including documentation of all consent decree violations and
           follow-up decisions (File documentation must be maintained in whatever nie
           or files the Region uses as the official case file, whether in a separate ORC nie,
           Program file, or a common Program-ORC file.)

           6. Maintaining and reporting data on the status of active consent decrees as
           ought be required by the Agency management and accountability systems

           7  Assisting in obtaining the termination of consent decrees which have
           been successfully fulfilled, including updating the Agency DOCKET
           database to reflect current status


          Certification requirements were prescribed in the July 25,1988 memorandum
      from Thomas L. Adams Jr. to Assistant Administrators, Regional Administrators
      and Regional Counsels,, "Guidance on Certification of Compliance with Enforcement
      Agreements." This Guidance addresses the inclusion of compliance certification
      language (in which a responsible official personally attests to the accuracy of
      information contained in compliance documents made available to EPA pursuant to
      the terms erf a settlement agreement) and the need for including prease
      documentation requirements for self-certifying provisions of the decree
          Each Region must take steps to insure that ail staff involved in drafting and
     negotiating consent decrees are fully aware of the requirements of the July 25, 1988
     guidance memorandum and this Policy. (While that guidance applies more broadlv
     than to consent decrees, the discussion in this Policy will refer only to consent
     decrees, consistent with the scope of the rest of the document.)

          Staff involved in drafting consent decrees must incorporate the guidance for
     documentation of compliance and for certification by a responsible official unless

      :he% amrmatuelv determine and document that the pohcv is not applicable to a
      specific case  Therefore, each consent decree should speofv that all future reports '
      the settling party to the Agency, which purport to document compliance
      with th« terms of the decree, shall be signed by a responsible official The need ror
      certification and documentation requirements should be raised early in the
      negotiation and drafting process

          Regional managers who review and approve drafted consent decrees must
      assure that the Guidance has been adequately incorporated or determine that the
      Guidance is not applicable for the specific case

          Staff and managers within the OECM Associate Enforcement Counsel Offices
      must also review drafted consent decrees for inclusion and/or applicability of the
      Guidance  Implementation of the certification and documentation requirements
      will be a component of the ongoing oversight and periodic reviews conducted bv


          Regional Program Divisions are responsible for tracking compliance with active
      consent decrees once the decree has been entered by the Court The ORC is
      -  .  ~ nsible for obtaining a copy of the entered decree and providing it to the
      Program Division and the Financial Management Office (for penalty tracking)  U ch
      decree has been entered but a copy has not yet been made available, the program can
      use the lodged decree during the interim, if it is known that the final decree was not

          Compliance tracking is accomplished through the receipt of reports and other
      deliverables from the consent decree parties and through the use of announced and
      unannounced inspections.  In order to determine whether a party is currently in
      compliance with the consent agreement, the program compliance staff must
      compare the requirements of each decree with the information gathered through
      inspections and deliverables. In the case of deliverable items, the compliance staff
      should determine if the submission adequately meets the decree requirements

          Gootdatabase management is an important element for effective and timely
      tracking tad reporting of case status This policy outlines requirements for the
      consent decree databases that are used to track consent decrees for each Regional
      program. Additional elements may be required by each of the National Program


          Each program responsible for tracking consent decree compliance status must
      maintain a consent decree database (file/record). Each program database must

OECM-EPA                                   4                                   Janyarv  --

      include the tollowing information for each active decree  case name and
      enforcement avil judicial docket number, statute/program, all required miles to -es
      and their due dates, and a block for inserting the date each milestone was como etec

           The consent decree database can be manual, on a personal computer or
      included as a part of a national compliance database such as the CDS of the Air
      Program  The database could also be maintained centrally, as in Region n, where |-.e
      ORC maintains a database of all regional consent decrees using the MEIC - CDETS
      capability Each Region can choose what database type system(s) to use  For
      programs with only a few consent decrees to track, a manual system may be
      sufficient. Regional programs may opt to use the national compliance database
      depending on its specific capabilities

           The consent decree database must be maintained in three ways for it to be used
      effectively Milestones for all decrees must be entered (and revisions, if applicable,
      in the case of amended decrees)  On a regular schedule (not less than quarterly), all
      currently due (and overdue) milestones must be extracted from the system and made
      available to staff and supervisors  This use as a tickler system will alert staff as to
      what actions are required to be checked on  Finally, the dates for completed
      milestones must be put into the database on a regular basis (suggested monthly

          Maintaining this database in a central location will allow a program easy access
      to the status of all its decrees, the ability to retrieve all due milestones and a complete
      historical record of each decree as staff turnover and assignment changes occur It
      will also provide documentation of case history for audits or other oversight activity


          Program Divisions are responsible for determining if a consent decree violation
      has occurred  Any milestone not complied with by the due date of the consent
      decree constitutes a violation, regardless of the substantive impact of the deviation
      from th* consent decree requirement In certain cases. Program Divisions may need
      to conMdtvtth the ORC in determining whether a violation has occurred (e g,
      wher* A tflta of force majeure has been made).

          Regional Program Divisions must notify the ORC of each violation of an active
      consent decree. A violation occurs when any milestone is missed (Le. a report that is
      one day late is a violation), although there may be instances where, as a matter of
      priority, no formal enforcement action is taken.  In addition/ a record of the violation
      must be placed in the official Regional case file (see copy of form attached).



          When a violation occurs, the Region must determine the appropriate Agenc\
      response  In some cases, the violation may not pose a threat to public health or the
      environment or jeopardize the party s ability to meet subsequent milestones or the
      final compliance date  In such instances, after a review including the criteria
      discussed in subsection C below, the program office and ORC may jointly decide trat
      no follow-up action is required or that a non-formal response may be appropnate
      Other violations will be more senous and the program and ORC may deade to take a
      formal enforcement action such as seeking stipulated penalties or initiating a
      contempt action.  For all violations it is important for the Agency to document the
      decision process within the case record For all violations, the responsibility for
      determining the appropriate response action is shared by the Regional Program
      Division and the Office of Regional Counsel


          A. Responsibility for decision*

            Once a violation occurs, the Program and the ORC must jointly determine
      the Agency response Given the seriousness of consent decree violations,
      concurrence must occur at no lower than the Branch Chief level in both Offices
      Disagreements should be elevated to senior management On the rare occasion
      when the two offices cannot agree, the issue will be resolved at the RA or DRA ievei

          B. File documentation of follow-up decisions.

            The decision concerning how the Agency will respond to a violation must be
      documented in the official Regional case file  The documentation (copy of form
      attached) must include the decision made and the reason for the decision The
      documentation must also include the signatures of the responsible Program Office
      and ORC Branch Chiefs (or higher level).

          C General Criteria for follow-up decisions:

             Win the Agency enters into a consent decree we expect the defendant to
      comply. Hit take compliance with the decree very seriously and expect all parties to
      take att ftepf necessary for tamely compliance.  As a result, if they are in violation, we
      will normally respond for the purpose of remedying the violation, obtaining a
      penalty, or both.  However, given the need to set priorities, we may not choose to
      take a formal action in every instance The Region is delegated authority to deade
      what follow-up action, if any, to take  The decision not to take a formal action is a
      serious judgment required to be made jointly by the Regional Program Division and
      the Office of Regional Counsel at the Branch Chief or higher level.

           In selecting the appropriate response, the followmg ractors/criteria T\;*r- r«

              Environmental Harm Caused by Violation  What is the level of risk to
           human health and to the ambient surroundings for continuing
              Duration of the Violation: How long has the violation continued7 Has the
           violation been continuous or interrupted' Has the violation been corrected7,
              Good Faith/Bad Faith (Compliance history)- Was the violation deliberate'
           Has the party been notified that it was m violation and continued to violate'
           Has the party demonstrated good or bad faith in its past efforts to comply or
           respond to Agency efforts' Is there a pattern of violations which suggests
           inattention to its compliance obligations, even though the individual
           violations are not, m themselves, of major concern?
              Deterrence Value' Will an action deter future violations7
              Ability to Respond  Will the enforcement action result in compliance'
           Will the facility meet its final compliance date, even though it missed an
           interim date?
              Economic. Gam  Has the violator gained an economic advantage over its
           competitors as a result of the violation?

           Violations for which a decision not to take a formal action based on competing
      priorities might be appropnate would generally find the party on the positive side of
      the factors above (i e no or limited environmental harm from the violation, good
      compliance record, etc)  Situations where the Agency might exercise its discretion
      not to take an action might include

            • Late reporting  with no environmental consequence and without a
           past pattern of delay or noncompliance.

            - Missed milestone, not a major requirement, with expectation they will be m
           compliance with/by the next milestone

            • Violation of an interim limit, magnitude of the exceedence is minor, with
           compliance now achieved or anticipated shortly.


          Currently, each ORC is responsible for providing consent decree status reports
      each quarter to OECM as part of the Agency SPMS system. In most Regions, the
      information for this report is collected from each program and combined into a
      Regional report.
OECM - EPA                                                                      Januarv


          The ORCs will continue to be responsible for maintaining information on
      regionwide status of consent decrees and providing Regional reports to OECM as
      required. The specific nature ot these reports may change from the current 5T AR
      measure. Regional Program Divisions are responsible for supplying
      program-specific information or reports to ORC that might be needed to fulfill
      national reporting requirements in addition to meeting the requirements ot their
      National Program Office



          A judicial enforcement case with a consent decree is successfully completed
      when all the requirements of the consent decree, including penalty payments, have
      been met and the termination clause satisfied  At that point, the consent decree
      should be terminated in accordance with the terms of the decree. Agency databases
      and status reports need to accurately reflect the current status of cases (including cases
      where the requirements of the decree have been fully met, cases for which
      termination of the decree is due, and cases which have been closed after consent
      decree termination)  Accurate data are needed to report the status of active decrees
      and for planning, budgeting and other management purposes


          Program Divisions, as part of their responsibility for tracking consent decree
      compliance status, must notify the ORC when all the requirements of the consent
      decree have been satisfied

          The ORC is responsible for working with DO! to effect the termination of the
      consent decrees, in accordance with the termination clause of the decree (tuneframe,
      automatic, plaintiff or defendant motion). The ORC is responsible for tracking the
      termination status of inactive decrees and assisting the completion of plaintiff
      responsibilities, as appropriate. The ORC is responsible for maintaining the current
      status erf these decrees in the Agency DOCKET system and dosing cases after
OECM - EPA                                                                       lanuif*

                          PART A: REPORT OF VIOLATION
 Case Name
    - 'gTiern(s) i violation
 Requirement due date      	
 Requirement was completed late
         EPA QocKet *
Requirement not completed
 Violation documented by

Q Type of enforcement acton planned*
D Enforcement edton determined not to be appropnate for the following reason(s)
                                                     Office of Regional Counsel
                                                                       £PAO€CM fvm


"Agency Guidelines for Participation in Grand Jury Investigations", dated
April 30, 1982.  See GM-9.

"Criminal Enforcement Priorities for the EPA11, dated October  12,  1982.   See

"Analysis of Existing Law Enforcement Emergency authorities", dated March
6, 1984.

     Analysis of Existing Law Enforcement
     Emergency Authorities
  March 6, 1984
 To   Distribution                  F^ Stephen S. Trott
                                       Assistant Attorney General
                                       Criminal Division
     As you  are  aware, the Law Enforcement and Public Safety
Working Group  (LEPSWG), which I chair, was directed by the
President  to compile  existing emergency law enforcement author*
ities, analyze them,  and propose measures which could improve
law  enforcement  agency preparedness to respond to severe
regional or  national  emergencies.  The ourpose of this exercise
is to provide the nation with the legal means to confront the
disruptions  that would result from a wide range of severe
national security and domestic emergencies.

     The Federal Emergency Management Agency  (FEMA) recently
completed  a  compilation  (attached) of emergency authorities.
As we enter  upon the  second and third phases — analysis and
recommendation,  respectively — of our assignment, I request
your assistance.  Your participation will also present an
opportunity  to assure that your agency will be in a position
to act efficiently and with lawful authority in responding to
regional or  national  emergencies.

     I would appreciate your determination whether the compi-
lation accurately reflects your agency's existing emergency
authority.   (The LEPSWG determined that only authorities which
take effect  in emergency situations should be included in the
compilation.)  Even if your agency has already had an opportunity
to review  and comment upon an earlier draft of this compilation,
it would be  appreciated if you would bring any current errors
or omissions to  our attention.

     I would also appreciate your suggestions regarding statutes,
Executive Orders, or other authorities that need to be enacted
to provide your agency with jurisdiction that would be necessary
or useful in meeting foreseeable emergencies.   In this regard,
it is the Working Group's belief that a review should be con-
ducted by both your legal staff and by officials with operational

                           - 2 -

responsibilities.  It would be most helpful if your staff con-
sidered both hypothetical situations that might develop and
actual incidents which have already occurred,  if your agency
has created after-incident reports following previous law
enforcement emergencies, such reports could be very useful in
this endeavor.  We are only looking for outlined suggestions,
not meticulous legislative drafts.  The attached sample would
be an ample response.

     Finally, as it may be necessary for us to discuss specific
issues in greater detail with members of your legal or operational
staffs, please identify for me, by name, title, and phone number,
the persons whom we can contact for further information.  At
this time it has not been determined whether such interviews
will be necessary, or how they can be most productively con-
ducted, if necessary.

     Consistent with the Presidentially "mandated milestone
deadlines for completion of this project, it is requested that
you provide us with the requested information within one month
of receipt of this memorandum.  The responses should be addressed
to the Emergency Mobilization Preparedness Board Support Group
(Room 2252-, Main Justice Building, 10th and Pennsylvania Avenue,
NW., Washington, D.C.  20530).  Mr. Ezra Friedman, Chairman of
the Emergency Law Enforcement Authorities Sub-Working Group,
may be contacted directly at 724-6971 if your staff has any
questions regarding this project.


General Counsel
Department of Agriculture
Washington, D.C.  20250

Inspector General
Department of Agriculture
Washington, D.C.  20250

General Counsel
U.S. Forest Service
Department of Agriculture
Washington, D.C.  20250

General Counsel
Commodity Futures Trading
Washington, D.C.  20581

General Counsel
Consumer Product Safety
Washington, D.C.  20207

General Counsel
Department of Commerce
Washington, D.C.  20230

General Counsel
Civil Aeronautics Board
Department of Commerce
Washington, D.C.  20428

General Counsel
Environmental Protection
Washington, D.C.  20460

General Counsel
Department of Energy
Washington, D.C.  20585

General Counsel
Farm Credit Administration
Washington, D.C.  20578

General Counsel
Federal Communications
Washington, D.C.  20554

General Counsel
Federal Home Loan Bank Board
Washington, D.C.  20552
General Counsel
Federal Maritime Commission
Washington, D.C.  20573

General Counsel
Federal Reserve Board
Washington, D.C.  20551

General Counsel
Federal Trade Commission
Washington, D.C.  20580

General Counsel
General Services Administration
Washington, D.C.  20405

General Counsel
Depar^nent of Health and Human
Washington, D.C.  20201

General Counsel
Food and Drug Administration
Department of Health and Human
5600 Fishers Lane
Rockville, Maryland  20857

General Counsel
Social Security Administration
Department of Health and Human
Baltimore, Maryland  21235

Inspector General
Department of Health and Human
Washington, D.C.  20201

General Counsel
Department of Housing and Urban
Washington, D.C.  20410

Department of the Interior
Washington, D.C.  20240

General Counsel
National Park Service
Department of the Interior
Washington, D.C.  20240

                             - 2 -
Deputy Assistant Secretary
  for Indian Affairs
Bureau of Indian Affairs
Department of the Interior
Washington, D.C.  20245

U.S. Fish & Wildlife Service
Department of the Interior
Washington, D.C.  20240

Bureau of Land Management
Department of the Interior
Washington, D.C.  20240

General Counsel
International Trade Commission
Washington, D.C.  20436

General Counsel
Interstate Commerce Commission
Washington, D.C.  20423

General Counsel
International Boundary and
  Water Commission, U.S.
  and Mexico
4110 Rio Bravo
El Paso, Texas  79902

General Counsel
International Boundary
  Commission, U.S. and Canada
Room 150 - 425 I. St., NW.
Washington, D.C.  20001

Community Relations Service
Department of Justice
Washington, D.C.  20530

Assistant Attorney General
Antitrust Division
Department of Justice
Washington, D.C.  20530

Assistant Attorney General
Civil Division
Department of Justice
Washington, D.C.  20530

Assistant Attorney General
Civil Rights Division
Department of Justice
Washington, D.C.  20530
Assistant Attorney General
Land & Natural Resources Divis
Department of Justice
Washington, D.C.  20530          >

Assistant Attorney General
Tax Division
Department of Justice
Washington, D.C.  20530

General Counsel
Bureau of Prisons
Department of Justice
Washington, D.C.  20530

General Counsel
U.S. Marshals Service
One Tysons Corner Center
McLean, Virginia  22102

General Counsel
Immigration & Naturalization Service
Department of Justice
Washington, D.C.  20536

General Counsel
Federal Bureau of Investigation
Washington, D.C.  20535

General Counsel
Drug Enforcement Administration
Washington, D.C.  20537

Department of Labor
Washington, D.C.  20210

General Counsel
National Credit Union Admin.
Washington, D.C.  20456

General Counsel
Nuclear Regulatory Commission
Washington, D.C.  20555

Chief Postal Inspector
Postal Inspection Service
Washington, D.C.  20260

General Counsel
Small Business Administration
Washington, D.C.  20416

General Counsel
Securities & Exchange Commissi
Washington, D.C.  20549

                              - 3 -
Legal Adviser
Department of State
Washington, D.C.  20520

General Counsel
Tennessee Valley Authority
400 West Summit Hill
Knoxville, Tennessee  37902

General Counsel
Department of Transportation
Washington, D.C.  20590

General Counsel
U.S. Coast Guard
Washington, D.C.  20593

General Counsel
Federal Aviation Administration
Washington, D.C.  20591

General Counsel
Maritime Administration
Washington, D.C.  20590

General Counsel
Department of the Treasury
Washington, D.C.  20220

General Counsel
U.S. Customs Service
Washington, D.C.  20229

Chief Counsel
Bureau of Alcohol, Tobacco,
  and Firearms
Washington, D.C.  20226

Chief Counsel
Internal Revenue Service
Washington, D.C.  20224

Chief Counsel
U.S. Secret Service
Washington, D.C.  20223

Chief Counsel
Veterans Administration
Washington, D.C.  20420


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"Guidelines on Sampling, Preservation,  and Disposal of Technical Evidence
in Criminal Enforcement Matters",  dated April 18,  1984.


                      WASHINGTON, D C. 20460

                          APR  J 8 ISSi
                                                          OFFICE of
                                                        ENFORCEMENT AND
                                                      COMPUANrE MONITORING

SUBJECT:  Guidelines  on  Sampling,  Preservation,  and
          Disposal  of Technical  Evidence in Criminal
          Enforcement Matteri
FROM:      Courtney  M.  Price
           Assistant Administrator  for  Enforcement
             and  Compliance Monitoring

TO:        Assistant Administrators
           Regional  Administrators,  Regions  I-X
           Regional  Counsels,  Regions I-X
           Associate Enforcement  Counsels
           Director,  NEIC


     This  guidance  describes  procedures to  be  used  for tech-
nical evidence related  to cases  which  have  been assigned to,
and are being managed by, the Office of Criminal Investigations
of the National  Enforcement  Investigations  Center (NEIC) of
the Office of Enforcement and Compliance  Monitoring.   This
guidance,  and the internal office  procedures adopted  in
accordance with  the  guidance,  are  not  intended to,  do not,
and may not  be relied upon to create a right or benefit--
substantive  or procedural--enforceable at law  by a  party in
litigation with  the  United States.  Attempts to litigate
any portion  of this  guidance  should be brought to the
attention  of the Criminal Enforcement  Division, Office of
Enforcement  and  Complaince Monitoring, EPA  Headquarters.



     In any  criminal prosecution,  the  government must prove
each element of  each offense  beyond a  reasonable doubt.  The
evidence that the government  chooses to use to meet this
burden is  left to the prosecutor's discretion  subject to the
standard limitations of probativity and relevancy*  Prosecution
under environmental  statutes  poses particularly interesting

questions because of the need to prove the identity (and
often quantity) of pollutants, and because of the need for
experts (i.e., technicians, environmental engineers, etc.)
to establish aspects of the government's case.  The facts
upon which the expert relies must impress a jury, meet defense
challenges, and establish the criteria necessary for the
expert opinion.

     Only by considering issues of proof before evidence is
collected can the government be assured that violations dis-
covered can be proved when the case goes to trial.  A determina-
tion of what evidence should be taken, how it is to be taken
and how much should be taken must be done on a case-by-case
basis.  As will be discussed below, the general principle
will be to take representative samples and to refer clean
up problems for civil and/or administrative remedies.


     What level of pollutant sampling will suffice to support
a criminal case?


     Technical support operations conducted as part of investi-
gations assigned to the Office of Criminal Investigations  ,
will, with few exceptions, be evidence-gathering rather than
remedial or response operations, and will be limited accordingly.
Samples taken in support of a criminal investigation normally
will be limited to those considered necessary to confirm the
occurence of illegal activity, and to prove the government's
case at trial.  Any overall remedial response required by the
situation will then become the responsibility of existing
administrative or civil response authorities within the

     It will be the policy of the Agency to use representative
samples as evidence for criminal cases.  Occasionally, the only
evidence available for a significant environmental offense will
be a small amount of material.  In that event, the entire amount
of material which can be collected will be retained for testing
and for defense requests.  Host cases assigned to the Office
of Criminal Investigations will involve large amounts of pollu-
tion or hazardous substances and, in those cases, representative
samples will be gathered.

     Before any decisions are made or any  samples obtained,
agents, technical personnel) and, where possible, prosecuting
attorneys should collaborate to decide what evidence  will  be
necessary and desirable to prove each charge.  When samples
are obtained without a search warrant and  prior  to a  referral
to the Justice Department or to the U.S. Attorney's office, a
prosecutor may not be working on the case.  When this  is the
case, the legal, investigative and technical personnel at  the
Agency will make the evidence decisions.

     If the evidence is to be obtained pursuant to a  search
warrant, this discussion (concerning evidence collection)  must
be prior to the submission of the affidavit for the warrant.
The magistrate or judge issuing the warrant will inquire as to
the duration of the "on-site" time, the area to be searched,
and the subject(s) of the search.  These questions can only be
answered if the government has formulated  an investigative
plan for obtaining the evidence in advance of the request  for
the warrant.

     In some cases, the Office of Criminal Investigations will
be notified of environment offenses which  must be documented
immediately if the evidence is to be preserved.  In such situ-
ations, the necessarily quick response time precludes  lengthy
collaborate discussions.  However, the guidelines concerning
quality control, chain-of-custody and representative  sampling
apply even in these situations*


     Evidence decisions must start with the technicians, envi-
ronmental engineers and other experts who  are familiar with
the evidence necessary to form a basis a for their scientific
opinions.  Attorneys and agents should then add information
concerning the tangible evidence that is most likely  to
clarify the government's case for the jury and what evidence
is likely to best reflect the seriousness of the charges.
Thought should be given to defense arguments concerning whether
the samples are truly representative and whether they were
obtained, preserved and tested in an accurate, scientific
manner.  Consideration must also be given  to reducing the
"on-site" time and the practical difficulties of proper storage

       and safekeeping.  Finally* under certain statutory provisions
       [for example,  the CERCLA reporting requirement for "reportable
       quantities" found at Section 103(b}(3)], the government will
       be obliged to  demonstrate that a specified amount of a hazardous
       substance was  released.  This will also affect the amount of
       sampling that  is conducted on-site.

            The question of what is a representative sample can only
       be answered in the context of the case.  All the parameters of
       the potential  evidence should be sampled, photographed or
       documented in  some fashion.  See, MEIC Policies and Procedures
       Manual.  For instance, if drums are located at a plant which
       does not have  a permit to store hazardous wastes, the necessary
       proof will include establishing the nature of the drum contents.
       The total number of drums should also be determined and docu-
       mented.  Unless the number is extremely large, samples can be
       obtained from  each drum.  If this is impractical, samples
       should be obtained from all apparent categories  (size, content,
       appearance, state of deterioration or exposure to the environ-
       ment, etc.).  If the soil under and around the drums appears
       contaminated,  then soil samples should be taken at different
       points and at  different depths.  Keeping in mind that the
       concentration  of the substances as well as the gross amount of
       the substance  may be relevant, the technicians should be prepared
       to take samples which can answer these questions.  See, United
       States v. Gonzalez, 697 F. 2d 155 (6th Cir. 1983).

            If it is  anticipated that a screening procedure will be
       used, either at the site or in the laboratory, it is recommended
       that the prosecuter be made aware of this.  A screening procedure
       is a preliminary analysis used to determine whether further
       analysis would be useful.

            Because criminal prosecutions must be proved "beyond a
       reasonable doubt", care must be taken to ensure  thorough and
       complete testing and sampling procedures.  Recognizing the
       storage limitations of the Agency, it cannot be denied that
       the seriousness of the offense is emphasized when the Govern-  „
       ment can visually prove its case with a multitude of samples
       and physical evidence.  It is expected that the technical
       personnel who testify in criminal cases will be able to state
       that a thorough and scientific procedure was used to obtain
       the evidence,  that no further samples or tests would be necessary
       to confirm the results, and that strict chain of custody and
       quality control procedures were employed.



      There  will  be  occasions  when  EPA technicians  and  agents
 take  more evidence  samples  than  are  necessary to prove a case.
 The storage and  preservation  expense as  well  as  potential
 dangerousness of the  items  might make it advisable to  dispose
 of the  evidence  in  advance  of trial*  At the  same  time,  courts
 lopk  with disfavor  upon the disposal of  material that  may be
 characterized as potential  evidence  in a criminal  trial.
 Thus, destruction of  samples  and remains of samples must occur
 in a  manner that does  not jeopardize the subsequent prosecution

      Finally,  once  a  prosecution has been concluded, decisions
 must  be made  concerning all remaining evidence stored  on behalf
 of the  Office of Criminal Investigations.


      When and how may  the Agency dispose of surplus sampling
 evidence collected  on  behalf  of  the  Office of Criminal Investi-


      Court  permission  must  be  obtained before surplus  samples
 obtained in the  course of a criminal investigation are disposed
 of by the government.   Disposal  procedures will  vary depending
 on the  stage  of  the criminal  case.   Where a defendant  has been
 formally charged, the  government can file a pre-trial  motion
 for disposal  of  evidence that will be considered in an adver-
 sarial proceeding.  If charges have  not  been  filed,  the  same
 type  of motion filed ex parte  may  be used.  This ex parte
 motion would  be  made pursuant  to the All Writs Act,  28 U.S.C.
 $636(b)(1)(A).   (A  copy of  a  sample  destruction  motion is
 attached to this  guidance.)

      Following termination  of  the  criminal case  (by trial,
 plea, dismissal  or  other means), the prosecutor  should be
 contacted to  discuse appropriate procedures for  evidence


     It should be noted at  the outset that an evidence destruc-
 tion motion will  not always succeed.   For example,  it  is not
 certain that a court will give permission for such  destruction
 in the context of a criminal  case  involving nen-contraband
 materials.   The majority of cases which  discuss  destruction of
 evidence before  trial  involve  destruction of  contraband  (i.e.,
 fo-ugs, counterfeit money, illegal weapons).   It  would  be  under-
 randable for a  court  to refuse  permission to dispose  of
chemicals,  soil,  capacitors, or drums  when it has not been

conclusively established -- by plea or trial -- that these
items were illegally held or stored by the def endant (s ) .  If
the jury acquits the def endant ( s ), they would have the right
to repossess the evidence seized,  for whatever value it might
have .

     In United States v. Ramsey, 490 F. Supp. 96 (E.D. Tenn .
1980} the court issued an opinion on the government's motion
to destroy certain chemicals*  The ..court would not authorize
the disposal of chemicals which the government had seized
even though the government documented a reasonable concern
over the hazardous nature of the substances.  The government
alleged that the chemicals were flammable and explosive and
•constitute a present danger to property and a threat of
personal injury or death to people in or near the storage
area." Id. at 97.  But, the court reasoned, how could it
authorize destruction of non-contraband/ unforfeited property
when there has been "no showing that the chemicals have been
used or intended to be used by anyone in any significant way
in a criminal enterprise?" Id. at 96*  Presumably, that is
what the government intended to prove at trial, but until then,
the prosecutor was admonished by the court to use extreme care
and caution with the chemicals, but to keep them*
     When a court is petitioned, either pursuant to the
Writs Act, or by way of a pre-trial notion, for permission to
destroy evidence, the court should be informed whether the
targets of the investigation have been notified of the motion,
whether the targets have been offered split samples (see Section
111 ' infra) and whether the targets have been offered the
opportunity to view the evidence before destruction.  Of course,
before such a motion is made, the effect of disclosing the
existence of a previously secret criminal investigation must
be analyzed.  However, if the defendants have been formally
charged or otherwise made aware of the criminal investigation,
EPA will encourage the prosecutor assigned to the case to
obtain court authorization to destroy sample evidence which
goes beyond that necessary to prove the case or evidence
which the defense has declined.

     In any event, 'any evidence obtained on behalf of the
Office of Criminal Investigations shall not be disposed of
until the investigation has foreclosed the possibility of
criminal charges; or until the  criminal case has been concluded
by trial, plea, dismissal or otherwise and the prosecutor and,
if necessary, the court have approved disposal.




      Many environmental  statutes  require  the  Agency  to  split
 samples  taken in the  exercise  of  statutory inspection rights*
 When  a site search  is  conducted pursuant  to a  criminal  search
 warrant, no such requirement exists.   However,  offering samples
 at  the time of  the  execution of the warrant is  an  expeditious
 method of assuring  the defense access  to  the  samples while  not
 burdening the Agency  with  storeage problems.
      Should  samples  be  split  in  the  context  of a  criminal

      All  samples  taken by  EPA  technical personnel on  behalf
 of  the  Office  of  Criminal  Investigations  should  be  taken  in
 large enough quantities so  that if  the defense requests part
 of  the  sample  at  any  time  prior to  trial,  a  portion of  the
 sample  may be  turned  over  to the defense  or  to a defense-
 designated laboratory.

      If sample  ollection  is authorized by a court  as part of a
 search  warrant, it  is appropriate to  inform  the  court  (at the
 time  the  warrant  is obtained)  of the  Agency's plan  to offer
 split samples  to  authorized persons at the site  of  the  warrant.
 Prior court approva.  of the transfer  of hazardous substances
 is  helpful, even  if not necessary.  Once  the court  has  authorized
 the collection of samples and  the splitting of such samples, an
 offer to  turn over  split samples should* be made  to  an authorized
 person at the site, even without such a request having  been made
 by  the defense.

     An alternative which may  be used is  to ask the defendant
 to  designate a laboratory  to analyze  the  sample.  Thus, instead
 of  giving the sample  to an  authorized person at the site, the
 sample would be sent  to a laboratory  named by the defendant(s).

    If the split  sample is  refused or no  one is available to
 accept it, extra  amounts of the sample must be retained by the
 Agency.  Whether or not the extra amounts  are kept  in separate
 containers should be  a laboratory decision.  There  may  be
 subsequent requests for samples so that independant testing
 can be administered on behalf  of the  defense in preparing for
 trial.  Courts will normally honor such requests.

     Finally, the return on the search warrant should document
whether a sample split is accepted,  refused or not  offered
because no one v-.s available to accept it*



     Although convictions have been affirmed where the govern-
ment has lost or destroyed an evidentiary sample, the courts
have begun to sympathize with a defendant's request to indepen-
dently inspect and test.  For instance, in Banks v« F.A.A.,
687 F.2d 92 (5th Cir. 1982} the courts reversed the dismissal
of two air traffic controllers who were fired after drugs
were found in their urine.  The defendants claimed that their
due process rights were violated because F.A.A. allowed the
private lab which had tested the urine to destroy it after it
was analyzed.  The court agreed that it was "crucial" that the
samples were not available for independent testing and dis-
counted the government's claim that cross examination of the
independent testing chemist and challenging the testing methods
were sufficient.  Citing the principles of United States v.
Gordon, 580 F.2d 827 (5th Cir.), cert. denied,439 U.S. 1051
(1978), the court stated:
          The laboratory tests here were the only
          meaningful evidence resulting in the
          discharges.  The accuracy of those tests,         ,
          including the possibility that the samples
          were mixed up, damaged, or even inaccurately
          tested, was the likely determinant of the
          entire case.  Id. at 94. (emphasis in original)

     In Gordon,, even though the government made available
samples of the three seized chemicals to the defense, the
court found that it was error not to also have turned over
the chemical which the government chemist made from the three
seized chemicals.  The reasoning of this and other similar
cases is that if the government intends to introduce secondary
evidence (i.e., photographs, testimony, test results), then
it should retain the primary evidence for defense inspection
and testing.

     One more case widely cited is U.S. v. Loud Hawk, 628 F2d
1139 (9th Cir. 1979), cert, denied, 445 U.S. 917 (1980).  In
this case, state law enforcement officers destroyed seized dyna-
mite after thoroughly examining it and photographing it*  The
defense argued that the material was not dynamite and that they
were not notified of the state's intention to destroy it and
therefore, did not get a chance to test it.  The court held
that even though the dynamite was destroyed for "public safety
considerations," it was evidence and it should have been
preserved for the defense.

     The Fifth (U.S. v. Gordon, supra.). Ninth (JJ.S. v. Loud
Hawk, supra.}, Third (Government of the Virgin Islands v.
Testamark, 570 F.2d 1162, 1978), Eleventh (U.S. v. Mabors, 707
P.2d 1294, 1983) and First  (U.S. v. Pieariello. 568 F.2d 222,
1978),  Circuits are not sympathetic to the argument that

 evidence  which has  been destroyed is not "suppressed*"  Under
 Brady  v.   Maryland,  373 U.S.  83  (1963)  and  following the
 reasoning of  U.S.   v.  Bryant/  439 P2d 642 (D.C.  Cir. 1971),
 courts have found  that a  right to discover  implies  a duty to
 preserve.  Therefore,  sufficient quantities of the  evidence
 should be obtained  and preserved so  that both  the governaent
 and  the defense can perform tests.



     Samples  taken  by  the  government may, no natter how scienti-
 fically preserved,  degenerate  with the  passage of time*  Thus,
 even if there  is an  adequate  amount  of  the  material for defense
 testing,  it may no  longer  be  suitable for testing by the  time
 the defense is  notified or  by  the time  a defendant  is identi-
 fied.   This will only  be  an issue when  the  defense  has  not
 obtained  a split sample at  the time  the sample was  taken  by the


     What steps  should the  government take  when  it  has  poss-
 ession of evidence  which -degenerates?


     Under no  circumstances will  samples, residues,  or  sample
 containers used  in  cases assigned to the Office  of  Criminal
 Investigations  be destroyed, regardless  of  their condition,
 without following disposal  procedures established in Section II
 above.  If the chemical and/or biological properties of the
 evidence  seized remains stable for only a short  period  of time,
 the Office of  Criminal  Investigations should be  notified  by
 the laboratory personnel.   Agency personnel and/or  a prosecutor
 will then  notify the defense.  The notification  should  state
 that the  government  has a sample  and that the  defense has
 until  a certain date to inspect  or obtain the  sample for  indepen-
 dent testing.  The  target must be notified  as  soon  as possible
 after  formal charges have been brought*   Whenever the target
 is notified/ court approval to destroy  after the stated date,
whether or not the defense  responds  to  the  notice,  must be
 obtained.  This can  be  accomplished  by  way  of  the All Writs
Act or by a motion to  the court which has jurisdiction  over
 the case.

     This is a difficult and sensitive area because of the
time considerations when evidence is likely to self-destruct.
To avoid an allegation of bad faith, it will be important
that the government give notice as soon as possible, so that
the defense has adequate time to retain their own experts
and to start their own testing.

     Notice should include a technical person's preliminary
assessment of what the sample contains, when it was obtained
and the rate of anticipated degeneration.  The Agency has good
technical information upon which to make sound assessments of
how long a sample may be held and still retain its integrity
for its intended purpose*  The name and phone number of the
prosecutor and agent to contact should also be included.  If
the defense responds to the notice, the U.S. Attorney's office
should be contacted and the arrangements for the transfer of a
portion of the sample should be coordinated with that office.

V.  Laboratory Procedures


     what procedures should be used in the laboratory in handling
evidence for criminal enforcement cases?


     All evidence obtained on behalf of the Office of Criminal
Investigations will be obtained, tested and preserved by Agency
laboratories.  Unless unavoidable, no contract laboratories
will be employed.  Until further guidance is issued, each Agency
laboratory will institute its own procedures to ensure the
security of the paperwork and the samples.  These procedures
will supplement those already in force in this this area.


     Because of superior quality control and simplified chain
of custody, technical samples collected in criminal cases should
be analyzed whenever possible in EPA laboratories, rather than
contract laboratories*  In addition, samples and paperwork
(on these samples) should not be tampered with or discussed
with persons who are not assigned to work on the case.  A
premature disclosure, even inadvertant, to a company, the
media, or other individuals can jeopardize the success of the
investigation and the safety of the investigators.

     Furthermore, the "tighter" the chain of custody, the easier
it will be to prove the case in court.  Since it may be necessary
to bring into court each individual who handled, tested or packaged
the samples, the fewer individuals involved, the better.  Because
of the complexity of the sampling and testing procedures, the
laboratories are authorized to determine their own methods for
making sure that no "unnecessary* personnel handle the evidence.

     It is assumed that the quality control guidelines and methods
already in use by the laboratories will be applied with particular
care in the development of criminal cases.

"Guidance Concerning Compliance with the Jencks Act", dated November 21,
1983.  See GM-23.  Superseded and replaced by V.8. below.

"Policy and Procedure on Parallel Proceedings at the EPA", dated January
23, 1984.  See GM-30.  Superseded.

"The Use of Administrative Discovery Devices in the Development of Cases
Assigned to the Office of Criminal Investigations", dated February 16,
1984.  See GM-36. Superseded.

"Guidance Concerning Compliance with the Jencks Act"  dated March 8, 1984,

      t                 WASHINGTON. D.C. 20460

                           MAR  € 1984
                                                       ENFORCEMENT AND
                                                      COMPLIANCE MONITORING


          Guidance Concerning  Compliance with  the  Jencks  Act
                                -7- /\ -Pt •
          Courtney M. Price^AiA^S* />-(T*x-~
          Assistant Administrator  tor  Enforcement
             and Compliance  Monitoring

          Assistant Administrators
          Regional Administrators
          Regional Counsels
          Associate Enforcement Counsels
          Director, NEIC

     The Jencks Act  (18 U.S.C. $3500) provides  that  in  a
federal criminal prosecution, after  a witness called by the
United States has testified on direct examination, the  court,
on motion of the defendant, shall  order  the  United States  to
produce any 'statement*, as defined  in the Act,  in the
possession of the United States  that relates to the  subject
matter as to which the witness has testified.   Any witness
called by the United States is subject to the Jencks Act.
Therefore, the "statements* of environmental engineers,
technicians, laboratory personnel, criminal  investigators,
inspectors, and EPA lawyers may  be ordered turned over  to
the defense if any of these individuals  testifies for the
Government.  The need for a complete understanding of the
requirements of the Jencks Act,  by all EPA personnel, can-
not be underestimated.  The identity of  government witnesses
cannot be accurately predicted in advance, and  the sanctions
for losing, destroying or misplacing "Jencks Act material*
can be severe.

     The Act (the text of which  is set forth in Appendix A) —
has generated a considerable amount  of case  law.  Litigation^
has mainly concerned questions as to what is a  "statement"  3-
and what sanctions should be imposed should  the Government  3
fail to produce Jencks Act material.  This memorandum will  —
discuss these points and the procedures  which must be used  ^
to preserve the material.                                   73


     What written materials will be considered "statements"
subject to production to the defense during the course of
criminal litigation?


      A 'statement" is defined in part in 18 D.S.C. §3500(e)
as (1) a written statement made by the witness and signed or
otherwise adopted or approved by him; or (2) a stenographic,
mechanical, electrical* or other recording, or a transcription
thereof, which is a substantially verbatim recital of an oral
statement made by the witness and recorded contemporaneously
with the making of such oral statement.

"(e)(l) Statements"i  Under subsection (e)(l), a written
statement can be a report written by an agent and adopted by
the witness.  That is, if an agent writes up a report and
either reads it back to the witness or lets the witness read
it and then has the witness, in writing or orally, approve
what has been written, then the witness has "adopted" the
statement and it becomes the witness's statement.  This
statement or report does not have to be written at the time
of the interview-of the witness.  If an agent talks to a wit-
ness, types up a report a few days later and shows the report
to the witness who approves it, it is an "(e){l) statement"
of the witness.  A document written by a witness, whether
signed or unsigned, is also a statement and, if turned over
to an agent, must be retained as Jencks Act material.

     Criminal investigators or agents intentionally obtaining
statements from potential witnesses are not the only EPA
personnel who may create *(e)(l) statements."  If an EPA
technician or inspector writes a report which a facility
manager reads and certifies as being accurate, then this
report may be considered the "statement" of the facility
manager.  The manager has "adopted" the report.  Also, the
notes or laboratory reports of a technician or inspector
are "(e)(l) statements* as to that technician or inspector.
If the technician or inspector testifies, then these notes
or reports must be turned over to the defense if they relate
to the subject matter of the direct testimony.  It does not
matter who records the statement or for what purpose; it
remains Jencks Act material.  EPA technical personnel must
keep any notes that they have made of interviews with facil-
ity personnel (or other potential witnesses) as well as notes
recording actions which may later be the subject of a criminal


 "(e)(2)  Statements*:   Statements which  are  "(e)(2)  statements"
 Include  not  only  tape  recordings,  but any notes which can  be
 considered a "substantially  verbatim recital* of  a  witness's
 oral  statement.   If an agent takes notes quoting, or writing
 down  in  a substantially  verbatim form,  the  words  of a witness
 and these notes are taken  either at  or  near the time of  the
 witness's oral statement,  these notes become the  witness's
 "(e)(2)  statement".  The agent taking the notes is  viewed  in
 the manner of a stenographer who accurately memorializes the
 witness's words.  The  witness does not  have to approve or
 adopt the agent's notes.He does  not have  to even  know  that
 notes were being  taken.  If  the agent has captured  the witness's
 words on paper, then these words are the witness's  statement
 even  if  he is unaware  that he is making a statement.

      Agents who  testify in  court  oecome witnesses  whose
 statements also must be  turned over  to  the  defense.  Investi-
 gative reports, written  interpretations or  impressions of  a
 case, and written analyses of case problems and issues may
 all be "statements" of an  agent.   For instance, a report of
 a witness interview may  not  be a witness's  "(e)(l)" or "(e)(2)"
 statement because it does  not directly  quote the witness or
 capture  the  witness's  words  in a substantially verbatim  form*
 However, it  may be the *(e)(l) statement" of the agent who
wrote the report.  "The written report  of the agent, however,
 is just  as much a verbatim statement of the agent who prepares
 it as a written statement  of an informer, incorporated in
 the report,  is the statement of the  informer."  Holmes v.
United States, 271 P.2d  655, 658 (4th Cir.  1959).

   "Running  resumes" of  F.B.I, agents,  detectives or EPA
agents are "(e)(l) statements" of  the agent and may be
producible.  If a Special  Agent testifies,  it can be antici-
pated that his/her notes,  reports  to SAICs, case referral
reports, and investigative reports will be  producible if the
direct testimony covers areas which  are discussed in these
previously written documents.  United States v. Sink, 586
F.2d  1041 (5th Cir. 1978), cert"denied, 443 U.S.  912 (1979);
Holmes v. Dnited States, supra.  Although it is incumbent
upon  the trial judge to separate out personal evaluations
and "discussions of legal  and practical problems of a prose-
cution" from the "running  resumes" (or  from any document
which contains Jencks Act  material), the writer who includes
extraneous material always runs the  risk of a judge deciding
against excision.  Dnited  States v.  Pfinqst, 377 F.2d 177,
195 (2d Cir.), cert, denied, 412 O.S. 941 (1973).  Material
in an agent's report which is sensitive or  which might affect
the security of EPA's  investigative  techniques is not exempt
from Jencks Act requirements.  West  v.  United States, 274
F.2d 885 (6th Cir.  1960), cert, denied, 365 D.S. 819 (1961).

    Notes, reports, etc., in the hands of any EPA employee—
including criminal investigators, lawyers and technical
persons—are considered "in the possession of the government."
Therefore, if an EPA employee fails to disclose Jencks Act
material to the prosecutor, that failure will be held against
the Government even though it is the agent rather than the
prosecutor who has failed to preserve something.  United
States v. Bryant, 439 P.2d 642 (D.C. Cir. 1971); Emmett v.
Ricketts, 397 F. Supp. 1025 (N.D. Ga. 1975); United States v.
Hiederberger, 580 P.2d 63 (3d Cir. 1978}? United States v.
Williams, 6^4 P.2d 1102 (8th Cir. 1979).  As soon as a case
is opened by the Office of Criminal Investigations, the agent
assigned to the case should inventory all existing notes and
reports concerning potential government witnesses in the
possession of, or known to, all Agency personnel involved in
the case, and inform them of their obligation to retain such
material.  Copies of this Agency's guidance on the Jencks Act
should also be distributed to such personnel.

   Courts will require the Government to turn over any material
which fits the "statement" definition if it relates to the
subject matter of the witness's direct testimony.  Any material
which either is not a statement of the witness or does not
relate to the subject matter of the witness's direct testimony
will be excised- from the document.  A judge may not exercise
his or her own judgment as to what material is important,
helpful or necessary for the defense.  If it is a statement
that relates to the direct testimony, it must be turned

     Courts have broadly interpreted the phrase "relates to
the subject matter as to which the witness has testified," in
Section (b) of the Act.  However, courts have more restnc-
tively defined "statements" under Section (e).  Acknowledging
that it is unfair to cross-examine a witness using material
which does not represent what the witness in fact said,
courts have excluded material that is really the agent's
words or impressions rather than those of the witness.  In
Palermo v. United States, 360 U.S. 343 (1959), the Court
affirmed the denial of the production of a 600-word memoran-
dum in which the Government agent summarized a three and a
half hour interrogation of a witness who testified at trial.
In one of the first Supreme Court decisions discussing the
"statement* definition of the Jencks Act, the Court attempted
to clarify what courts may exclude:

     [SJummaries of an oral statement which evidence  substan-
     tial selection of material, or which were prepared after
     the interview without the  aid of complete notes,  and hence
     rest on the memory of the  agent, are not to be produced.
     Neither, of course, are statements which contain the
     agent's interpretations or impressions.

360  D.S. at 353.  If a court describes an agent's notes as
•rough", "random" or "brief",  it will be signaling its finding
that the notes are not "statements" as to the witness referred
to in the notes.

     To determine whether notes accurately reflect a witness's
words, courts will consider the extent to which the  writing
conforms to the witness's language (e.g., "I dumped  it because
I thought the load was hot.");  I/ the number of pages of notes
in relation to the length of the interview (e.g., one page of
notes after three hours of interviewing); 2/ the lapse of time
between the interview and its  transcription; 3/ the  appearance
of the substance of the witness's remarks (i.'e., are  they in
quotation marks? in sentence fora?); 4/ and the presence of
comments or ideas of the inter viewer.~j>/

   The Jencks Act clearly gives the court the authority to
determine, after an in camera  inspection, what is Jencks Act
material and what is not.  It  is not the Government's function
to excise material; rather, any notes or memoranda which
conceivably could be viewed as Jencks Act material should be
provided to the prosecutor for review by the courts.
V Palermo v. United States, supra.

2/ Dnited States v. Judon, 581 P.2d 553  (5th Cir. 1978);
United States v. Durham, 587 F.2d 799  (5th Cir. 1979);
Goldberg v. Dnited States, 425 U.S. 94 (1976); Palermo v.
United States, supra.

3/ Campbell v. Dnited States, 365 O.S. 85 (1961).

4/ United States v. Muckenstrum, 515 P.2d 568  (5th Cir.),
cert, denied, 423 D.S. 1032 (1975);  United States v.
Pennett, 496 F.2d 293 (10th Cir. 19747;United States v.
Bines, 455 P.2d 1317 (D.C. Cir. 1971).

5/ United States v. Pfingst, supra.


     When must Jencks Act material be made available to the
defense and what are the sanctions if it is not made


     If a prosecutor decides to follow strictly the letter
of the law, he or she need not turn over Jencks Act material
until after the witness has testified at trial for the Govern-
ment.  However, because of the delay which this creates.(while
the defense reviews the material)/ most courts expect that a
prosecutor will agree to turn over Jencks Act material either
at the start of each day of trial or before the witness testi-
fies on direct examination.  Some prosecutors even allow the
defense to examine the material before trial.

     As in any area of the law, different courts interpret
the Jencks Act differently.  Prosecutors who are aware of
previous rulings by a court on Jencks Act issues will conform
their practice accordingly.  Therefore, what one prosecutor
considers Jencks Act material/ another may not.  EPA personnel
must accommodate themselves to the practice of the prosecutor
within their jurisdiction.

    The Congressional purpose of the Act is to allow the
defendant to have/ for impeachment purposes, "relevant and
competent statements of a governmental witness in possession
of the Government touching the events or activities as to
which the witness has testified at trial."  Campbell v. United
States, supra, 365 U.S. at 92. If the defense's ability to
cross-examine is impeded by the deliberate or inadvertent
loss/ by the Government, of Jencks Act material, the Court
may decide not to allow the witness to testify at all or to
strike the witness's entire testimony.  Of course, the effect
of completely excluding the testimony of a Government witness
may be significant.

    Although the Act does not require the automatic imposi-
tion of sanctions for failure to preserve potential Jencks
Act material/ courts have warned law enforcement agencies of
their duty to promulgate procedures to ensure preservation.

    [SJauctions for non-disclosure based on loss of evidence
    will be invoked in the future unless the Government can
    show that it has promulgated, enforced, and attempted in
    good faith to follow rigorous and systematic procedures
    designated to preserve all discoverable evidence gathered
    in the course of a criminal investigation.  The burden,
    of course, is on the Government to make this showing.
    Negligent failure to comply with the required procedures
    will provide no excuse.

 United States v.  Bryant, 439 F.2d 642 (D.C. Cir.  1971)
 (footnote omitted)(emphasis in original).

      In light of  the sanctions that can flow from a failure
 to preserve Jencks  Act material,  as well as Government's
 inherent responsibility to preserve discoverable  evidence,  it
 is incumbent upon EPA to develop  procedures that  will ensure
 this end.


      What procedures should be implemented throughout the
 Agency to preserve  Jencks Act material?


      As a general rule, after a matter is  referred to EPA's
 Office of Criminal  Investigations,  the case agent, will be
 responsible for reports written to  document factual develop-
 ments in ongoing  cases.  This would include, for  example,
 interview write-ups, surveillance reports, documentation
 of the receipt of physical evidence, etc.   One clear exception
 to this general rule will be Agency technical personnel who
 will continue to  draft reports documenting sampling data
 and analysis, chain of custody information, etc.

      If more than one investigator  is involved in an investi-
 gation, only one  report should be written  documenting a
 specific event unless circumstances mandate otherwise.

      All work notes should be retained by  Agency  personnel
 working on the criminal investigation until the final disposi-
 tion of the case.   This potential Jencks Act material must
 be kept in secured  files when not in immediate use.  Any
 notes taken at the  time of the event, or at the time of the
 interview, as well  as reports composed from the notes must  be
 retained.   Intermediate drafts need not be retained.

     Investigative reports and technical reports should not
 include the writer's subjective thoughts,  impressions or
 general opinions  concerning a case. If it  is thought necessary
 to reduce to writing information  that is not strictly factual,
 this should be kept separately in secured  files.   It is more
 likely that material which is arguably not producible under
 the Act will be withheld from the defense  if it is kept apart
 from material which is clearly Jencks Act  material*  Rather
 than disputing in court which portions of  reports should be
 excised,  everything within a report should be relevant and
^objective  material.   Extraneous material which does not
 directly relate to  a case should  not be included  in investi-
 gative reports on that case.

                               . 4 -

                — DAA Civil,  who, in conjunction with the DAA-
                   Criminal, will coordinate  final discussions
                   with and input froa the  Department of Justice
                   (and, as necessary, State  enforcement

                — Assistant Administrator, Office of Enforcement
                   and Compliance Monitoring.

Time limits will  be met.   Extensions of time limits will be
allowed only for  good cause and required approval by the DAA
Civi,! and should  not exceed five (5)  working days.  Routine
preparation of  analyses or implementing memoranda shall not be
appropriate reasons for delay  or extensions  of time in the review
      9.    When  the referral package and implementing memorandum
have been signed  by the Assistant Administrator, the package will
be returned to  the preparing office.  The office assigned
responsibility  for preparation of the referral must assure
distribution of copies of  the  referral memorandum to the persons
named in  paragraph 4.

Emergency Clearances

      10.   When  the public  health or the environment is
significantly endangered,  and  in the judgment of the Region
immediate civil or administrative action is  required to
stabilize or to control an emergency fact situation when there
would otherwise be need for approval of parallel proceedings, the
Region may seek emergency  clearance.  Prior  to seeking emergency
clearance,  the  Region  shall consult with the Special (Resident)
Agent in  Charge of that Region.   Emergency clearance may be
requested by telephonic contact between the Regional
Administrator or  Deputy Regional Administrator and Regional
Counsel with the  Assistant Administrator - Office of Enforcement
and Compliance  Monitoring  for  limited civil or administrative
action.   This Emergency Request will then be memorialized by the
Region in accordance with  the  procedures outlined above.

      Emergency  approval will be limited to an immediate need to
stabilize a fact  situation or  protect against Significant
environmental harm or  public endangerment* and4 — not a
substitute for  final,  formal approval of parallel proceedings.

cc:   Gerald H.  Yamada

                              -  3  -
      «.    Upon receipt  by the Assistant Administrator, the
 request  for parallel  proceedings will  first be sent to the Deputy
 Assistant Adainistrator for Civil Enforcement (DAA Civil).  The
 OAA Civil will assign and delegate  the preparation of the
 referral package.

      7.    Upon receipt  of their information copies, each Deputy
 Assistant Administrator will assign a  staff attorney to work on
 the request.   The staff attorney should begin preliminary issue
 exploration immediately after receiving the assignment.
 Preliminary issue exploration includes having discussions and
 conferences with other  attorneys and EPA or Regional staff.  This
 is  necessary to prepare the matter  for speedy review when the
 request  is actually received from the  DAA Civil.  Note:  It is
 anticipated that before there is discussion of « parallel
 proceeding request with the Department of Justice by
 headquarters,  all affected programs will exchange information and
 views, and discuss the  merits of the request to establish an
 Agency consensus before seeking information or comment from
 outside  sources, departments, agencies or individuals.

      8.    The  office  assigned responsibility for the request
 shall process  the request into a referral package within eight
 (8) working days.  Within the eight day limit for and during
 preparation of  the referral package, the office assigned
 responsibility for the  package preparation is expected to confer
 with  all  affected media representatives during its preparation of
 the package.   The referral package  shall include a memorandum
 drafted  to the Regional Counsel from the Assistant Administrator,
 reflecting approval or  disapproval  of  the request.  The final
 referral  package should reflect the concurrence of each Associate
 Enforcement Counsel for each medium identified as affected by the
 request for parallel  proceedings.   The final package will then be
 forwarded  to each of  the following  offices in turn, which will
each complete  its review within five (5) working days of
receiving  the package:

                — Deputy Assistant  Administrator for Civil
                  Enforcement (OAA  Civil)

                — Office of Criminal Ex "rcemeht counsel (OCEC),
                  who will discuss  the referral with the Regional
                  criminal enforcement contact.

"Functions and General Operating Procedures for the Criminal Enforcement
Program", dated January 7, 1985.  See GM-15.

                          APPENDIX A
53500 Demands  for production of statements and  reports of
      (a)   Ir any criminal prosecution brought by the United
States, no statement or report  in the possession of the United
States which was made by a Government witness or prospective
Government witness  (other than  the defendant) shal  be the
subject of subpoena, discovery, or inspection unti- said wit-
ness  has  testified  on direct examination  in the trial of the

      (b)   After a witness called by the United States has tes-
tified on  direct examination, the court shall, on motion of
the defendant, order the United States to produce any state-
ment  (as hereinafter defined) of the witness in the possession
of the United States which relates to the subject matter as to
which the  witness has testified.  If the entire contents of
any such statement  relate to the subject matter of the testi-
mony  of the witness, the court shall order it to be delivered
directly to the defendant for his examination and use.

      (c)   If the United States claims that any statement
ordered to be produced under this section contains matter
which does not relate to the subject matter of the testimony
of the witness, the court shall order the United States to
deliver such statement for the  inspection of the court in
camera.  Upon such  delivery the court shall excise the portions
of such statement which do not relate to the subject matter of
the testimony of the witness.  With such material excised, the
court shall then direct delivery of such statement to the
defendant  for his use.  If, pursuant to such procedure, any
portion of such statement is withheld from the defendant and
the defendant objects to such withholding, and the trial is
continued  to an adjudication of the guilt of the defendant,
the entire text of  such statement shall be preserved by the
United States and,  in the event *he defendant appeals, shall
be made available to the appellate court for the purpose of
determining the correctness of tne ruling of the trial judge.
Whenever any statement is delivered to a defendant pursuant to
this section, the court in its discretion, upon application of
said defendant, may recess proceedings in the trial for such
time as it may determine to be reasonably required for the
examination of such statement by said defendant and his
preparation for its use in the trial.

     (d)  If the United States elects not to comply with an
order of the court under subsection (b) or (c) hereof to
deliver to the defendant any such statement, or such portion
hereof as the court may direct, the court shall strike from
the record the testimony of the witness, and the trial shall
proceed unless the court in its discretion shall determine
that the interest interests of justice require that a mistrial
be declared.

     (e)  The term "statement", as used in subsections (b),
(c), and (d) of this section in relation to any witness
called by the United States, means—

          (1) a written statement made by said witness and
              signed or otherwise adopted or approved by him;

          (2} a stenographic, mechanical, electrical, or other
              recording, or a transcription thereof, which is
              a substantially verbatim recital of an oral
              statement made by saia witness and recorded
              contemporaneously with the making of such oral
              statement; or

          (3) a statement, however taken or recorded, or a
              transcription thereof, if any, made by said
              witness to a grand jury.

"Procedures for Requesting and Obtaining Approval of Parallel Proceedings",
dated June 15, 1989.  Excludes attachment entitled "Guidelines on
Investigative Procedures for Parallel Proceedings".

^    J                WASHINGTON. 0 C 20460
 «< **t&
                             JUN 15

  SUBJECT:  Procedures for Requesting and Obtaining Approval of
            Parallel Proceedings

  FROM:     Edward E. Reich
            Acting Assistant"

  TO:       Regional Counsels, Regions I-X
            Associate Enforcement Counsels

       This memorandum supersedes and replaces a prior OECM policy
  document, dated April 2, 1987, entitled "Handling Requests for
  Parallel Proceedings."

       Although not favored as a general matter, the parallel
  proceeding occasionally is necessary or desirable as the best way
  to achieve EPA goals and objectives.  Parallel administrative or
  civil proceedings which conform to Agency policy may be approved
  by the Assistant Administrator, Office of Enforcement and
  Compliance Monitoring, before or after the initiation of a
  criminal proceeding.  Use of the following procedural steps will
  ensure the most expeditious treatment of a Regional request for
  parallel proceedings:
       Initiation gf tf*^ parallel Proceedings Request;

       1.    A Region initiates a request for parallel proceedings
  by memorandum directed to the Assistant Administrator,  Office of
  Enforcement and Compliance Monitoring.  The memorandum request
  for parallel proceedings should include the following:

            — background information including a statement
               concerning the status of administrative or civil
               evidence or information gathering with respect to
               the matt - for which approval is' being sought, and
               a statement that the Region has made inquiry and is
               not pursuing any administrative or civil proceeding
               for any purpose other than the one for which the
               approval is being sought.

                              - 2 -

           — a brief  factual outline of each proposed civil*or
             administrative action;

           — a brief  description of the existing criminal
             investigation or action; and,

           — a specific statement explaining why simultaneous
             actions  are necessary and the specific aspects of
             the Agency parallel proceedings policy which justify
             this request.

     2.    The memorandum request for parallel proceedings should
be prepared by the Regional Counsel.  The memo should be signed
by the Office of Regional Counsel anu by affected Regional
     3.    All factors affecting potential enforcement actions —
criminal,  civil and administrative — should be coordinated
within the Region before the decision to request approval for
parallel proceedings.  However, once the decision is made, in
advance of sending the memorandum request, the Office of  -
Regional Counsel should call the Special (Resident) Agent in
Charge in  that Region and the Office of Criminal Enforcement
Counsel (OCEC) in Headquarters that the request is coming.

     4.    Simultaneous information copies of the request for
approval together with any supporting attachments should be sent
to the following persons:

           A.   Deputy Assistant Administrator for Criminal

           B.   Deputy Assistant Administrator for Civil

           C.   Regional Criminal Enforcement Counsel for the
               requesting Region;

           0.   Special (or Resident) Agent in Charge in the
               requesting Region;

           8.   Chief of the Environmental Enforcement Section
               (EES), Departs ->t of Justice; and,

           P.   Chief of the Environmental Crimes Section (ECS),
               Department of Justice.

     5.    While awaiting approval of requests for parallel
proceedings, Regional personnel may continue good faith
inspection and monitoring activities, but Agency policy with
respect to separation of civil and criminal staff shall be
followed in anticipation of approval of the request.

     (U.S. ATTORNEY)
                                              REGIONAL PROGRAM
                      MEMORANDUM REQUEST
                      REFERRAL PACKAGE
                     PRINCIPAL MEDIA, AEC
                                                  ALL AFFECTED
                                                  MEDIA, AECs
                                                 C DISAPPROVAL
                                                  REGIONAL COUNSEL

# "Revised EPA Guidance for Parallel Proceedings", dated June 21, 1989.
This document together with V.12. above, supersedes and replaces the
documents at V.6.,V.7., and V.lO.  This document is supplemented by the
document at V.14.

    /                WASHINGTON. D C 20460

                          JUN2I {989
                                                        of net o*
         ,                                             EMMftCtMtNT *KO
         '                                            COMtWkMf MOMTOaifcG


SUBJECT:  Revised EPA Guidance  for Parallel Proceedings
FROM:      Edward  E. Reich   	    _
           Acting  Assistant Administrator  '

TO:        Assistant Administrators
           Associate Administrators
           Headquarters Enforcement Program Office Directors
           Regional Administrators, I-X
           Deputy  Regional Administrators, I-X
           Regional counsel, I-X

     Attached for your use and distribution is the revised
guidance on parallel proceedings.  Copies of the "Guidelines on
Investigative Procedures for Parallel Proceedings* should be made
available  at once to all affected enforcement personnel, program
managers,  and senior staff.  Also included in the Guidelines is a
short form, two-page "Easy Access to Parallel Proceedings
Guidance by Five  Rules of Thumb* which you may wish to post
prominently in all civil enforcement offices.

     Effective immediately, thes>- Guidelines constitute Agency
policy with respect to parallel proceedings.  These Guidelines,
taken together with the June 15, 1989 memorandum, "Procedures for
Reguesting and Obtaining Approval of Parallel Proceedings*,
(attached) supersede and replace the following five memoranda
dealing with parallel proceedings:

     —"Policies  and Procedures on Parallel Proceedings at the
     Environmental Protection Agency," dated January 23, 1984;

     —"The Use of Administrative Discovery Devices in the
     Development  of cases Assigned to the Office of Criminal
     Investigations,11 February 16, 1984;

      —"The  Role  of  EPA  Supervisors  During Parallel  Proceedinas  "
      March 12,  1985,                                    *.«uj.i^a.

      —"Implementation of  Guidance on  Parallel  Proceedinas,"
      February 3,  1986; and,                             *  '

      —"Handling  Requests  for Parallel Proceedings,11 April 2,
     This final guidance reflects all of the comments received
upon th* several prior drafts circulated over the past several
months.  These Agency Guidelines also reflect the comments of the
Department of Justice and correlate with their October 13, 1987,
"Guidelines for Civil and Criminal Parallel Proceedings."  Your
comments were very helpful, and we appreciated your assistance in
making the guidance useful as a field reference tool.

I "Supplement to Parallel Proceedings Guidance and Procedures for
Requesting and Obtaining Approval of Parallel Proceedings", dated July 18,

                            WASHINGTON. O.C. 204W

                                JUL ! 8 1990
                                                             of net or

SUBJECT:  Supplement to Parallel Proceedings Guidance and
          Procedures for Requesting and Obtaining Approval of
          Parallel Proceedinc
FROM:     James M. Strode^/
          Assistant Administra-fco'r

TO:       Regional Counsels, Regions I-X
          Associate Enforcement Counsels
          Director, Office of Criminal Enforcement
          Director, Office of Civil Enforcement

     As a result of the recent reorganization of and realignments
within the Office of Enforcement, changes must be made to the
parallel proceedings policy and to procedures for requesting and
obtaining approval of parallel proceedings requests.  This
memorandum supplements prior memoranda dated June 15, 1989,
"Procedures for Requesting and Obtaining Approval of Parallel
Proceedings," and June 21, lr89, "Revised EPA Guidance for
Parallel Proceedings," which transmitted "Guidelines on
Investigative Procedures for Parallel Proceedings," to the degree
necessary to change certain references and terms used in those
memoranda.  The procedures, policy and guidance provided by the
memoranda dated June 15 and 21, 1989, remain fully effective,
except as revised as follows:

     1.   Two revised flow charts, which replace the one
previously supplied with the memorandum dated June 15, 1989, are
attached.  These charts should be used instead of the earlier one
as an aid in routing the parallel proceeding request.

     2.   Requests for parallel proceedings will continue to be
submitted by memoranda from the Office of Regional Counsel,
directed to the Assistant Administrator, OE.  Information copies
should also be sent simultaneously to the Office of Criminal
Enforcement and to the attention of the Associate Enforcement
Counsel for the principal media affected by the parallel
proceeding request (Chart I).

     3.   Upon receipt in the Office of the Assistant
Administrator, the Deputy Assistant Administrator will assign the
request to an Associate Enforcement Counsel for preparation of
the package, which will then be routed for concurrence and action
within Headquarters as provided by the existing policy and
procedures (Chart II).  (A request for parallel proceedings which
involves a request for suspension or debarment or discretionary
listing and for which there is an ongoing environmental criminal
investigation will be routed to the Office of Criminal
Enforcement for preparation of the package for internal OE
concurrence and AA approval.)

     4.   The following titles and terms, used in prior
memoranda, have been changed as indicated:

     "Office of Enforcement and Compliance Monitoring (OECM)" to
     "Office of Enforcement (OE)n

     "Deputy Assistant Administrator, Civil" to "Director,
     Office of Civil Enforcement"

     •'Deputy Assistant Administrator, Criminal" to "Director,
     Office of Criminal Enforcement"


cc:  Gerald H. Yamada, Deputy General Counsel

           U. S. Environmental Protection Agency

            Procedures for Approval of Parallel Proceedings
           Row Chart for Regional Request to Headquarters

Special Agent in Charge
    (U. S. Attorney)
(Other Federal Agency)
     Regional Program Personnel
                       Memorandum Request
                     Office of Regional Counsel
                   Regional Program Managers)
                           (original request)
                        Assistant Administrator
                        Office of Enforcement
         (information copy)
    Office of Criminal Enforcement
      (information copy)
Associate Enforcement Counsel
 Civil Division (Affected Media)

         U. S. Environmental Protection Agency
          Procedures for Approval of Parallel Proceedings
                   Flow Chart for Headquarters
                     Memorandum Request
                     Assistant Administrator
                      Office of Enforcement
                         Deputy Assistant
                       (assignment to AEC)
      Referral Package
AEC Principal Affected Media
       All Affected Media
 Director of Civil Enforcement

 Director of Criminal Enforcement

  Deputy Assistant Administrator
    Requests for
   Suspension or
Discretionary listing
                                              Office of Criminal
   Assistant Administrator
   (approval or disapproval)



"Municipal Enforcement Case Requirements",  dated December 14,  1982.

                         WASHINGTON. DC 20460
                           DEC I  4 1932
                                                         ornee or
                                                 UtCAU. AND ENFORCEMENT CC
SUBJECT:  Municipal Enforcement £ase Requirements
FROM   :  Louise D. Jacobs
          Associate Enforcement Counsel for Water

TO     :  All Attorneys
          Water Enforcement Division, OLEC

     Please ensure that the following information is contained
in all referrals sent to the Department of Justice for
prosecution of municipal violations:

     9  Confirmation of the municipality's permit requirements;

     0  Listing of precise nature of violation of the requirements;

     0  Information about alternatives for solving the problem
        which are likely, in the opinion of an informed  indivi-
        dual, to be successful.  The informant should be  some-
        one who knows the plant and violation, is familiar
        with the kind of violations occurring, is knowledgeable
        about sewage treatment systems in general, and is of
        the opinion that these particular violations are
        possible to solve by one of several alternatives  posited.
        The informant should be identified in the referral.
        A JRB report may ordinarily suffice to meet this

     e  "First-cut" information indicating that the cost  of a
        probably feasible solution is one which this municipality
        will not find it totally impossible to pay.  We will
        discuss at a later date some sources for this "first-
        cut" conclusion.  One source of such information
        might be the OW test (Longest office) for whether a-
        given munipality can support a grant.  Another source
        might be the economists on staff in Renion III.

     You will note that the tests listed are broad and general.
This is purposeful, particularly in the case of .the financial
information requests.  The purpose of collecting this information

is to provide the Department of Justice with a rough, predis-
covery screening of the case, containing enough information
to indicate to a sensible lawyer that filing is warranted, but •.
certainly not enough to make a conscientious lawyer comfortable
at the time he/she enters the courtroom for the first day of trial.

     It is my opinion that too often we have tried to meet
the first-day-of-trial test in our profiling efforts, and
that this has slowed the rate of filing beyond what might be

     If after providing the information listed above you  find
that further information is being requested by the Department
of Justice,, please call this to my attention.  It may be  that
in a given case further information might be desirable.
However, I would like to keep abreast of these requests and
to discuss them with Steve Ramsey if necessary.

     The elements listed above as materials sufficient for -an
average filing have been discussed by me with Steve, and  generally
agreed upon*

     In addition to meeting these internal requirements for a
municipal referral, each attorney should impress upon his/her
regional counterpart, to the extent possible, that we prefer
to use scarce agency resources to develop cases against larger
municipalities, or those presenting otherwise significant         ^
problems.          i                                             '

     Examples of "otherwise significant" might include damage
to water quality or threat to public health caused by
violations by any-sized municipality, violations having
unusual precedential significance, or responses to an unusual
show of recalcitrance.

     I am sending a copy of this memo to Steve so that he may
make any corrections he desires in this statement of my
understanding of our agreement.

cc:  Mike Brown
     Steve Ramsey

"CWA Municipal Enforcement Cases", dated January 3, 1983.

CVA Municipal Enforcenent Cases
      January 3, 193£
All EES Attorneys
          As you know, EPA is in Che process of developing a
municipal water enforcement policy.   Although the policy is not
yet final, we have said we will consider filing cases against a
municipality where the agency can identify what the municipality
must do to achieve compliance and that the municipality has the
financial wherewithal to implement the remedy.

          Mike Brown and Louise Jacobs have agreed that EPA will
provide the following information to assist us in reviewing
these cases:

          1.  Violation

          Infornation about the precise nature and duration of
the violation, including confirnation of the municipality's pemi

          2.  Remedy

          An explanation of what the municipality must do to
achieve compliance, basically a particularised plan of action
identifying practical alternatives we can propose to the court.

          3.  Financial Capacity

          Information which reflects that the proposed remedy
will not be impossible for the municipality Co fund.  EPA's
economists are putting together a test which identifies the kinds
of information relevant to this inquiry (e.g. , bond rating,
assessment of staff economists, user charges).

          We also expect that the referral will identify an
individual who has been to the plant, is familiar with the
violations, and can explain how the violations can be remedied.

                              - 2  -

The referral should indicate the civil penalty the agency seeks
including the penalty calculation and what amount EPA will ace
as -a bottom line.                 .                               v-

          If any of the municipal enforcement cases which you are
reviewing lack this information, please advise Carol, Lloyd, or
Chip immediately and prepare a letter to the EPA staff attorney
requesting this information.  These  cases are important to EPA
and I would appreciate your expediting your assessment of them.

NATIONAL KUNICIPAL POLICY, 49 FR 3832 (January 30, 1984)

January 30, 1984
Part V

Protection Agency
Publicly-Owned Treatment Works;
National Municipal Policy; Notice

Federal Register / Vol 49. No  20 / Monday. January 30.198) / Notices


Notice el National Municipal Policy on
Publicly-Owned Treatment Works.

AOENCY: Environmental Protection
ACTION. Notice of National Municipal

SUMMARY: This notice sets forth the
Environmental Protection Agency s
policy on ensuring that all publicly-
owned treatment works (POTW) comply
with the statutory requirements and
compliance dead-lines in the Clean
Water Act (CWA)  The policy describes
the Agency's intention to focus its
efforts on POTWs that previously
received Federal funding assistance and
are not in compliance on all other major
POTWs  and on minor POTWs that are
contributing significantly to an
impairment of water quality It also
describes how the Agency expects EPA
Regions and States to carry out the
intent of the policy The purposes of the
policy are to achieve maximum
improvement in water quality in
accordance with the goals of the CWA.
and to protect the public s investment in
wastewater treatment facilities
  The Agency has  recently proposed a
regulation that redefines secondary
treatment pursuant to the 1981
amendments to section 304(d) of the
CWA. 48 FR 52258. November IB. 1933
This related action will help provide
reasonable certainty regarding POTWs
applicable effluent limits and will
facilitate implementation of this policy
EFFECTIVE DATE This policy will be
effective January 30.1984.
Robert W  Zeller Ph. D-, US
Environmental Protection Agency. EN-
338 401 M Street. SW. Washington.
0 C  20460 (202) 475-B3O4.
  Dated January 21  19B4
William D RuckeUbaiu.

Statement of Policy
  When the Clean Water Act {CWA)
was passed m 1972 Congress gave
municipalities until 1977 to comply with
its requirements Congress authorized
the Environmental Protection Agency
(EPA) to extend the deadline to 1983 and
then again to }u!y 1 1988 for some
municipalities  In addition Congres*
amended the Act in 1981 to mcdif} the
                  basic treatment requirements. Therfore.
                  Congress has authorized EPA to give
                  some municipalities several additional
                  years to achieve compliance and baa
                  also provided more reasonable
                  treatment requirements for certain types
                  of facilities.
                    The CWA requires all publicly-owned
                  treatment works (POTWs) to meet the
                  statutory compliance deadlines and to
                  achieve the water quality objectives of
                  the Act whether or not they receive
                  Federal funds The EPA will focus on
                  POTWs that previously received Federal
                  funding assistance and are not currently
                  in compliance with their applicable
                  effluent limits; on all other major
                  POTWs and on minor POTWs that are
                  contributing significantly to an
                  impairment of water quality. EPA'a goal
                  will be to obtain compliance by POTWs
                  as soon as possible, and no later than
                  July 1.1988. Where there are
                  extraordinary circumstances that
                  preclude compliance of such facilities by
                  July 1.1988. EPA will work with States
                  and the affected municipal authorities to
                  ensure that these POTWs are on
                  enforceable schedules for achieving
                  compliance as soon as possible
                  thereafter, and are doing all they can in
                  the meantime to abate pollution to the
                  Nation s waters.

                  Implementation Strategy
                    The Agency is committed to pursuing
                  a clear course of action that fulfills the
                  intent of Congress and results in the
                  maximum improvement in wa'cr quality
                  The Agency is also committed to
                  protecting the public s financial
                  investment m wastewater treatment
                  facilities. To meet these objectives, the
                  Agency expects EPA Regions and States
                  to adhere to the National policy stated
                  above and to use the following
                  mechanisms to carry out the intent of
                  this policy
                    EPA Regions will cooperate with their
                  respective States to develop strategies
                  that describe how they plan to bnng
                  noncomplying facilities into compliance.
                  These strategies should include a
                  complete inventory of all noncomplying
                  facilities, should identify the affected
                  municipalities consistent with the
                  National pohcv and should describe a
                  plan to bnng these POTWs into
                  compliance as soon as possible Region*
                  and States will then use the annual
                  State program grant negotiation process
                  to reach agreement on the specific
                  activities the) will undertake to carry
                  out the plan
                    Based on the information in the final
strategies, the permitting authority
(Region or approved NPOES State)
require affected municipal authorities to
develop one of the following as
  Composite Correction Plan An
affected municipality that has a
constructed POTW that is not in
compliance with its NPDES permit
effluent limits will be required to
develop a Composite Correction Plan
(CCP) The CCP should describe the
cause(s) ofnoncompliance. should
outline the corrective actions necessary
to achieve compliance, and should
provide a schedule for completing the
required work and for achieving
  Municipal Compliance Plan: An
affected municipality that needs to
construct a wastewater treatment
facility in order to achieve compliance
will be required to develop a Municipal
Compliance Plan (MCP) TheMCP
should describe the necessary treatment
technology and estimated cost should
outline the proposed sources and
methods of financing the proposed
facility (both construction and O&M).
and should provide a schedule for
achieving compliance as soon as
  The permitting authority will use
information in these plans and will %
with the affected municipality to
develop a reasonable schedule for
achieving compliance In any case
where the affected municipal authority
la unable to achieve compliance
promptly, the permitting authority w ill.
In addition to setting a schedule for
achieving full compliance, ensure that
the POTW undertakes appropriate
interim steps that lead to full
compliance as soon as possible Where
there are extraordinary circumstances
that make H impossible for an affected
municipal authority to meet a Juiv 1.
1968 compliance date, the permitting
authority will work with the affected
municipality to establish a fixed date
schedule to achieve compliance in the
shortest reasonable penod of time
thereafter, including intenm abatement
measures as appropriate The general
goal is to establish enforceable
compliance schedules for all affected
municipalities by the end of FY1985
Once schedules for affected
municipalities are in place, the
permitting authority will monitor
progress towards compliance and will
take follow-up action as appropriate
Nothing in this policy is intended to

                    Federal Register / Vot 45 No  20 / Monday. January  30. 1904 / Notices               3833
 impede or delay any ongoing or future
 enforcement actions

  EPA Headquarter* will overview the
 implementation of this policy to ensure
 that actions taken by Regions and States
 are consistent with National policy and
 that the Agency as a whole is making
 progress towards meeting the statutory
 deadlines and achieving the water
 quality objectives of the Act

  Dated  January 23 19M
William O Ruck*l*bau».
(FR Due M-WM fiM l-r-M Mi ra|

"Municipal Enforcement: The Financial Ability Question", dated February 17,

                    WASHINGTON. D C 20460
                       FEB I7B8I
                                                   COM»| lAf, r WON u" »


SUBJECT:  Municipal Enforcement: the Financial Ability Question
                               *  \     /
FROM:     Louise D, Jacobs //^-^OW/---
          Associate Enforcement Counsel
            for Water

TO:       Addressees:  Headquarters Water Program, Department of
          Justice, and OECM (Water)
     I was delighted with progress made in our meeting Thursday
morning on this subject.  Efforts made to discuss this subject
among departments and among disciplines were worth the effort in
my opinion, and we should do it more often.

     Following are some of the more important conclusions
reached, as I understood them.

     0 The Office of water will make clear to the Regions that
       priorities in '-nunicipal cases lie first in correcting the
       substantial noncompliance among funded facilities.

     • OECM will participate with the office of water in
       developing and sending to the Regions a statement of
       other qualifications which should be viewed as having
       high priority for litigation. (Regions should be cautioned
       not to view the development of this formula as a reason
       for delay in developing other cases which they presently
       consider important.)

     * For cases referred against POTWs built with Federal
       funds, no financial impossibility defense should be
       anticipated, and no special financial information will
       be requested from the Regions.

     0 For cases dealing with POTW noncompliance where compliance
       can be achieved through proper O & M, no special financial
       information will be requested from the Regions.

     0  when  a  Regie,  refers  a  case  against  a  POTW which was  no   i
       federally  funded,  and in  regard  to which  construction
       is  needed,  the amount of  financial information requested
       from  the  Region will  depend  on the stage  the case has
       reached and other  relevant circumstances.   While we
       have  not  had sufficient experience with municipal enforce-
       ment  to define this with  precision,  we can make the
       following  agreement,  based to some extent on past partial

          1. To  justify filing a complaint, information listed in
             the  attached exchange  of memos (Ramsey and Jacobs)
             will be requested from the Region,  to make a priroa
             facie showing that  construction  expenditure proposed
             is  not an impossibility for the  municipal defendant.

          2. If  the case  proceeds  into  early  stages of discovery
             and shows signs of  being contested, information con-
             tained in the attached "Longest" questionnaire  will
             be  requested from the  Regions.  (It should be noted
             that this is information to be supplied in other
             contexts for other  purposes and  may in some cases
             already be on file  in  the  Regions.)  This information
             is  intended  to  result  in a balance  sheet which  shows
             municipal assets and  liabilities and therefore
             the relative financial health  of the municipality

          3. If  discovery is extended,  and  there is indication
             of  a seriously  contested case  which may well lead
             to  full trial,  an expert will  be hired by the
             Agency to provide direction on any  further financial
             information needed  from the Region  or from else-
             where.  Funds are available in the  FY84 OW budget
             for this purpose.  OW and  OECM can  assist in
             locating and hiring experts.

     • OW will provide OECM  with information on  ways in which
       financial data gathered for grants purposes has been
       applied in making grants  decisions,  to assist the Agency
       in maintaining,a consistent  position.

     0 OECM will gather examples of some successful municipal
       cases for OW to use in encouraging the Regions to
       prioritize cases properly and refer them promptly.

     These agreements, in my opinion,  give us a good starting
point for moving agressively into the  implementation of enforce-
ment aspects of  the Administrator's municipal policy.  As we
encounter new problems, or as the Regions make us aware of
new questions, I will hope to reconvene the participants for
similarly constructive solutions.

     Again, thanks for your cooperation,

Rebecca Hanmer, OW
Betsy LaRoe, OW
Robert Zeller, OW
Don Olson, OW
Stephen Ramsey, DOJ
Lloyd Guerci, DOJ
John Lyon, OECM
Jack Winder, OECM
Elyse DiBiagio-Wood, OECM
cc:  Courtney Price
     Richard Mays

"Financial Capability Guidebook", dated March 1984.  (Table of Contents

                Environmental Protection      Programs Operations (WH 547'
                Agency                  Washington DC 20460
                                                               • l«M k.11
A             Rnancial  Capability
                            TABLE OF CONTENTS

          o Purpose of the Guidebook                                    1
          o Guidebook Audience                                         2
          o Approach Used in this Guidebook                              4
          o Application and Evaluation Procedures                         4
          o Guidebook Organization                                      7

   H.     Overview of Approach and Notes on the Preparation
          of a Financial Capability Analysis

          o An Overview of the Approach                                9
          o - Worksheet 01:   Roles and  Responsibilities
                             of Local Governments                       9
            - Worksheet tf2s   Facilities Cost Estimate                     9
            - Worksheet #3s   Financing the Facilities                    11
            - Worksheet #4:   Determining the Annual Costs
                             per Household                             11
            - Worksheet 05:   Assessing the Community's
                             Debt History                              11
            - Worksheet #6:   Evaluating the Community's
                             Financial Condition                        12
          o Notes on the Preparation of a Financial
            Capability Analysis                                        12
            • Obtaining the Data                                       13
            - Estimating Needed Data                                   13
            - Knowing Which Number to Use When
              There's a Choice                                         13
            - Recognizing the Effect of Different
              Accounting Methods                                      13
            • Incorporating Trend  Analysis into the
              Financial Capability Assessment                            14
            - Taking Account of Inflation and Economic
              Change                                                 14
            - Considering Overlapping Debt                              14
            - Funding Financial Capability Analysis                       15

   IIL     Financial Capability Analysis Worksheets and

          o Evaluating Results of  the Analysis                           17
            - Worksheet fit   Roles and  Responsibilities
                            of Local Governments                      23
            • Worksheet f 2:   Facilities Cost Estimate                    27

                 - Worksheet #3:  Financing the Facilities                       35
                 • Worksheet #4:  Determining the Annual Costs                -47
                 • Worksheet 05:  Assessing the Community's
                                  Debt History                                 53
                 - Worksheet 06:  Evaluating the Community's
                                  Financial Condition                           59
              A.  Selected References                                          A-3

              B.  Glossary of Financial Terms                                  B-3

              C.  The Calculation of Capital Recovery Factors                  C-3

              D.  Sensitivity Analysis                                          D-3

       Exhibit I   Integration of Financial Capability Analysis
                  into the Construction Grants Process                            3

       Exhibit n  Relationship of Guidebook to Financial
                  Capability Policy  Facilities                                     5

       Exhibit 01  Flow of Information from Source
                  Documents to Worksheets                                       10

       Exhibit IV  Overlapping  Debt  in Community "A"                             16

       Exhibit V  Wastewater  Facilities Financial
                  Information Sheet                                              19

       Exhibit VI  Basis for Identification of Regional
                  Costs                                                         24

       Exhibit vn Supplemental Information Sheet                                 52

"Eligibility for Variances under Section 301(i)(l)  of the CWA",  dated April
11, 1984.


                         WASHINGTON D C 20460
                          :.PR  I I  ?ii
                                                           orrice or

SUBJECT:  Eligibility  for  Variances  under  Section
          301(1)(1)  of  the Clean Wacer Ace

FROM.     Colburn T. Cherneyrf^(   f.
          Associate  General Coujis"eT
          Wacer  Division  (LE'xI32U)

TO-       Rebecca Harnier
          Orfice of  wacer  Enforcement ana
           Permits (EN-335)

     Bruce Barrett requestea ny legal opinion  on  a  set of
five issues relating to che eligibility of publicly owned
treatment works  (POTWs) for compliance extensions under
Section 301(i)(l) of the Clean Wacer Ace (CWA).   This
memorandum responcs  to  that request.


     (1) Can EPA (or an approvea NPDES Stace)  issue a  Section
301(i)(l) compliance extension to a municipal  permittee chat
will not be receiving Federal funas  to conscrucc  ics creatzienc


     Yes, if the permittee is otherwise eligible.   In  order
Co be eligible a POTW would have to escablisn  that  it  applied
by June 26,  1978 and meecs a variety of subscancive criteria
discussed below.


     Under Section 301(b)(l)(B) and  (C)  of  Che CWA.  enacced
in 1972,  all POTWs were required co comply wich secondary


treatnent, as well as d variety or" other requirements,  I/  by
July 1, 1977.  To assist POTlvs co meet Che 1977 compliance
deadline, Congress also enacted in 1972 Title H of  the CWA,
which provided Federal grant assistance for POTW construction.
Congress did not, however, condition the applicability of
the compliance deadline upon the tinely receipt of Federal
funds.  See State Water Control Board v. Train, 559  tr\2d
921 (4th Cir. 1977) .

     Many POTWs failed to meet the 1977 deadline, in part
because of delays in Feoeral funding.  Therefore, in the
1977 Ataendnents to the CWA, Congress enacted a new Section
301(i)(l) granting EPA the authority to extend the compliance
deadline for particular POTS's in appropriate circumstances. 2/
Section 3,01 (i)(l) as originally enacted read as follows:

            Where construction is required in
          oraer for a planned or existing publicly
          ownea treatment works to acnieve limitations
          unoer subsection (b)(l)(B)  or (b)(l)(C) of
          this section, but (A) construction cannot  be
          corapletea within the tirae required in such
          subsection, or (3) the United States has
          failed to make financial assistance uncer  this
          Act available in tine to achieve such limitations
          by the ti'ae specified in such subsection,   the
          owner or operator of such treatment worns  may
          request the Aoninistrator (or if appropriate* the
          State) to issue a permit pursuant to section 402
          of this Act or to codify a perr?it issued pursuant
          to that section to extend such time for compliance.
          Any such request shall be filea witn tna AdniniiCr^co
          (or if appropriate the State) within ISO days
          after the date of enactment, of this subsection.
          The Administrator (or if appropriate the State)
\J  These consist of "any more stringent limitation, including
    those necessary to meet water quality standards, treatment
standards, or schedule of compliance, establisned pursuant
to any State law or regulations (under authority preserved
by section 510), or any other Federal law'or regulation, or
required to implement any applicable water quality standard
established pursuant to this Act." Section 301(b)(1)(C).

2/  Congress also granted EPA authority to extend compliance
    deadlines for direct dischargers that haci planned to
discharge into POTVJs that were not yet fully constructed and
were granted Section 301(i)(l) extensions.   See Section 301(i)(2)


           nay grant  such  request and  t-ssue  or  moany such a
           permit,  which shall contain -a schedule of  compliance
           for the  publicly owned treatment  works based  on
           the earliest date by which such financial  assistance
           will be  available from the United States ana
           construction can be completed, but in no event
           later than July 1,  1983, and shall contain such
           other terns and conditions, including those necassary
           to carry out subsection  (b) through  (3) of section
           201 of this Act, section JQ7 of this Act,  ana suca
           interim  effluent limitations applicable to that
           treatment  works as  the Administrator determines
           are necessary to carry out the provisions  of  chu

     On  December 29,  1981, Congress again amended the Clear,
Water Act  by enacting tne "Municipal Uastewater Treatment
Construction Grant Aoenanents of 1931," P.L. 97-117  ("1931
Amendments").   The 1981 arenoments reduced  Federal funding
of  POTvJs,  both in  aggregate terns and in the maximum
percentage of construction^ costs that nay be borne by EPA.

     The 19S1 Amendnents  also extended the  co-sollarcc deadline
for recipients  of  Section 301(i) extensions to July  1,
1938-  The remainder of the section was unchangeo.   Thus,
che criteria that  previously applied to ootaining and granting
extensions have regained  in effect.  Congress did, however,
restrict the availaoility of extensions beyond July  1,  1^33

           The anendnent shall not be interpreted or
           applied  to  extend tne date tor conpliancs
           with  section 301(o)(l)(B) or (C)  of the
           Federal  r^ater Pollution Control Act
           beyond schedules for compliance in effect
           as  of the date  of enactment of this Act,
           except in  cases where recuctions in the
           amount of financial assistance under
           this  Act or changed conditions affecting
           the rate of construction beyond the
           control  of  the  owner or operator will make
           it  impossible to complete construction
           by July  1, 1983.

1981 Amendments, Section 21(a).

     The criteria  set forth in Section 301(i)(l)  and in
Section 21(u) of the 1981 Amendments  arc designed to assess

whether a POTW has justiriably failoJ to achieve
with the -relevant compliance deadline. 3/ The*e include  Che
POWs ability to physically construct by the deadline-;  the
impact ot Federal failure to provide funding in «i timely
manner upon the POT-v" s schedule,  and changed conditions  that
have affected the rate of constructon bevond the POT'.J's
control.  None of these statutory criteria makes, a POTW's
eligibility for an extension contingent upon the likelihood
that the POTVI will receive Federal funds in the future.

     Likewise, nothing in the legislative history prevents
EPA from granting a Section 301(i) extension to an otherwise
eligible POTW that will not receive Federal funus.  The
relevant legislative history consists of the following brief
discussion in the Senate Report

          The 1972 Act originally required municipal  plants
     to coniply with effluent limitations based on secondary
     treatment by 1977.  This deadline proved to be difficult,
     and in many cases impossible to "ieet, largely because of
     insufficient Federal,funding.  The 1977 amendments,
     therefore, permitted'extension of the deadline to
     municisalitifs acting in good raith whicn were unable
     to aeet this requirement.  Such extensions were  to  be
     in no case later  than July 1, 1983.

          With the projected shortfall in Federal expenditures,
     and the reduced Federal share for the construction  grant
     program, it is once nore appireit that r.any communities
     will be unable  to ueet the' 1933 deadline.  The legislstio"
     thus extencs the deadline to 19S8 for contrunties nnicn
     cannot meet earlier oeactlines because Federal runos
     are not ava11ao1e.  The Committee empnasizes that the
     same good faita requirements nox* in existing law are
     also extended to facilities seeKing the new extension.

          The Committee is aware that a number of communities
     are under court orders to comply with certain pollution
     control deadlines.  These communities  will not  be
     helped by the further program limitations ana reduced
     funding irapose-d by this legislation.  This provision
3/  The  relevant compliance deadline at present  is  either no
    later  than July  1. 1977, or, for POTWs that  were granted
Section  301(i)(1)  extensions, no lan^r than July 1, U'SJ.

      expresses the sen^e of the Congress chat courts in
      supervision of court orders tor buch non-complying
      municipalities cake cognisance  of the amendnents
      contained in this legislation in their consiaeration
      of modifications  to such deadlines.

 Senate Report No. 97-204, 97tn Cong., 1st Ses,s.  (1981). at 17
 (eraphasis added).

      Under no circur-istances ,  nouever, mav a POTW delay
 compliance beyona July 1, 19S8.   Section 301(i)  provides that
 any extension "snail contain  a schedule of compliance for the
 publicly owned treatTent works based on the earliest date by
 whicn such financial assistance will oe available from the
 United States and construction can be completed,  but in no
 event later than July  1, 1988" (emphasis addeo)  ana roust
 contain interia limitations or other necessary requirements.
 Thus, even if the POT" does not anticipate receiving any Fecera]
 funcs,  it is requires  to construct and achieve compliance.  &/
 The quoted language does indicate, nowever,  that  the sciieclu7c:d
 availaoility or Federal funding is a relevant factor in
 estsolishing a schecule or* cc-oiiance for POT.Cs  tnac are
 granted extensions unaer Section  301(i).

        :: 2
      Can a Section 301(i)(l)  compliance  extension beyono
 July  1,  1983  be  issued  to  a oernlttoe  that  applied for an
 extension by  June 25,  1973,  if  E?i  for an  auproveu IJPDIS
 Stats)  never  acted on  the  request9




      The  1977 Amendments to the CW'A provide  that  EPA may
 grant an extension to any  eligiole POTW  that applied in'a
 tj.nie.Ls manner.   There  is no deadline by which EPA is
 required to ^ram  or deny  the extension.  The 1981 Amendments
 and legislative  history dia not alter  this conclusion.
£/  Moreover, we note that the 1931 anendznonts cut back on  the
    Federal grants program without providing a waiver for
unfunded POT'^s.  Theretorc, POTUs do not have a reasonable
basis to expoct that Congress will provide further relief from
compliance deadlines in the future.



     Is a permittee that requested a Section 301(t)(l)
compliance extension upon which EPA (or the approved State)
did" not act  in violation of the Act or tfPDUS regulations7


     Yes, if the permittee has not achieved compliance with
the requirements of Section 301(o)(1)(3)  ana (C) by the deacline
set forth in its permit.


     Initially, all POTWs should have been issued permits
requiring compliance with Section 301(b)(l)(3) ana (C) not
later than July 1, 1977.  This pemit deadline remains in
effect unless the permit is modified by EPA (or the approved
State) under Section 301(i)(l).  If EPA (or the approved
State) has not modified the permit to extend the deadline
and the permittee.has not achieved compliance by the deadline,
tnen the permittee is in violation of its permit. j>/


     Can EPA bring an enforcement action  against a POTW
where EPA has not yet acted upon the FOTTs timely Section
301(i)(l) request'"




     EPA may bring an enforcement action  under Section 309 of
the Act against any permittee that is  violating its permit.
If a POTW has not complied with the compliance deadline in
its permit,  it is subject to an enforcement action.

     The statute does not provide any defense against
enforcement based upon the pendency of a  request for an
extension, variance, or other permit modification.   While the
5/  The Senate Report described the reported bill as extending
"~   the 1983 deadline.  However,  like the  enacted amendment,
the bill itself did not extend the deadline.  Rather,  it
authorized EPA to do so on a case-by-case  basis,  thereby
assuring, as noted in the Senate Report,  that only good-faith
actors receive such extensions.

issue has vet Co arise in any Clean ';acar Ace case,  it has
been held chat ynforcement actions way proceed, and  compliance
orders may be issued, under che Clean Air Ace against violators
of Scace Implementation Plans (SIPs) , despite the pendency
of variance requests.  Train v. Natural Resources Derense
Courcil, 421 U.S. 60,92 (1975) , Ohio environmental Council
v'. U.S'. District Court. 565 r.2d 393, 397 (6tn Uir.  1977) ,
Gett% Oil £o. v.  Ruc^elsnaus. 467 F.2a 349 (3ra Cir. 1972).

     Node of the Clean Ur Ace cases cited above involved
delavs as lengthy as EP.i's si '.-year delay in deciding many
301(i) extension" requests.  However, the principle that valid
existing requirements are enforceable regains true in any
case.  If a POT'.; believes that che Agency is unduly  delaying
its Section 30i(i) decision to the POTV s detriment, che
POTV can challenge che Agency delay, as discussed faelov.
Such delay is not, however, a deicnse against enforcement of
the existing requirement.

     This does not mean that a court would ignore a  pending
variance reouest.  If EPA were to bring an enrorce^ent action
against a POT'* without having acteo upon the POTv's  301 (i)
request, the POT* -nay see* (by asbercins a counterclaim or
initiating a separate lawsuit) to co^oel EPA to act  upon  the
reauest.  Unaer  the Adninistrative Proceuure Act (APA) , 5
U.S.C. $706(1),  a reviewing court 6/ tnav "cotaoel agency
action unlawfully ^icr.held or unreasonably delayed."
Furtherrapre, the APA .jencrally reauires agencies to  conclude
matters "I^]ith  due regard for the uc-venioncc and n
of che parties or their representatives ar.c uichin a
     "  5 U.S.C. §555(b).
     A claiffl to conoel agency action "light also be assertea
under Section 505(a;(2) of the CWA, wnicn provides for an
action in district court against the Aa.ninistracor "where
there is alleged a failure of the Administrator to perform
any act or duty unaer  this Act which is not discretionary
wich tne Adrainii, tracer."  A court mi»;hc accept a POT'.v" s
argument that the duty to act upon a 30l(i) request within a
reasonable time is not discretionary.  See, e.g. , Rite- Resear
Improves che Environment v. Cos tie. 650 T.2d 1312 , 1322
(Sen Cir. 1931) .  See also FiC v. Anderson 631 F.2d 741
(D.C. Cir. 1979), "NaSer v. FCC, 520 r.2d 132 (D.C. Cir. 1975)
<>/  "Reviewing court" is undefined.  However, Section 70.2 of
     the APA provides that unlcii. prior, adeauutc and exclasx
opportuniu., -or judicial rcvicv is provided by law, agency
action is suoj'»ct to jww^ciui review in civil or criminal
proceed 1.131, for judicial


      It  the  POTW  asserts  a  claim,  a  court  may well stay the
 enforcement  proceeding  penning  an  agency decision un che
 Section  301(i)  requesc.   In  an  tixcrcme  case  where agency
 delay has  prejudiced  che  POTW's abilicy co defend itself
 (e.g.,  if  POTW  employees  wich pertinenc knowledge have lerc
 its  employ and  are unuvailaole) , the court mignt even dismss
 the  lawsuit.  See,  e.g.,  EEOC v. Libercv Loan Corp.. 584
 F.2d 853 (8th Cir.  197j)  ana cases ciceci cneretn at 355.

      Finally, even if che courc allows  che case  Co proceed co
 juagnent in  EPA's favor,  eicher before  or  afcer  a final agency
 action on  Che J01(i)  requesc, che  courc maintains a great
 deal of equitable discretion co fashion appropriace reaeuies
 for  violacions  of Clean Wacer Ace  requiremencs.   Weinoerger
 v. Romero.-Bareelo.  456 U.S. 305 (19b2).   Moreover, a court
 would li'e  Oraer  process (Seccion
 309(a)(5)) co issue coirpi^anct;  scr.eaultrs in  lieu of nodifying
 or reissuing perr.its  for  municipalities chac are eligiole'
 for  Section  301(i)(l) compliance extensions?

 /i*i o «^r\         «
     Aai?ini3tracive  orders  can be used, buc noc  "in lieu" of
Seccion 301(i)(l)  compliance excenjions.


     Adniniscracive  orders  unuer Seccion 309(a)(3)  and (5) (A)  ]_/
cannot be used  "in lieu" of Seccion 301(i)(l) extensions
2/ Seccion ,309(a)(3) provides

   Whenever  on  che  basis of  any  information available  to hiu
   the Adniniscracor finds Chac  anv person is  in  violacion  of


 because the two processes* ire functionally »Ji<5tinct.  A
 Section 30UO(,D  extension is sec torUi in d pemic, whicn
 thereby establishes a new compliance deadline for the POTW.
 An administrative  order is an enforcement action.  Compliance
 with the order does not relieve che POT'* fron its legal
 obligation to coopl/ rfith the perrat deadline.   See front:so*"or*'
 Environmental Coalition v.  EP\.  19 E.R.C.  11&9.  1171 (D.C. ^
 Cir.  19S3) .The orj-r merely assures the POTW that EPA will
 exercise its discretion not to enforce  against  the permit
 violation if the POi ^ complies with a specifiea set of
 requirements.                                               	,

      The distinction between Section 301(i)  extensions anc
 aarunistrative orders  may be imoortant  from  the POT\" s point
 of view.  If the POTW is issued a  pernic containing a Section
 301(i)  extension and complies -nth thac  pernit,  the POT'*' has
 a  good  aefense to  citizens'  suits.   It  the POTV does not
 receive sucn an extension,  it will be subject to citizens'
 suits alleging a perait violation,  compliance with an
 aaninistrative oraer is no  defense to t>ucn a lawsuit.  See
 Montgomery  Environmental Coalition v.  £P.~  supra,  at n.  o.
 Therefore,  if  CPA  wouio atce-npc  to use auninibtrative orders
 on a  broaa  scale "in lieu of" 301(i)  extensions,  it would :>e

 sections 301,  302,  306,  307, 308, 313, or i05 of  this  Act,  or
 is  in violation of  any oer.ni: condition or limitation
 implementing any of such sections in a permit issued  unccr
 section 402  of this  Act  .  .  . , he shall i*>sue an  orcer
 requiring  such person to comely with tuch section or  recuiru.7,er.t
 or  ne snail  bring a  civil  action in accordance with subsection
 (b) of this  section.

    Section 309(a)(5)(A)  provides-

    Any order issued  under  this subsection shall be by  personal
service, shall state with  reasonable specificity  the nature
of  the violation, and shall  specify a time for compliance not
to  exceed  thirty days in  the case of a violation  of an intern
compliance scnedule  or operation and maintenance  requirement
and not to exceeu a  time the Administrator determines  to be
reasonaole in the case or  «  violation of a final  deadline,
taking into  account  the  seriousness  or the violation and any
gooa faith efforts  to comply with applicaole requirements.


pldcing those POTVs at risk despite Congress'  cle^r intent
to dffors them reliat. 8/

     Nonetheless, the use of administrative orders under
Section 309(a)(5) is a per-ussiole me^ns of issuing enforceaola
compliance schedules to POTl.'s that are not complying with their
permits.  While an administrative order does not shield a POTW
from citizens suits, it does provide governmental assurances
of non-enforcement if the order is conolied with.  Furthermore,
if 3 citizen suit is brought, the Aaniristrative order is
likely to be assigned significant weight by & reviewing court. 9/
8/  As noted above, the failure to act upon requests for
~~   Section 301(i) extensions gives rise to potential actions   /
by POT'.is or others to conpel Agency action.  Moreover, in a
recent case decided under the Resource Conservation snu
Recovery Act (RCRrt.), the Court held that a general agency
policy not to issue RCRA permits to certain types of facilities
jeopardized the rights and interests of parties ana was
therefore a rule reviewable in the U.S. Circuit Court of
Appeals.  Environmental DefenseFund v.  Gorsucn. 713 p.2d 802
(D.C. Cir. 1983).  Extending this lTn<= or reasoning, a petitioner
might argue that an EPA "decision" not to act upon Section
301(i)(l) applications is a rule and challenge this "rule"
in the U.S. Circuit Court of Appeals, alleging that the rule
is arbitrary and capricious or is otherwise without legal

£/  The issuance of A.O.s with reasonable compliance schedules
    also might help EPA defend against a Section 505 action
seeking to compel Agency action on the Section 301(i) application.

cc:  Louise Jacobs

March, 1984.

                          WASHINGTON, D.C. 20460
                                1 '  ra^**                    WATI R

 SUBJECT:  Regional  and  State  Guidance on  the National  Municipal
Jack E. Ravarv!=7££^rC ftstA/zL*. -
Assistant Administratorfor Water

TO:       Regional Administrators
          State Program Directors

     On January 23 ,  1984,  the Administrator signed the National
Mun-cipal Policy.  The release of the signed Policy was preceded  b<
a series of public briefings and other announcements to alert ou
various constituencies that we intend to carry out the Policy
immediately.  The  issuance of this Policy signaled a new era in
municipal compliance and enforcement, and we must now move  forwarc
to carry out its objectives.

     Since the release of  the Policy, we have tracked the development
of State municipal strategies through the Regional Offices.  The
target date for completion of those strategies was April 1, 1984.
Thus far, only Rc:;^ -n VI has submitted strategies for its States,
and we appreciate  . leir timeliness.  I expect the remaining State
strategies, including the  categorized list of noncomplying  facilities,
to be completed immediately, as they are an essential element of
your $106 program planning for FY85.  We must adhere to this schedule
to ensure our ability to establish enforceable schedules by the end
of FY85 for all noncomplying POTWs that need construction to meet^
the reouirements of the Clean Water Act.

     In order to facil tate the coordination betwee'n Regions and
States in this critical early period, we are providing the attached
guidance for carrying out  the Policy.  This product was jointly
developed over a long period by Regions, States, and representatives
of ASIWPCA.  We consider this our operational guidance, but it has
been forwarded to OMB for clearance under the Paperwork Reduction
Act, and it will become final upon OMB clearance (30-60 days).  Yo<
will note that we have withheld the sample financial capability

               on the

U.S. Environmental Protection Agency

          Office of Water

            March 1984

                     on the


Background                                       1

Introduction                                     2

Guiding Principles                               3

State Strategies:  The Framework for Carrying    6
                   out the Policy

Executing State Strategies                       7

0  Approach to Completed POTWs                   8

0  Approach to POTWs in the Grants Process       9

0  Approach to Unfunded Municipalities          10

0  Compliance Monitoring and Enforcement        11

Program Management Activities and Overview      12


0  Permit Issuance and Compliance Schedule
   Development Table (and associated activities)


                            ON THE


     The Clean Water Act  (CWA) originally established July 1, 1977,
as the statutory deadline for publicly-owned treatment works (POTWs!
to comply with both water quality-based and technology-based per-
mit requirements.  Congress later authorized the Agency to extend
the compliance deadline for certain municipalities.  In order to
receive an extension under §301{i) of the CWA, a municipality had
to apply by June 1978 and to demonstrate in its application that
construction could not be completed by the July 1, 1977 deadline,
or that the Federal Government had failed to provide grants in
time to allow the POTW to meet the deadline.  EPA or the State was
authorized to extend the compliance date for such POTWs to the
earliest date by which grants would be made available and construc-
tion could be completed, but no later than July 1, 1983.

     In 1981, Congress recognized the need to provide additional
time for some POTWs to achieve compliance and amended §301(i) to
allow eligible facilities additional time to comply with their
applicable effluent limits.  EPA or the State is authorized to
extend the compliance date for eligible POTWs to the earliest date
by which grants are available and construction can be completed,
but no later than July 1, 1988.  A POTW is eligible for an exten-
sion beyond 1983 only where reductions in the amount of financial
assistance under the CWA or changed conditions affecting the rate
of construction, beyond the control of the owner or operator, made
it impossible to complete construction by July 1, 1983.  Any muni-
cipality that is not currently in compliance with its permit re-
quirements and has not received a §301(i) extension, is in viola-
tion of the July 1, 1977, statutory compliance deadline.  There
are, however, many S301(i) applications that have never been acted

     In 1981, Congress also amended other sections of the CWA to
provide significant reform and redirection to the Federal Construc-
tion Grants program.  Congress, for example, amended §201 of the
CWA to reduce both the number of categories of POTW construction
costs that are eligible for Federal funding after September 1984,
and the Federal share of the total eligible costs.  These changes
indicate a Congressional intent to reduce local dependence on
Federal funding assistance and to increase local accountability
for achieving compliance with the requirements of the CWA.


     Also in 1981, §304(d) of the CWA was amended to specify cer-
tain less costly treatment technologies that are the equivalent of -,
providing secondary treatment.  The Agency has published a proposed""
regulation that establishes a class of equivalent secondary treat-
ment works.  The issuance of the National Municipal Policy has been
timed to follow the proposal of the new definition of secondary

     Because of historic and current problems with municipal compli-
ance/ the Agency developed the National Municipal Policy, which
places renewed emphasis on improving municipal compliance rates in
order to protect the Nation's water quality.  The policy basically
reaffirms that municipalities must comply with the statutory dead-
lines in the CWA, whether or not they receive Federal funds.  While
the deadlines in the CWA apply to all POTWs, the policy states that
the Agency will focus its compliance efforts on 1) fully constructed
POTWs that previously received Federal funding assistance and are
not currently meeting their permit limits, 2) on all other major
POTWs, and 3) on minor POTWs that are contributing significantly
to an impairment of water quality.  The policy also recognizes that
there may be extraordinary circumstances that make it impossible
for some municipalities to comply even by 1988.  in such cases,
provided that the municipality has acted in good faith, the Agency
will work with the States and the affected municipalities to estab-
lish enforceable schedules for achieving compliance as soon as pos-
sible thereafter.  These schedules will also require such munici-
palities to undertake appropriate, interim abatement measures.
Nothing in the policy is intended to impede or delay any ongoing or,
future enforcement actions.

     This guidance sets forth a logical approach for implementing
the National Municipal Policy.  The document is divided into four
main sections:  an introduction, which presents a tiered approach
for addressing the problem of municipal noncompliance, as well as
guiding principles for implementation; a section that describes
Regional/State strategies, which are the basic planning documents
that permitting authorities should use to carry out the policy; a
section that discusses specific problems that permitting authori-
ties may encounter in implementing the policy, as well as suggested
mechanisms for addressing particular kinds of noncompliance; and
a final section that describes how Regions and States should use
the annual §106 program planning process to reach agreement on the
specific activities that States and EPA will undertake to carry
out the policy.


     The National Municipal Policy identifies certain planning and
program management activities that are considered essential in car-
rying out the Policy.  State-specific strategies are the primary
planning mechanisms for coordinating Regional and State efforts
and resources to accelerate effective regulatory action across the
broad front of municipal noncompliance.  To develop comprehensive ^
strategies, Regions and states need to coordinate carefully their v


permit, grant, and compliance/enforcement  programs  to  provide  the
mutual assistance necessary  to meet  the goals  of  the Policy.   The
content of State strategies  is discussed on page  six of  this guidance,

     The Policy also  sets  forth clear National priorities for
action.  In  support of  these priorities, this  guidance presents a
three-tiered approach for  Regions and States to use in addressing
the POTW noncompliance  problem.  It  places primary  importance  on
completed facilities  that  are not in compliance,  especially those
that used EPA funds for construction.  The goal here is  to achieve
maximum pollution abatement  through  effective  operation, and to
realize the  full water  quality benefits of construction  grant

     As this first universe  is addressed,  Regions and  States
should next  consider  affected municipalities that are  already  in
the grants process; this includes those municipalities that have
already received a construction grant and  those on  the fundable
portion of the State's  priority list.  The goal here is  simply to
move these projects through  the grants and construction  phases as
quickly as possible,  and to manage the grants  and the  schedules
so that the  completed plants will meet certification requirements
one year after initial  operation.

     Next are those affected municipalities that  need  construction
to meet statutory requirements and will not, or are not  likely to,
receive EPA grant assistance.  This  group  poses the most difficulty
in designing reasonable schedules, and will require the  most sensi-
tivity on the part of Regions and States.  The goal here will  be to
work with these affected municipalities to develop  schedules that
enable them  to achieve  compliance as soon  as it is  technically and
financially possible.   Within this group,  the  focus should be  on
major POTWs  and on minors  that are contributing significantly  to an
impairment of water quality.

     The following principles should be used by the Regions and
the states as a guide in developing  state-specific  strategies  and
compliance schedules  for affected municipalities.

Responsibility for compliance rests  with each  municipality.

     Municipalities should make every effort to comply expedi-
tiously with the requirements of the CWA, whether or not they
receive Federal funds.  Local governments  should  select  an appro-
priate treatment technology and explore the full  range of alter-
native financing methods available to them not only to construct
these treatment works,  but also to provide for adequate  operation,
maintenance, and replacement (OM&R).

Funding decisions should be based on the potential  for water quality

     States should dedicate available EPA  funds on  a priority  basis
toward those POTW construction projects with the  greatest potential

for environmental benefits as provided by the CWA, EPA regulations,
and priority list guidance.1 This may be accomplished by sound Stat
management of construction grant project priority systems and lists,
and State review and revision, as appropriate, of water quality
standards (WQS) and waste load allocations (WLA).

Special emphasis should be placed on compliance by POTWs that have
completed construction ofthe necessary treatment facilities.

     Municipalities with fully constructed POTWs must achieve and
maintain compliance with their permit limits.  EPA and the States
will exercise all available administrative and judicial options
needed to assure that noncomplying POTWs achieve and maintain
compliance With their NPDES permits.

Construction grant agreements must be honored, and grant and permit
schedules must be coordinated.

     Municipalities that receive EPA construction grant assistance
are responsible for meeting the terms of their grant agreements.
EPA will enforce grant conditions, if necessary, to assure that
POTWs constructed with EPA funds achieve compliance with final
effluent limits.  EPA and the States will ensure that compliance
schedules in construction grant agreements are consistent with com-
pliance schedules in NPDES permits (when a §301(1) extension has
been granted), and also Administrative Orders (AOs), judicial
orders, or comparable state actions.  Any changes in grant sched-
ules should be justified and coordinated with the others.

SPA andiStates should provide municipalities with as much certainty
as possible regarding applicable permit limits prior to requiring
commitments to major capital investments.

     EPA will provide technical information on the redefinition of
secondary treatment (consistent with the 1981 CWA Amendments) and
will issue tentative §301(h) variance decisions as quickly as pos-
sible.  EPA and the States are responsible for the review and,
where appropriate, modification of permits to accommodate revised
WQS, WLAs, and secondary treatment criteria in accordance with EPA
regulations.  In this context, States should act quickly to notify
municipalities of any proposed secondary treatment changes or modi-
fications to WLA for POTWs.  However, municipalities are account-
able for POTW compliance with statutory requirements at all times.

Compliance schedules should be reasonable.

     Regions and States will reissue permits to those municipali-
ties eligible under §301(i) of the CWA, or will issue AOs (or will
obtain judicial orders in appropriate cases) with fixed-date compli-
ance schedules.  These schedules should provide municipalities with
   §216 of  the CWA  and  EPA1s  construction grant  regulations,
   40 CFR 35.2015(b).

sufficient time to design and construct needed treatment facilities,
and to achieve compliance with applicable effluent limits and other
enforceable requirements; schedules should generally require munici-
palities to be in compliance with their applicable effluent limits
as soon as possible and no later than July 1, 1988.

     Where extraordinary circumstances preclude compliance by July
1988, EPA will work with the State and the affected municipal author-
ities to ensure that tnese POTWs are on enforceable schedules for
achieving compliance as soon as possible thereafter; the presumption
is that any extension beyond July 1988, will be tnrough a judicial
enforcement action.  These municipalities should be asked to explain
how they plan to finance interim abatement measures, as well as how
they plan to finance any construction necessary to meet statutory
requirements by the earliest possible date after July 1, 1988.2

Where compliance cannot be achieved promptly, POTWs should take
appropriate, interim steps toward compliance with applicable
effluent limits"!

     At any time, EPA and the State may establish compliance sched-
ules that require interim steps toward compliance (phased reduction
of pollutant discharges).  Such interim steps may be appropriate
when final resolution of permit limits or final compliance will be
significantly delayed and there are logical abatement measures that
can be accomplished promptly, or where EPA or the State determines
that final compliance cannot be achieved by 1988.  However, resolu-
tion of final or applicable permit effluent limits and the setting
of appropriate final ^compliance schedules should remain the highest

     Phased reductions may also be warranted where States are re-
vising secondary treatment standards, WQS, or WLA, or are conduct-
ing studies to determine water quality-based effluent limits and
the need for related advanced treatment (AT) facilities.  Finally,
EPA or the States may establish interim effluent limits and asso-
ciated compliance schedules, on a case-by-case basis, as noncom-
plying POTWs move toward compliance with final (applicable) efflu-
ent limits.  The use of Federal grant assistance may not allow
phased or segmented projects in some cases (see 40 CFR 35.2108).
   The Agency will be providing additional guidance showing how the
   information necessary to demonstrate financial capability might
   be displayed.  In addition, the municipality may use any format
   it chooses, a capital improvement plan, a financial plan, a
   separate chapter in the Facility Plan, or procedures prescribed
   by an approved State, provided that the information required is
   adequately addressed.



     The National Municipal Policy requires Regions and States to
develop long-range planning documents or "strategies" that describe
how they plan to bring noncomplying facilities into compliance by
the target dates.  These documents should be the long-term plans
for achieving compliance based on the specific circumstances that
face affected municipalities and the laws and regulations that
govern each State's actions.  The process of developing a strategy
provides each Region and State with an opportunity to establish the
proper protocol and control mechanisms, consistent with the Policy,
for carrying out the goals and intent of the Policy.

     From a National program management perspective, development of
strategies will promote uniform, consistent implementation of the
Policy.  From the Regional and State manager's point of view, the
strategies will provide a hierarchy of work priorities, a phased
approach to implementation, a reasonable schedule of target dates,
and a convenient way to track accomplishments.  Properly prepared,
the strategies will provide contingency plans in the event of cir-
cumstances beyond the control of the regulatory agency.

     Regions and the States should form a partnership to develop
State-specific strategies so that the interests of both agencies
are served in reaching a common goal.  These strategies should:

1.  Describe the basis and method for setting priorities consistent
    with the National Policy.

2.  Identify (list) all municipalities that are out of compliance
    with their statutory requirements.3

3.  Develop a schedule for working with affected municipalities to
    provide final decisions on applicable effluent limits and com-
    pliance schedules by the end of FY 1985.  Wherever possible,
    such schedules should generally require compliance with statu-
    tory requirements as soon as possible, and no later than
    July 1, 1988, unless extraordinary circumstances make compliance
    by July 1, 1988, impossible.

4.  Describe the procedures and coordinating mechanisms to ensure
    program consistency, especially between compliance schedules in
    permits, AOs or judicial orders, and construction grants sched-
   It is recommended that Regions and States review the attached
   "Permit issuance and Compliance Development Table," and the
   accompanying sequence of activities.  This will help organize
   the universe of noncomplying municipalities into manageable
   subcategories and to identify the basic  steps to take  in deter-
   mining applicable effluent  limits and establishing compliance

    Examples of such activities  include*;

    a.  Criteria development for setting priorities for permit,
        grant, and compliance actions to carry out the State
    b.  information gathering for making decisions on applicable
        effluent limits.
    c.  Case-by-case technical review and decision making.
    d.  Management and  information systems, including policies and
    e.  State/EPA coordinating mechanisms to develop and modify
        permit and grant schedules, and to track and report compli-
        ance improvement activities.
    f.  Integration with §106 program planning, leading to the
        establishment of firm commitments for each fiscal year.
    g.  Periodic adjustment of State strategies, if appropriate,
        during §106 program reviews.

5.  Describe a general  schedule, by fiscal year, for achieving com-
    pliance with all statutory requirements as soon as possible, and
    no later than July  1988.  Where extraordinary circumstances pre-
    clude compliance by July 1,  1988, describe a contingency plan
    for achieving compliance beyond that date and develop criteria
    and schedules for achieving  compliance by the earliest possible
    date thereafter, including interim abatement measures as appro-
    priate.  The presumption is  that all schedules that go beyond
    1988 should be established through a judicial enforcement action,

     Data to establish  applicable effluent limits and compliance
schedules for many noncomplying  POTWs should be available imme-
diately; the schedules  for these and many other POTWs can be de-
veloped and included in State strategies by March 31, 1984.  The
general goal is to establish enforceable compliance schedules for
all affected municipalities by the end of FY. 1985.

     State activities associated with developing and carrying out
the strategies are eligible for  EPA funding under §106 and §205{j)
of the CWA.  States with delegated construction grant programs
under the CWA may also  receive grant funds to carry out this policy
under §205(g) of the CWA.


     The State strategies described above will provide Regions and
States with a complete  inventory of all noncomplying facilities,
   The guidance established in the "Enforcement Management System"
   (EMS), March 1977, is recommended in developing State strategies.
   Use of the Permit Compliance System (PCS) as the primary data
   management system will facilitate effective coordination, com-
   munication, and data management.  States will also benefit from
   increased participation in PCS.

wi.ll identify affected municipalities consistent with the National
policy and guidance, and will establish the most appropriate way to
achieve compliance given the particular circumstances facing each
affected municipality.

     As stated earlier in this guidance, noncomplying municipali-
ties should be addressed in three tiers: completed facilities  that
are not in compliance with their final effluent limits; municipali-
ties that have or will receive Federal grant assistance for needed
construction by September 30, 1985; and municipalities that are not
expected to be funded.  The following sections describe the special
problems that the permitting authority may encounter in dealing
with each of these categories of noncompliers, as well as the  mech-
anisms that should be used to achieve compliance.  The final section
presents some special considerations related to routine compliance
monitoring and enforcement activities.

Approach to Take with Completed POTWs

    Municipalities that have completed POTW construction, but  are
failing to achieve final effluent limits, may be required to per-
form an in-depth, diagnostic evaluation (analysis) of the causes of
noncompliance and to develop a detailed Composite Correction Plan
(CCP) for bringing the POTW into compliance as soon as possible.
The permitting authority can require a CCP through an AO or through
other appropriate enforcement mechanisms.  The affected municipality
may choose to complete the CCP with its own in-house expertise or
may use an outside consultant.

     Based on the results of the diagnostic evaluation, the CCP

1.   Discuss/explain the cause(s) of noncompliance.
2.   Discuss the corrective steps required to achieve compliance,
     their cost, and the proposed method of financing those steps,
     including whether there is:

     a.  A plan of operation that identifies annual O&M costs.
     b.  A financial management system that adequately accounts
         for revenues and expenditures.
     c.  A user charge/revenue system that generates sufficient
         revenues to operate, maintain, and replace the treatment

3.   Provide an expeditious schedule for completing the required
     steps and for achieving compliance.

     Once the CCP is completed, it  should be submitted to the  Re-
gion or the State for review.  If the CCP appears  technically  and
financially sound,  the permitting authority should use an AO or
judicial Consent-^Decree  to  require  the municipality  to carry out
the plan at its own expense.


     While CCPs will be the most common mechanism  for  returning
constructed  facilities to compliance,  there are  two other kinds of
situations that Regions and States will encounter.  First, section
204(d)(2) of the CWA, as amended in  1981, requires municipalities
that construct POTWs with EPA grants made after  May 12, 1982, to
certify  the  performance of those POTWs one year  after  initial oper-
ation.   Grantees that cannot certify compliance  with both perform-
ance and design standards are required to submit a Corrective Ac-
tion Plan (CAP) and to correct  the operating deficiencies promptly
at other than EPA expense.  EPA will place a high  priority on track-
ing the  performance certifications,  the CAPs, and  the  resulting cor-
rective  actions.  Since the CCP and  CAP are similar documents, the
CAP should be used in lieu of the CCP where appropriate.  The re-
quired elements of a CAP are described in EPA regulation 40 CFR

     Once a  plant has been certified as operational, it must con-
tinue to meet its final limits  or it is subject  to any of the en-
forcement mechanisms available  to the permitting authority.  The
requirements under §204(d)(2) are designed to protect  the public's
investment in the project.  If  a plant cannot meet certification
requirements, the grant program can enforce grant conditions.
Appropriate  enforcement actions may also be taken under §309.

     The second situation involves the special circumstances asso-
ciated with  enforcement actions against completed POTWs that were
not originally planned, designed or constructed  to meet the current
secondary treatment requirements, e.g., P.L. 84-660 facilities.
Since POTWs previously funded under P.L. 84-660, or otherwise
funded prior to the August 17,  1973, secondary treatment regulation,
may be incapable of meeting secondary treatment, state strategies
must make a  conscious determination of whether such facilities
will be  treated as completed {tier one) or unfunded (tier three)

     Finally, Regions and States should exercise sound judgment in
dealing with any Federally funded facility.  Since enforcement
actions against these facilities can raise issues affecting the EPA
Construction Grants Program, proposed actions against  these munici-
palities should be thoroughly discussed and continuously coordinated
between  the  compliance and Construction Grants Programs before the
action is taken.

Approach to Municipalities in^the Grants Process

     Affected municipalities that are currently  in the grants pro-
cess, and that have approved §201 facility plans, do not need to
develop other plans that describe how they plan  to come into compli-
ance.  This  includes municipalities that already have  an approved
construction grant and those that are on the fundable portion of
the State project priority list.  The goal is to move  these pro-
jects through the grant and construction phases  as quickly as
possible, which has the dual benefit of improving compliance plus
reducing unliquidated balances  in the Construction Grants Program.

     Many of these municipalities ace currently operating on ex-
pired permits and/or compliance schedules.  Consequently, the
permitting "authority should reissue the permit and/or use AOs or
§301(i) extensions, if eligible, to establish final compliance
dates in these schedules, and to establish appropriate interim
effluent limits for existing facilities that achieve the maximum
degree of pollution abatement possible in the meantime.  Construc-
tion grant schedules should always be coordinated at critical
milestones with any related permit compliance schedules in §301(i)
permit modifications or other enforceable EPA/State mechanisms.
If either document is modified, the change should be reflected in
the other so that the POTW receives a unified response from the
regulatory agency.

Approach to UnfundedMunicipalities

     Any municipality that requires construction of a wastewater
treatment facility in order to achieve compliance should be re-
quired to develop a Municipal Compliance Plan (MCP) to show how it
plans to meet the enforceable requirements of the CWA.  State
strategies should identify the affected municipalities that need
to develop MCPs, and the permitting authority should then work with
these municipalities to establish reasonable compliance schedules
based on the information supplied in the MCP.

     MCPs for municipalities that have not constructed the appro-
priate treatment to meet the statutory requirements should identify:

1.  The treatment technology needed to achieve compliance, as well
    as estimates of capital requirements and OM&R costs.5

2.  The financial mechanisms (sources of revenue) to be used to fund
    construction and OM&R.

3.  The proposed, fixed-date compliance schedule, including, at
    a minimum, the milestones by which the municipality plans to
    start and complete construction, to attain operational levels,
    and to achieve compliance with applicable effluent limits.

4.  Any appropriate interim steps that will ensure progress toward
    compliance with statutory requirements, such as the completion
    of the secondary treatment component of an AT facility, improved
    O&M procedures, the implementation of an approved local pretreat-
    ment program, or the upgrade of the existing facility.

     The permitting authority should require unfunded municipali-
ties to develop MCPs through a §308 information request, an enforce-
able §309 AO, a judicial order, or an equivalent State action.  EPA
Headquarters has issued draft guidance on the form and content of
these §309 AOs and §308 requests.  These municipalities should be
given a reasonable length of time to develop MCPs so they can real-
5  See footnote on page  five.

 istically assess  their  compliance  needs, examine  their  financing
 alternatives, and work  out  reasonable schedules for achieving
 compliance.   In most  cases  six months from  the notification of the
 requirement to submit an MCP  should be adequate.

     Within the group of noncomplying municipalities that will not
 receive  Federal grant assistance,  Regions and States should concen-
 trate on ma^or POTWs  and then on minor POTWs that contribute signi-
 ficantly to an impairment of  water quality.  Finally, lowest prior-
 ity  for  EPA or State  action should be assigned to unfunded, minor
 POTWs that are not causing  significant water quality problems.

     EPA or the State agency  should review  each MCP and, if it is
 acceptable, should incorporate the schedule into a §301(i) permit
 (if  the  POTW  is eligible),  a  §309  AO, or a  judicial order.  If the
 MCP  is not acceptable,  EPA  or the  State may establish an appropri-
 ate  compliance schedule under its  own authority or may  initiate
 other appropriate enforcement actions.

     In  dealing with  unfunded municipalities, Pegions and States
 should exhibit great  sensitivity to their special problems and
 needs.   In working with these communities,  for example, every
 effort should be made to provide them with  available technical in-
 formation on  financial  capability  assessment and on alternative,
 less costly, wastewater treatment  technologies.  The objective is
 to help  these municipalities  develop reasonable and enforceable
 schedules, even though  it may require a judicial enforcement action
 to extend the schedule  beyond 1988 where extraordinary  circumstances
 are shown.

     For unfunded municipalities,  Regions and States are encouraged
 to adopt a community-by-community  strategy  that involves advance
 discussion with each  affected municipality  before establishing a
 final schedule that requires  a substantial  capital investment.
 Since actions against these communities are likely to be controver-
 sial, the permitting  authority should also  inform its Regional Ad-
ministrator or State  Director, as  appropriate, of the negotiations
with the affected municipality and the proposed actions necessary
 to achieve compliance.

Compliance Monitoring and Enforcement

     Regions and States should carefully monitor compliance with
 the requirements to develop and submit MCPs and CCPs, and should
 take follow-up actions  as needed.  They should also monitor enforce-
 able compliance schedules that are established in $301(i) permits,
 §309 AOs, or  judicial actions, and should initiate follow-up action
 where schedules are not being met.  All activities should be con-
 sistent with the priorities in the Policy and the approaches out-
 lined in this guidance.

     Section  309 AOs  (or equivalent State actions) should be used
when such actions are necessary to obtain corrective actions, but
civil enforcement actions should be initiated when necessary.
Negotiated consent decrees  can be  a useful  element of many EPA and


State civil enforcement actions.  Appropriate civil penalties
should be established to deter future violations.  Sewer connection
bans (§402(h), CWA) should be sought, when they are needed, to
achieve and maintain compliance.  Nothing in the Policy or the
guidance is intended to impede or delay any on-going or future
enforcement actions.

     Since municipalities are ultimately responsible for meeting
the contractual terms of construction grant agreements, grant
conditions should be enforced, if necessary*  If grantees fail
to correct problems in a timely manner, the regulatory agency
should take prompt action, which may include annulment or termina-
tion of the grant.  If required, appropriate legal actions should
also be taken, usually under §309 of the CWA or under comparable
State authority.


     Regions should use the annual State program grant negotiation
process to reach agreement on the specificsactivities they will
undertake to carry out the State strategies.  EPA and State §106
work plans for FY 1985, for example, should include the necessary
commitments to update State strategies, and to identify any remain-
ing POTWs for which applicable effluent limits and compliance sched-
ules need to be established.  Such commitments should include those
contained in the office of Water Accountability System (OWAS) FY 85
guide and should cover the following areas:

0  The identification of noncomplying POTWs (list) and those that
   need construction to meet statutory requirements.

0  The review, approval and/or modification of §201 plans.

0  The request, review, and approval of CCPs and MCPs.       ^

0  The establishment of compliance schedules.

0  The issuance and reissuance of municipal permits.

0  The taking of enforcement actions to obtain compliance.

0  The return of POTWs to compliance {and the improvement in the
   level of municipal compliance).

0  The termination of Step 1 and 2 grants.

0  The physical and administrative completion and close out of
   active Step 3 or Step 2/3 grants.

     By the end of FY 1985, to the extent possible, final decisions
should be reached on applicable effluent limits and compliance
schedules for all noncomplying POTWs and State strategies should be
updated accordingly.  Updating State strategies should be a contin-
uous process from FY 1984 through FY 1988.  Annual EPA permit, con-


struction grant, compliance monitoring, and enforcement commitments
will be included in the appropriate sections of EPA's annual Office
of Water. Accountability System  (OWAS), and the Administrator's
Strategic Planning and Management System  (SPMS).  This will help
assure that EPA's actions under the Policy are conducted in coordin-
ation with related State actions and are  consistent with the State
strategies and annual §106 plans.

     EPA Headquarters will overview implementation of the Policy
and will prepare appropriate reports to the EPA Administrator and
to Congress.  Headquarters will also analyze the state strategies,
PCS data, and other available information to determine the adequacy
of EPA and State resource commitments, the need for additional guid-
ance and/or technical assistance, and any need for mid-course cor-
rective actions.  During this process, the Agency will be looking
for successful State and Regional approaches and management tech-
niques in order to share them with other  States and Regions.  All
Headquarters overview will be carried out within the context of
OWAS and SPMS, and the EPA/State oversight protocol agreements,
which will be individually negotiated with each State, consistent
with the FY 85-86 Agency Operating Guidance.6
   See FY 85-86 Agency Operating Guidance, February 1984, pp. 9-10.


                           SEQUENCE OF ACTIVITIES
     A discussion of EPA and State  actions  that should be taken during the
development  of  the  State strategies is  presented below.  These actions may
occur  simultaneously or in sequence.  This  sequence  is consistent with the
attached Table.

1.  Review availaole data and identify  those  POTWs that are  not in  compliance
    with statutory  requirements.  This  includes those  that need construction
    to meet  the  1988 compliance deadline under  S301U).

2.  Identify POTWs  for  which treatment  requirements  or compliance status
    may change as a result of revised WQS
                                                  ORAFT PERMIT ISSUANCE AND COMPLIANCE SCHEDULE DEVELOPMENT TABLE
1 • | INCOMPIIANCI | 	 	
1 1

dccMmntieiioN 1 1 NOI Af rcclio nv
wwar 1 — , H SKSSKSJA
\ 	 i 	 -j 	
NIC MO J 	 '" '
' 1

oh jol miDtcindN ) 1
1 ' I
           •OS »«•»» 1)01,
                               JOI|h| «NWM
                                                r*«i«o not My,
                                                i iailfcHKni.il.
                                                                  AMwlMt kr i«tic4
                                                                  MIS Mr I »l|h|
                                                         Aulhmlixl r«hMl
                                                         ••Mil MMbliM lh»
                                                         SlW III M •*•(
Anlhwirnl entail    fnlnM Iwrfi I
•Midi immliiii »     •»*« i

           M 4MMB •! M

           pIlIMN W •»
                                                       > M •Mtltof
                                                         IIHIIM | vi mil
                                                                                                      • II *IM./(PA
                                                                                                                       • lilt* AO ft
                                                                                                                        | JIM Irim
                                                                                                                                        • IMif p>i«ili n
                                                CCD Ml Ct»
                                               • Iml •. CCO
                                                   • Ucttf «
                                                    •MM •!«••«> «!• ,

                                                                                                                                                          • MnnilMKlt«t
                                                                                   • It uimtf
                                                                                                                                       • NMlHM |wmll Id
                                                                                                       IllM All 1
                                                                                     h«M A01
                                                                                                                       • Helium i*t
                                                                                                                        mt wf | MIDI
                           «-y MI>> k* |IIM« ky IfA
                                                                                          J" |M
                                                                                                                                        KlWiMi w *«•
                                                                                                                                        (nlJUMil tt
                                                                                                                                                           |JOIM U.k
                 SUIfl rfa 141 •>•«• Ib* l
                             t» *» MM  -

           CCO -

           Of -
                                                                                                                                                                                mm WiMi (no*
                                                                                                                                                                                pUM llllMnl
                                                                                                                                                   > •! CMIfllMrtWMI
                                                                                                                                                    k; iMml«d. HIM
                                                                                                                                                    AO X f Ml kiln
                                                                                                                                                   •rfmh ram t
                                                                       1 AtUta* 9**mft
                                                                        •/ MIDI rf
                                                                        •k*kk> K AO

, nm *«**•«• k» eoj-irf" *
it«>fMM«Mkr A>)«l IS* II
           W - HMlkkjilCMf*MC« flM.

           *  Includes  POTUs  that  need

              construction  under §301{i)
                                                                                                                               » AO

"Available Techniques for Obtaining Compliance with National Municipal
Policy by Unfunded POTWs Requiring Construction", dated September 13, 1984,

                       WASHINGTON. D.C. 20460
                                                      OFFICE OF
           Available  Techniques  for  Obtaining Compliance with
           National Municipal  Policy by  Unfunded  POTWs
           Requiring  Construction
           Rebecca W. Jjarimer,  Director
           Office  of ^Water  Enforcement  &  Permits
           Water Management Division  Directors, Regions  I  -  X
      The  Office  of  General  Counsel  (OGC)  responded  to  our  request
 for legal opinions  concerning  the applicability  of  the «301(i)
 compliance extension  and  the legality  of  various methods for
 obtaining compliance  with the  National Municipal Policy.
 Attached  are  copies of  those responses dated April  11,  1984
 and June  29,  1984.  These memoranda  address the  legal  basis  for
-use of  enforcement  or permitting techniques in establ ishina
 compliance schedules  for  unfunded POTWs (those which will  receive
 no  Construction  Grant funding)  and  the potential risks in  the
 use of  administrative enforcement techniques when an unfunded
 POTW proposes to meet the 1988  deadline and is eligible to receive
 a $301(i)  extension.  These memoranda  should assist you in the
 implementation of the National  Municipal  Policy.

      The  first OGC  memorandum,  dated April  11, 1984, states:

      (1)  that an unconstructed  and  unfunded POTW which is  capable
          of meeting the July 1,  1988 deadline in §301(i) of  the
          Clean Water  Act  may receive an extension under that
          section if it  is otherwise  eligible (Questions 1  and
          2 , pp .  1 - 5 ) ;

      (2)  that such  a  POTW remains in violation of a permit issued
          using S301(b) ( 1 ) (B) or  (C)  deadline requirements  until
          the  extension  is granted (Question 3, p. 6);  and

      (3)  that such  a  violator may be subject to  an  EPA enforcement
          action  (Question 4, pp. 6 - 8).

     The second OGC memorandum,  dated June 29,  1984,  confirms that
compliance with an Administrative Order does  not preclude further
enforcement action by EPA on the underlying violation.

     If you have any questions concerning the memoranda,  please
contact David Shedroff at FTS - 475-8307 or Greg McBrien  at
FTS - 426-2970.

cc:  Regional Counsel, Regions I - X, with attachments
     Associate Enforcement Counsel, Water, with attachments
     Associate General Counsel, Water Division, w/o attachments

"Finance Manual for Wastewater Treatment Systems", dated April 1985.
(Table of Contents only)-.

"The Role of EPA Supervisors during Parallel Proceedings", dated March 12,
1985.  See GM-37.  Superseded.

"Environmental Criminal Conduct Coining to the Attention of Agency Officials
and Employees", dated September 21, 1987.

                     V,4SHING70YD C 20460

                           SEP 2 I  IS37

SUBJECT:  Environmental Criminal Conduct Coming To The
          Attention of Agency Officials And Employees

FROM:     Thomas L. Adams, Jr.     \V       ^
          Assistant Administrator^"^

TO:       Assistant Administrators
          Regional Administrators
          Deputy Regional Administrators
          Associate Enforcement Counsels
          Program Enforcement Directors
          Regional Counsels I-X

     It is important that all acts of the regulated community
exhibiting actual or suspected environmental criminal conduct
which come to the attention of any employee of the Agency be
referred to the Office of Criminal Investigations for review and
possible investigation.  I urge each of you to communicate this
policy regularly to all of the employees under your supervision.
It should also be included in any new employee orientation or
training that you conduct.

     It is not expected or desired that your staff attempt an in
depth legal analysis of whether environmental criminal conduct
occurred.  The highly trained Special Agents in the Office of
Criminal Investigations will do that with the help of attorneys
in the Office of Criminal Enforcement Counsel, the Office of
Regional Counsel and the Environmental Crimes Section of the
Department of Justice.  However, in order for employees to
recognize possible environmental criminal conduct generally and
whether the case is meritorious, the factors listed below should
assist their efforts.  In addition, my office will help provide
training to your staff in this essential area of enforcement.


     1.   KnowincL or Willful Behavior.   All federal environmental
statutes require some degree of intent or voluntariness (usually
expressed in the statute as "knowingly" or "willfully") before a
criminal case can be proved. Prosecutions under the Clean Water
Act can be prosecuted also for simple negligent acts  (careless-
ness) without demonstrating intent, although such situations are
generally of lower prosecutorial priority than are knowing

violations.  Almost avery feaeral environmental statuta expres
the type of rsncal state roquirect to ce shown for an act ~o bs
criminally punishable.

     When statutes, such as the environmental laws, are enacted
for the purpose of protecting puolic healun and welfare, and
especially in suirjcct areas where ihere is a strong likelihood of
protective governmental regulation, -che government generally only
has to prove that a person knew what he was doing and he did it
voluntarily, not accidentally, in order to establish the state of
mind required for a conviction.  It is not necessary to show that:
he actually knew what the law required or that he acted with the
specific purpose of violating that law.  Also, the knowledge
necessary for a criminal conviction may se proven circumstan-
tially; it need not always be shown directly.  For example, while
there may be no direct evidence  (such as a statement by the
defendant) that he knew a particular material was a hazardous
waste, a document found in his file describing it as such would
be good circumstantial evidence of knowledge.  Thus employees
should be alert to indirect indicators of knowledge and other
elements of the offense.

     2.  Elements of the Offcise.  in addition to the required
degree of intent, each statut iry offense consists of a number of
other elements, each one of w
pollutants in -Ived, and the proximity to population centers,
among otr. -s.  Proof of hana is not a prerequisites to pro-
secution   at    a factor considered in eAsr^ising prosecutorial

     5.  gatterns or Practices.  It is useful to review a
subject's historical record of nonconpliance cefore prosecution.
The past practices of a company, whether good or bad, can weigh
heavily in sentencing, thereby effecting its deterrent value and
prosecutorial merit.

     6.  Deterrence.  A sajor value of criminal prosecution in an
environmental enforcement context is its ability to deter others
from doing the same type of act for fear of being prosecuted
themselves.  For the deterrence to be effective, others similarly
situated must become aware of the prosecution.  In some areas,
one criminal conviction with appropriate penalties can motivate
much of the regulated industry to be in compliance.   Although
this factor is considered, it is not a prerequisite for prose-

                       OTHER  CONSIDERATIONS

     The factors discussed above are not exclusive and are not in
any particular order of importance.  Many of the factors overlap.
Kow to weigh the various factors in any given case will depend on
the circumstances involved.

     It is possible that an eve..:: involving environmental
criminal activity will not be investigated further or prosecuted.
There are innumerable reasons for th-s including, for example,
lack of prosecutorial merit, inadequate proof, the matter would
be better handled civilly or administratively, the state is
prosecuting the matter, the matter is not commensurate with
Agency priorities, and lack of resources.  However, if the Office
of Criminal Investigations determines that criminal activity
occurred after formally opening a case investigation, only the
United states Attorney (or his representative) in the District or
the Department of Justice can decline to criminally prosecute the

     If a potential environmental criminal matter comes to the
attention of an employee, consultation with the Office of
Criminal Investigation should be sought at the earliest
opportunity.  When in doubt, it is far better to consult with the
Office of Criminal Investigations on matters that may be
questionable than to risk the possibility of overlooking or
failing to recognize serious environmental criminal conduct.

             FINANCE MANUAL



               APRIL 1985
              Prepared  by:
   Government  Finance Research  Center
Govenrment Finance Officers Association
           Washington,  D.C.
             Prepared for:
  U.S.  Environmental  Protection Agency
Office of Water Enforcement and Permits
     Under Contract No. 68-01-7050

                      Table of Contents

CHAPTER                                             PAGE

Acknowledgments                                      ii

I. Introduction

     o Objective                                      1
     o organization and Limitations of the Manual     1

II. What is Financial Management?

     o The Role of Financial Management               3
     o The Elements of Financial Management           4
     o The Tools of Financial Management              8
     o Conclusion                                    11

III.  Planning and Budgeting

     o Understanding Planning and Budgeting          13
     o Capital Planning and Budgeting                17
     o Operations Planning and Budgeting             25
     o Improving organizational Planning             38
     o Planning/Budgeting System Checklist           42

IV. User Charges and Cost Recovery

     o The Role of User Charges in Wastewater
       Treatment                                     45
     o User Charge Policies                          45
     o The Rate Study process                        48
     o Cost Recovery/User charge Checklist           59

V. procurement
     o Introduction:  organization of the procurement
       Function                                      61
     o The Purchasing Process                        62
     o completing the procurement Cycle              70
     o Procurement System Checklist                  74

VI. Accounting

     o introduction:  The importance of Accounting   81
     o Accounting Systems                            83
     o Accounting for the Financial Functions       107
     o Accounting Systems Checklist                 108
     o Revenue Accounting Checklist                 112
     o Expenditure Accounting Checklist             117
     o Payroll Accounting checklist                 122
     o Asset Accounting Checklist                   126
     o Liability Accounting Checklist               130

VII. Cash Management
     o Introduction                                 133
     o Maximizing and Knowing Cash Availability     133
     o Investing Excess Cash                        140
     o Banking Services                             144
     o cash Management Checklist                    151
VIII. Debt Management

     o Debt—Its Uses and Role                      155
     o Long-term Debt                               156
     o Short-term Debt                              168
     o Debt Administration                          170
     o Debt Management checklist                    173
IX. Conclusion                                      177

X.  Bibliography         ,                           179

XI.  Glossary                                       185


                          WASHINGTON. D C 20460
                       APR   1 1985
MEMORANDUM                                                WATEH

SUBJECT:   National Municipal Policy Implementation

FROM:      Rebecca W. Hanmer, Director       Re~*cca w. hanner
           Office of Water Enforcement and Permits  (EN-338)

TO:        Water Management Division Directors
           Regions I-X
     During the past year, as we received State municipal strategies
at Headquarters, the Enforcement Division attempted to create a
national inventory of major POTWs (by name) affected by the Policy.
This list is necessary to stabilize the universe of POTWs, as well
as to track, with confidence, Regional and State progress.  Due to
the high visibility of the Policy, information is required that we
cannot presently provide to Congress and other public institutions.
The data we have obtained from  the original strategies do not correlate
well with data in PCS.  In follow-up discussions with Regional staff
we have been unable to verify,  on a name basis, all the POTWs that
are affected and their status with respect to compliance schedules,
final limits, and financial capability.

     The attached list has been prepared from the names and permit
numbers of POTWs identified by  Regions and States as of the end of
January.  In addition to the named permittees, we have succeeded in
merging relevant data from the  NEEDS and GICS information systems
using a crossover file linking  NPDES permit numbers and their related
Authority/Facility numbers used in the 84 NEEDS survey.  The data
is presented to you for your review and use in enforcement decision

     We are not certain if this printout represents all major NPDES
permittees affected by the Policy.  Late arriving State inventories
indicate some of these POTWs may be incorrectly listed.  Please
review the attached printout to assure that it represents all major
POTWs that: (1) are under construction, (2) need construction to
meet statutory requirements, and (3) have a high probability for
construction once decisions on  final effluent limits are made.  The
corrected list should include all POTWs already on a schedule,
regardless of compliance status.

                                - 2 -
     Attached is an instruction sheet to explain the layout of the
information and a sample page that highlights the critical elements
that need verification immediately.   Chuck Evans (FTS 475-8327) of
the Enforcement Division will work with your staff to complete this
inventory.  I ask that you give this a high priority and submit
the corrected information to the Enforcement Division by Monday,
April 15, 1985.  Regions may submit this data b/ telephone if the
updates are not large.

     Once we have stabilized the list of affected major POTWs, we
intend to update the construction milestone dates quarterly through
PCS.  For the short term, we need your assistance to learn as many
actual dates as possible*  As Regions and States update'facility and
NEEDS data, we will amend the merged data set and continue to provide
you with revised lists.  At the recent PCS Steering Committee meeting
in Washington, on March 19-20, 1985, we discussed a method for tracking
final schedules and POTW funding capabilities.  The use of the PCS
data field to do this (RDF6) needs further evaluation and will be
discussed in a Regional conference call on Thursday, April 4, 1985.
When the codes have been established, our office will provide detailed
guidance on their use and update.

     Along with the corrected MCP inventory, Regions should also submit
a list of completed, major POTWs that have been identified in origin
and updated State strategies as requiring Composite Correction Plans
(CCP).  Once this list is established, we will review it periodically
with the Regions to follow trends.

     I would also like to emphasize a few other developments that
have a significant bearing on this program's success in FY85.  At
the National Branch Chief's meeting early in May, one of the main
topics'will be the National Municipal Policy.  Our office sent a
memorandum to you about this meeting on March 27, 1985.  I encourage
each of you, or your Compliance Branch Chief, to attend this meeting
as there are some developing enforcement issues that must be resolved
before all final schedules are established.

     Recently, OWEP and the Office of Municipal Pollution Control
(OMPC) have coordinated to present a series of workshops on financial
capability analysis that will provide basic information on the review
and evaluation of the financial components of MCPs and/or other
demonstrations of affordability.  Knowledge in this area is of
increasing importance as we enter the enforcement phase of the National
Municipal Policy.  Bill Whittington and I have announced this under
separate memo and urge you to make arrangements for the appropriate
Regional and State personnel to attend.

     I realize we have given you a short time to review and update
this information on your affected universe of °OTWs.  Dlease make
every effort to work with our staff to complete this inventory so
that we can summarize the data and prepare it for discussion at
the National meeting in May.  The workload and compliance implications
of the current status of schedules will have a significant impact on
our priorities for the remainder of the fiscal year.  The emphasis
placed on the Policy by the Administrate., requires that we not lose
any momentum gained in the States by our present activities.

     For further assistance with these issues or plans, please call
me (FTS 475-8438) or Bill Jordan, Director,  Enforcement Division
(FTS 475-8304).



                          WASHINGTON, D C. 20460
                                                         OFFICE OP

SUBJECT:   National Municipal Policy Implementation

FROM:      Jack E. Ravan'
           Assistant Administrator^
             for Water (WH-556)

TO:        Regional Administrators
           Regional Water Management Division Directors
           Regions I-X

     At the recent National Enforcement Conference, Administrator
Lee Thomas publicly reaffirmed the Agency's intention to uphold the
National Municipal Policy in its dealings with States and to enforce
the statutory deadline of July 1, 1988.  I made similar remarks
during that Conference and during the Water Pollution Control
Federation (WPCF) Government Affairs Seminar in March.  Also, at the
winter ASIWPCA National meeting, the Director of the Office of Water
Enforcement and Permits  (OWEP) again reconfirmed this Agency position.

     Now that we are mid-way through the year, T would like to take
this opportunity to discuss my current thoughts regarding
implementation of the National Municipal Policy,  we must be convinced
and we must assure the States that FY 1985 is not a trial period.
Each Region must have current, workable, and complete State strategies
that reflect the underlying principles of the Policy.  As you know,
enforceable compliance schedules are required, with or without Federal
grant assistance.  It is presumed that all schedules beyond July 1988
will require judicial action.  Strategies should contain updated
inventories that present current compliance status with applicable
effluent limits, as well as any technical or financial requirements
for full compliance.  Regional municipal strategies (or the State
equivalent) should serve as a current work plan as well as the long-
term framework for coordinating EPA and State activities to: (1) set
as many schedules as possible by the target date of September 30, 1985,
and (2) achieve as much compliance as possible before the final
compliance date of July 1, 1988.

                              - 2 -
Potential Implementation Problems

     During our National Municipal Policy workshops in the spring
of 1983, one of the main themes was that this program would not
become "business as usual."  Current commitments for FY 1985, for
all facilities that need schedules/ indicate that only 29% of the
universe is being addressed, including only 67% of the majors that
are not on enforceable schedules.  Even if we achieve these commitments
much work will have to be done in the 33 months after PY 1985 to
meet the goals of the Policy.  Examination of the first quarter
SPMS/OWEG results revealed that, although it appears we exceeded our
commitments, we may not have achieved the solid compliance results
we were seeking.  For example, we have learned that some NPDES State
Administrative Orders (AO) contain schedules that are reported as
"final" by the State, hut are considered to be interim schedules in
many cases until final negotiations with the -permittee are completed.

     The compliance schedules established in FY 1985 should address
facilities causing significant impacts to water quality or that need
as much time as possible to meet the 198a compliance date.  Otherwise,
we will experience even greater problems as we near the statutory
deadline of July 1, 1988.  I urge you to review your basic working
agreements with the States to be certain that they are actively
attempting to achieve the Municipal Policy goals, deadlines, and
other enforcement requirements.

Special Issues Identified

     Over the past several months, several questions have arisen as
Regions and States move forward to establish enforceable schedules
pursuant to the conditions of the Policy and its Regional and State
Guidance.  Since this is a critical step in the successful management
of State strategies, there is a need for National consistency in the
preparation and execution of these legal instruments.  Regions need
to make firm and consistent responses to the States on these issues.
The questions raised include:

1.  Can EPA or the States issue permits with final compliance dates
    past July 1, 1988?

     Permits cannot contain a schedule to meet secondary treatment
requirements later than July 1, 1988.  In fact, only those POTWs
that applied for and are eligible for a «301(i) extension may be
issued a permit with a schedule to meet secondary treatment past
July 1, 1977.  In these cases, the requirement to meet final limits
should be as soon as possible, but not later than July 1988.  All
other permits must contain a requirement to meet secondary limits at
the time of issuance, since (as stated above) the final compliance
date for these POTWs was July 1, 1977.  Any POTW not meeting
secondary treatment requirements and not eligible for a 301(i)
extension is in violation of the Act and is subject to an enforcement
action.  Any compliance schedule to meet secondary effluent limits
for POTWs not eligible for a S301(i) extension must be contained in
an AO and not in an NPDES permit.

 2.  Can EPA or the States  issue an AO  that contains a schedule  to
    meet  final effluent  limits that extends beyond July  1,  1988?

     The  National Municipal Policy does not specifically require
 that schedules beyond July 1988 be sanctioned by a court.   However,
 the Regional and State guidance on the Policy that I issued on
 April  17,  1984, presumes that all such extended schedules will  be
 established through the  judicial process.  This is the Agency's
 enforcement policy with  tespect to the statutory compliance deadline.

     Since the April 17, 1984, guidance is not binding on State NPDES
 programs,  a State could  choose to issue an AO with a schedule beyond
 July 1988, in direct conflict with the spirit of the Administrator's
 Policy and the letter of the subsequent guidance.  In such  cases,
 especially where the State's order does not involve imposition  of
 administrative penalties, EPA Regions should consider:   1)  issuing an
 AO that specifies a compliance date no later than July 1988, which
 then supercedes the State AO, or 2) filing a civil action to obtain a
 judicial  order that contains a final compliance date deemed appropriate
 by the court.

 3.  What  constitutes a "final" and "enforceable" schedule under the

     One  of the main principles upon which the Policy is based  is
 the assurance of "certainty" prior to requiring commitments to major
 capital investments.  Tn order to do this, Regions, States, and
 communities should strive to eliminate as many of the "unknowns" as
 possible, and as quickly as possible, with respect to final limits,
 correct treatment technology, actual costs, available funds, and
 revenue systems that are necessary to maintain the plant once it is
 completed.  Schedules established by Regions and States must reflect
 the appropriate legal, technical, and economic circumstances.
 Additionally, enforceable schedules must contain sufficient interim
milestones that require demonstrations of progress and allow for
 subsequent enforcement actions, if necessary, prior to the  final
 compliance deadline.

     Delays in eliminating the uncertainty of final effluent limits
 have focused on three situations.  First, limit changes associated
 with the  secondary treatment redefinition/percent removal should not
 cause major problems.  The Office of Water Enforcement and  Permits
 recently  sent out draft guidance for Regional and State review and
 requested data on how many municipal permits appear to need alteration.
Second, for those cities where 301{h) decisions are pending, Regions
 should continue to adhere to the direction contained in Al  Aim's
October 29, 1984 memorandum, "Expediting Achievement of Water Quality
 Improvement by 301(h) Applicants."  And third, advanced waste treatment
 (AWT) may be needed to meet section 101(a)(2) goals (fishable/swimmable)
of the Act.  The Water Quality Standards Regulation requires States to
 review water quality standards to assure that the standards do reflect
 these goals.  If a State believes that AWT may be necessary, then
priority should be given to completing those use attainability analyses

                                      -  4  -

           In  closing  I  want to reernphasize how essential it is for Regions
      and  States to have as many noncomplying communities as possible on
      final, enforceable schedules by September 30,  1985.  Unless we show
      outstanding results,  we will not be  able to achieve the statutory
      compliance deadline of July 1,  1988.  If my office can be of
      assistance in resolving additional implementation issues, please
      contact  us.

Letter to House of Representatives from EPA regarding the NMP with
Congressional Record materials attached, dated July 22, 1985.

                         WASHINGTON  DC  20460
honoraole Ed Jones
riouse of Representatives
Washington, D.C.  20515

Dear Mr. Jones:

     Thank you for your letter of June 25, 1985, requesting
our comments on a letter from James E. Word, Commissioner of
the Tennessee Department of Health and Environment.  Commissioner
Word is concerned that no more Federal grants for sewage con-
struction projects would be made for publicly-owned treatment
worics (POTW's) not in compliance with the Clean Water Act {the
Act) effluent limitations by July 1, 1988.

     The Hey to understanding the issue that Commissioner Word  *
has raised is to distinguish between our enforcement policy and
our policy for awarding grants to municipalities for construction
of wastewater .treatment facilities.  Our enforcement policy is
set forth in the National Municipal Policy (NMP), which was
published in the Federal Register on January 30, 1984, and says
that: "The Clean Water Act requires all publicly-owned treatment
works to meet the statutory deadlines and to achieve the water
quality objectives of the Act, whether or not they receive
Federal funds." The policy also provides for flexibility in
dealing with communities that face extraordinary hardships in
meeting the statutory deadline for reasons of financial or physi-
cal incapability.

     EPA grant policy with respect to funding construction of
wastewater treatment facilities does not prohibit EPA (or a
delegated State such as Tennessee) from awarding grants to munici-
palities that may not be able to complete construction by a
statutory deadline.  In fact, many municipalities that are now
being addressed under the NMP were supposed to be in compliance
with the earlier statutory deadline (1977), and we have continued
to provide grant funds to these facilities.

     Clearly,  some of the facilities that are of concern to
Commissioner Word may be eligible for extensions based on the
finding of physical impossibility.   These decisions have to be
made on a case-by-case basis, however.   In guidance we issued to
the EPA Regions to help promote consistent nationwide implementa-

                                  cue Tr ^'••vsicjl  ir.^ossibiiicy.  inhere sucn a
f.pQinj can be supported  by tie  tacts,  we expect tne Region/itate
ct re«cr agreement  on ^  compliance  sc'ieaule tnat tesults in
v.ui.Vj.j.jncte as sooi  as possible atter the July 1, 19db, deadline,
a. i- to incorporate  tnis  sc  iscuie into a consent cecree tnat  ^.s
sanctioned by a State or  Feceral court.

     It I or my statt can provi.ce turtner intornation or assis-
tance on tnis issue or any  other,  please contact me.
r Mate

                     JulvJJ l'JS5
the House of Reerrsentauies uid tfe appropriated to
car— j  2ut ».-!s subsection i:s 000 000 per
fiscal   *&r {or  e*cii  of the (Iscai  tears
j-ein* September 30  1984 September 30
1937  Seeie-aoer 30  19U  September 30
1989 tnd September 30. 1990  Amount* »>
prccri&ted  uncer tHta subsection  tn&U
rs~3-_n atajlaale until experaed.
  Page 71 >^e i si'-Le  out    tr.d lucre
in !  eu fereof  f)
  Pa?; ~4 .me U si- xe out  ind (d)  ind
trsert tn eut-e»eof   and(e)
  Pa«e 7« Sine n atter Act* insert  and
.ineer sect'on 39 of  .ni* Act. rtlat^g to
trair.teranee of water Quality in eaiuaxtes,
  Mr  OBSRSTAR (dunrg the read-
Irg)  Mr Chairman,  I ask unanimous
consent that the amenoment 6e con-
siuersd as read and printed  in  the
  Mr CHAIRMAN  Is there  objection
to the request of the gentleman from
  The-e «as no objection
  Mr.  O3ERSTAR  Mr  Chairman.
this amendment is  in concert with the
previous amendment just  adopted by
the Committee. It would provide fund-
ins to States  to establish, surveys at
their intrastate waters, surface waters.
within their State  to determine their
condition  of acidity, whether  due to
acid  deposition of mine  drainage  to
enaole such States to set up  programs
lor ac*d rain cleanup
  Mr  ROE Mr. Chairman  »ili  the
gentieiran yield'
  Mr  OBERST.-4R  I  yield to  tr-e
chairrran  of the  subcommittee   the
gertlenan from New Jersey
  Mr ROE. I thank the gentleman for
  Mr.  Chairman, th.s is  a  very fine
amendment and it is  really a  technical
amendment and we appreciate it  We
accept the amendment.
  Mr  SNTDER Mr Chairman, will
the gentleman yield''
  Mr OBERSTAR  I yield to the gen-
tleman from Kentucky
  Mr SNTDER I thank  the  gentle-
man for yielding.
  Mr Chairman, we accept the amend-
  The CHAIRMAN. The question is on
the amendment offered by the gentle-
man from Minnesota (Mr. OBZKSTAAJ
  The amendment was agreed to.

              O 1700
  Mr.  SOLOMON  Mr  Chairman.  1
move to str«ke the last word.
  Mr Chairman earlier this afternoon
the Committee of the Whole passed a
committee amendment  establishing  a
badly needed grants program to pro*
vide for the first time aid to  localities
where ground  water supplies have
been  polluted. The same amendment
was added to the Clean  Water Act
amendments  In the House  bill last
>ear. but it was never passed, as ae all
  One of the most se^ously affected
municipality In the country  *as. and
still j the town of Moreau In a rural
     area of Vew York State This »as one
     of the top priorities at re«d corrmum
     ties  according to the debat* last /ear
     At this point  M'  Chairman 1  aouid
     lute  to asu the c.*airman of the SUD
     committee the gentleman  from New
     Jersey [Mr  Roc) U he would engage
     In a brief colloquy
      Mr ROE Yes of course If the gen-
     tleman will vie'd
      Mr SOLOMOV Mr  Cr-ainran am I
     correct j\ ny uneentandlrg if at  as
     our d.scussion \2st year snowed  a new
     »ater d^jfct for "re town of Moreau
     is considered & top priority of the com
     mittee and %ould  be  eligible for full
     furmng  of up co S2 million unie- the
     ter-is of the Johnson legislation  as in-
     corporated in  your amendment tr-is
      Mr ROC Mr  Chairman If the gen-
     tleman «ill jieid. I thmJt the gentle-
     r-.an has exactly articulated the  entire
     Issue Iniol ed  Tr*ere  is no question
     that  urder the Johnson language in
     the  legulation the town  of Moreau
     should receive top pronty
      Mr  SOLOMON  Mr Chairman.  I
     thank the  gentleman, and again  I
     aould like to  commend the gentle-
     woman from Connecticut (Mrs  Joraf-
     sonJ  ard the other members of the
     comm'ttee for developing this  work-
     able  approach  to  the  problem  of
     ground  water contamination and on
     behalf cf all the people in this country
     I * ant to commend Chairman Roz for
     the  outstanding job he has done on
     this subcommittee
         \sirrDMirrr orrnto BT ML uooor
      Mr MOODY Mr Chairman I ofle-
     an amenoment and I ask unamimous
     consent  that the amendment be con-
     sidered  as read and  printed in tre
      The CHAIRMAN Is there objection
     to the request of the gentleman from
      There was no objection
      The text of the amendment is  as fol-
      Amendment offered by Mr *4oooY~ In the
     matter Inserted on pace 80 after lire 14 by
     Mr Howard i uaeioment insert at the end
     of subparagnpn  the followtnr
      A permit issued under  t*iis section may
     cover one or core tn&n one municipal sepa
     rate storm sewer
      Mr MOODY  Mr Chairman,  this  is
     a  brief technical amendment to make
     clear the intent of a  section of the
     Howard  amerdments to the committee
     amendment that were adopted earlier
     regarding the nonexemptlon of  urban
     areas  from  requiring  a permit for
     stonnwater overflow
      Mr  ROE  Mr  Chairman. wtU the
     gentleman yield'
      Mr MOODY I yield to the subcom-
     mittee chairman.
      Mr ROE. Mr Chairman  we have re-
     viewed this amendment It  Is really a
     clanf>tng and  an   Important amend-
     ment  We are prepared to accept the
     amendment on this side
      Mr  SNYTSER  Mr  Chairman. *ul
     the gertleman >feJd'
      Mr MOODY  I >teld to the gentle-
     man from Kentucky
  Mr SXYDER. Mr CJ"air-nan xeare
 prepared to accept the amencn»nt on
 f-is side
  T^e CHAIRMAN T-e quest'o"  s on
 tr-e amendment offered by the «»r: e
 "•on £'on Wisconsin CMr Mooav"
  The anendment aas agreed to
  Mr YOC-HG of NtLssourt  Mr  C^air
 rran  I Tiove to strike the last *c-i
  Mr C^alr-an I *i!S asl( tre ?e-i.e-
 •nan  '-om Ne*  Jersey [Mr Roc'  .*••
 sjtjcotnm.ttee crairrsan.  'f  re   •=-.  '
 ergage in a cc JC-Q-,
  Mr  ROE  I  itll.  of  course   Mr
 Chan-nan, if the gentierran iill j.e'i
  vtr YOUNG of Missouri Mr Chair
 man  it has been brougnt :o rn> a::en-
 t-on  tnat  EP\ LS conte-rpia: r;  a
 policy that %ouid deny Federal ;ra*u
 funds to local treatment project :na:
 *ill not be completed by the Ju1/  I
 1988 secondary treatment  dead'.r.e
 Apparently this unwntten ir:e-a-e:a
 tion is based on the national nunc ?ai
 policy adopted  in  1984  by EPA.  Mr
 Chairman, what concerns me is crat
 c.e have numerous local agenc es trat
 have  been  working  diLgently   ina
 against substint.il f.nanc:al ana o.^e*-
 limitations to comply with  the  1333
 secondary ceadltne  Mr. Chairman, as
 you  know  there   are  numerous
 projects now under  construction to
 comply with this  deadline/ We  also
 know  that  while  some of  these
 projects may not meet the July 1 ,1£S8
 deadl-re an EPA polio  as I desc-.bed
 will gunntee that these projects  *..!
 not meet the deacluie
  Mr. Chairman, iocs the ir..ent ;f
 Cor.sress  on tnis  Iegislat.on support
 such a policy b> EPA.
  Mr ROE.  No. it  is absolutely con-
 verse to the policy.
  Mr. YOUNG of Missouri Mr C*a.r
 r-an. furthermore  it seems tj-e aroie
 mteni  of  this  legislation befo-e us
 today, as well as the Senate  bill  "o%
 pending before trm  Chamber rccos-
 rues that despit*  the best eiforts of
 many agencies  completion  of SOT*
 projects will occur after the deadline I
 cannot believe that the intent of Con-
 gress could be Interpreted to support a
 policy to fund only those projects i*--t
 would be completed  by the Jul>  1
 1968 deadline and then deny fur.as to
 a project  slated for completion  'or
 August 1. 1988 Such a policy It seems
 negates the efforts of the Congress  r
 developing legislation to assist commu-
 nities In coming into compliance «ith
 this  Federal requirement before  and
 after the July 1 1988 deadline
  Mr Chalrnan. do you feel that add.-
•tional statutory direction is necessary
 to guarantee that this policy wuM rot
 be implemented.
  Mr  ROS  Mr  Chairman, will  t"e
 jcntlcmin yieid*
  Mr YOUNG  of Missouri. I >teld to
 the subcommittee chairman.
  Mr ROE. No. I trunk, as the *e~t e-
 man has pointed out. trai the p-ov
 »ions of our bill proviue that suf' c *-:
        »ili be atailaoi* to

July 23.198$
more prelects than originally contem-
plated 07 the administration,
  ,Mr. YOUNO of Missouri Mr Chair-
man. I  thank  the  gentleman. I am
pleased  to know that our agencies can
continue to expect Federal assistance
IT meeting these deadlines.
  Mr. Chairman, I yield back the bal-
ance of  my time.
  Mrs   JOKS'SON  Mr Chairman, Z
move to strse the last lord.
  cM-s  JOHNSON  assed  and  iaa
sue". pe-Taission to revise ana extend
her '•emarks.)
  Mrs.  JOHNSON  Mr Chairman. I
rise  in very strong support of the pas-
sage of  H.R. 8 and I want to take this
opportunity to commend the chairman
of the  subcommittee,  the gacrleman
from New Jersey CMr ROE], the chair-
man of the committee, the gentleman
trots. New Jersey CMr HOWARD], and
the  ranking members  the gentleman
from Kentucky  [Mr  SmrewJ and the
gentleman   from  Minnesota  CMr
STAxecjuroL Tl^ese gentlemen  have
together worked to craft for us a supe-
rior piece of legislation
  This is not nerely a reautfonzation
of  legislation that  has  gone far to
clean the rivers and sources  of «ater
in America but Is a refinement of that
legislation.  It represents the best in
the  legislative  tradition of oversight.
and it improves as u ell the  ability of
States to utilize their resources to im-
plement  -nore  economically the  re-
q^-err-.«nt3 cf  this important legisla-
t.on          »
   t also »ant to point out that tt haa
tn A three portions that are of particu-
lar ..—portance to the Northeast area
t*-at I  represent. I do want  to call to
the  Members' attention that  the con-
bined sewer overflow program. *tuch
in the  past was not eligible  for ordi-
nary sewer grant funds except on a
limited basis, will, as a result of this
thoughtful and  thorough piece of leg-
islat.on, be eligible for any amount of
funding the State  desires   to  make
availaole  to  It. That is extremely Im-
portant especially to the older cities
of America,
   It also addresses the crying need for
prevention  of non-point-squrce pollu-
tion ard  for addressings the serious
prooiem or ground  water contamina-
   Mr  Chairman.  1  merely  want to
commend the chairman of  the com-
 mittee  and the chairman of the sub-
 committee  for  their thoughtful and
 sole leadership  and I join  them tn
 supporting rhu reauthorizatton.
   Mr  ROL. Mr Chairman, a 111 the
 gentlewoman yield?
   Mrs.  JOHNSON I yield Co the chair-
 man of the subcommittee
   Mr ROE Mr Chairman, we express
 to the  gentlewoman our great appre-
 ciation for  the superb  job sne haa
 done &aa for having contributed to the
 legislation. It  would  not  have been
 pofisiole without her.
   Mrs.  JOHNSON   Mr. Chairman.  I
 thank the gentleman.
                      D IT MX. CtEAOX
       Mr BREAUX. Mr  Chairman. I offer
     an amendment.
       The Clerk read as follows.
       Amendment  offe»ed oy Mr  BRCAUX* On
     page BO strike out lines 7 tnrcugn it tad
     insert in lieu tner«o< me fouowuir
      mi oreeigitation runoff and *mcri do not
     come into con.act witn wxy overouroen  r»w
     material   irtermeaiate  product  'Irusned
     produce oy g-oouct or «aste product loot
     ed on tie site  oi jucn ooerst ons. Any
     person dbcrsrs'.r.g SiOTiwater rur.olf not
     descnaed in tfe pr««s5-ne sentence  (raa
     miniiff operations or oU or gas exploration
     production  processing  or treatment ooer-
     ii.oiu or transmission facilities $nad moni-
     tor e*e QUa.ity of water tn sum now* and
     snail resort lot less oUen ifia annually to
     tne Administrator  or at  sucft tntenais u
     the Administrator or tne State deems ap-
       Mr  BREAUX (during the reading)
     Mr Chairman I ask unanimous con-
     sent that the amendment be consid-
     ered as   read  and printed  in  the
       The CHAIRMAN  Is tr-ere objection
     to the request of the gentleman from
       There was no objection.
       (Mr 8RCALTC as*ed and was given
     permission to revise and extend his re-
       Mr.  BREAUX. Mr   Chapman.  I
     «ould say to the members of the com-
     raittee  that  the amendment I am of-
     fering goes to a section of the bill, sec-
     tion 26  ahich sets up  a procedure for
     various  exemptions  f-orn the perrt-
     t.rg of  certain  stornt-%aier "a*" if
     What  »e are dealing  with, for -n-
     stance  u rain *ater tr.at runs across a
       Mr  ROE. Mr  Chairman. »01  ue
     gentleman yield'
       Mr  BREAUX. I am  glad to yield to
     my subcommittee cJ- airman.
       Mr  ROE  Mr Chairman. «e  hate
     looked at this amendment. We feel the
     amendment  la reasonaoie. and we have
     no objection to tt on this side
       Mr. SNYDER. Mr  Chairman,  a ill
     the gentleman yield'
       Mr BREACTX  I azn glad  to yield to
     the gentleman irom Kentucky.
       Mr SNYDER. Mr Chairman. I want
     to say that this is a good amendment.
     and we are pleased to accept it.
       Mr. BREAUX. Mr Chairman.  I am
     prepared to  provide a further explana-
     tion of the amendment, but now with
     the assurance of the chairman of the
     subcommittee and the ranking minori-
     ty member. I ask for an aye vote on
     my amendment
       The CHAIRMAN The question Is on
     the amendment offered by the gentle-
     man from Louisiana CMr BRCACXJ.
       The amendment was agreed to.
          ueKmatre orram BT tot CKAIO
       Mr CRAIG  Mr Chairman  I  offer
     an amendment
        The Clerk read as followa.
       Amemuaent offerra By iir  CKAIO.  ?a«e
     i« tlae 10 twlore Section insert   '11 1*
       Pm«e SI after One 4 insert the (oUowtmr
       i&) Sets* or CoitouMMM.-'li. u tne MOM of
      Consres* .a»t me Adaunutr»uoa ana ifle
Suta. la devetoeiRo. BUDIUMAC. *a
mv  »aier  (juiJuy cntert» under
  il J consider tfit *conomtc elf*«a of i
nenut.on or tr.e p-ooosea later 5-i-./ -••
  f2) consider r/c'lca< eMrges Ji tr« ej
nate and en'/ircnnent ana
  <3l taxe into account  trie r^wyer ca-
tions of tie conceded Stawa and »-e ! "a
ings ard results oi site saeeille and »r»*vi..e
resea/cn tests exjerjnenu ira se— ona.*i
tion programs coreuc:ed oy ;ne cc"r-— i»a
  Mr  CRAIG  (dunng  the  rea&nst
Mr C>airran  I ask  u-.an,— ous con-
sent that the amendment be  cors.c-
ered  as  read  and  prrted   .1  :~e
  The CHAIRMAN Is there ob-ection
to the request of the  genueian Zrorn
  There *as no objection.
  Mr. CRAIG. Mr  Cfca.rr.ai. sr. 1531
in concurrence *ith the Idaao Kea-.n.
and We' fare Department,  ire State
legislature acted  to mod.fy ;-apcsed
State water  quality stardarss Se'oi
hydroelectric facilities to estabUn  a
dissolved oxygen standard of  5 nu...
grants/lure (m/1) average danr.g a 4-
hour period  between the conths at
May and October and a 6 a/1 average
during  the remaining  manxhs. E?^
later  disapproved  these  standard
siting that they would not adequately
protect saimonid  spawning       l~-
other life processes of tnese 1
her this year the EPA argued t
dissolved oxygen standard  shou.d
6 5 a/2 on a 30-day average. 5 zi/ 1
a 7-day average, ana a m!-^i-"i c
m/1 during nonspawning penocs.
  If the E?Vs proposed standard
adopted,  dams  in Idano  would
forced  to  install  monitoring  aeuces
and other  expensive equipment :o in-
crease the level of ox>gen in iacer
below  the  daas.  The issue to ce act-
dressed here is the legitimacy of EPA 4
claim that their standards are neces-
sary The EPA has testified oefore tne
Idaho Legislature that it cannot iden-
tify any areas of advene  uspact to
fisheries or  aquatic life but  ah  the
same  they feei we should mocUf / ou-
standards in oraer to  meet these aroi-
trary levels.
  If the EPA and Idaho can t reach, an
agreement  regarding  the  disputed
standards, the SPA will prozmiJgate tu
own and enforce them. If the State re-
fuses to follow the EPA a  standarcs
%e *ouid lose Federal funds  for con
struction of city wastewater treatment
  In   closing.  Mr.   Chairman,  my
amendment is a sense of the Congress
that the Administrator and the States
tn developing, publishing, and revising
*ater quality  criteria  under  sw- on
"IMPLEMENTATION OF THE NMP", dated July 24, 1985,

                         WASHINGTON, D C. 20460
                                                         OFFICE OF


          Implementation of the National M
          Henry L. Longest, II
          Acting Assistant Admin
            for Water
          Courtney M. Price
          Assistant Administrator for Enforcement
            and Compliance Monitoring

          Regional Administrators
          Regions I - X
     The purpose of this memorandum is to reaffirm the Environmental
Protection Agency's (EPA) commitment to implementing the National
Municipal Policy and focus your attention on specific actions EPA
must pursue in order to obtain compliance by the July 1, 1988,
statutory deadline.  All noncomplying facilities must achieve
compliance as soon as possible, regardless of the availability of
Federal grant assistance.  Publicly- owned treatment works (POTW)
that demonstrate their inability to meet requirements by the
compliance deadline due to extraordinary circumstances may obtain
reasonable schedules with final dates after July 1, 1988, with the
presumption that all such schedules must be established through
judicial orders.

     On April 12, 1985, then Assistant Administrator for Water,
Jack Ravan, issued a memorandum clarifying certain enforcement
positions we are taking concerning the National Municipal Policy
(the Policy) and urging that we strive to meet the interim goal of
establishing enforceable schedules for all noncomplying POTWs by
September 30, 1985.  Since that time, we have reviewed the second
and third quarter Strategic Planning and Management System/Office
of Water Evaluation Guide (SPMS/OWEG) results,  discussed our
implementation progress at the Office of Water Enforcement and
Permits (OWEP) National Branch Chief's meeting on May 2, 1985, and
reviewed the findings of the Office of Management Systems Evaluation
(OMSE)  study on how the Regions and States are carrying out the
Policy.  You will recall that, at the recent Regional Administrators

                                    -  2  -
    meeting,  the Policy was  one  of  the  key  items  on the agenda.   During
    this session,  these matters  were  reviewed  along with the status of
    the Policy.   Lee Thomas  also emphasized  the role of enforcement in
    carrying  out the Policy  and  the need  for Regional leadership to
    assure equitable and consistent enforcement toward municipalities.
    Highlights of these activities  are  discussed  below,  including a POTW
    enforcement initiative scheduled  for  late  FY  1935/early FY86.  In
    addition,  we have provided direction  on  five  current enforcement
    issues related to the Policy in an  attachment.

    Status of  Enforceable Schedules

         As stated previously, one  of the goals of  the Policy is to have
    all noncomplying POTWs on final,  enforceable  schedules by_ the end of
    FY 1985.   Despite good efforts  by some  EPA Regions,  the combined
    efforts of Regions and States have  addressed  less than half  the
    national  workload for major  POTWs as  of  the end of the third fiscal
    quarter.   We will need a tremendous fourth quarter effort in order to
    meet our  SPMS commitments, let  alone  the interim Policy goal for all
    noncomplying POTWs.

    Obtaining Management Information

         Additionally, we are concerned about  the OMSE study finding that
    EPA Regions and States may not  have all  the necessary information to
    carry out their oversight and enforcement  roles.  Such information
    needs should have been a significant  component  of original State
    municipal  strategies and deficiencies should  have since been addresse
    in State/EPA agreements.  OWEP  is presently working with EPA Regions
    and States to automate fully the  tracking  of  municipal data  in the
    Permit Compliance System (PCS).  Unfortunately,  this cannot  be
    accomplished until late  FY 1985 or  early FY 1986.   In the interim,
    Regions and states must  establish information sharing procedures so
    that administrative activities  proceed  smoothly.  Regional Water
    Enforcement staff must also  coordinate with Construction Grants staff
    to make better use of the available information on grant and funding
    status.  Toward this end,  OWEP  and  the Office of Municipal Pollution
    Control (OMPC) have initiated an  effort  to integrate PCS, NEEDS, and
    GICS files so that users can review pertinent compliance schedule,
    treatment, and construction  grants  information  on POTWs by using the
    appropriate NPDES permit numbers.

    Enforcement Initiative

         In order to underscore  EPA's resolve  to  enforce the July 1988
    statutory deadline and the other  National  Municipal Policy requirements,
    SPA Headquarters, working with  the  Department of Justice, is developing
    a municipal enforcement  initiative  to supplement previous municipal
    referrals.  The initiative will focus on major  POTWs that need

                                - 3 -
construction to comply with FELs.  Regions should closely examine
all POTWs that are possible candidates for this initiative; the
more varied they are in terms of location and size, the more likely
the initiative will achieve its desired impact.  Each Region will be
expected to prepare its best case(s) for referral early in FY86 so as
to send a truly national message to the POTW community.  Our offices
are already in touch with Regional staff to identify appropriate
candidates.  In the near future, we will send you further information
about this initiative by separate memorandum.

     It is clear that Regions and States must act now in concert to
address the backlog of uncompleted schedules and to establish an
effective working relationship that will allow them to gain the
momentum necessary to achieve full compliance by 1988.  tie believe
this will take your personal support and involvement, as well as
that of your program and legal staff, in order to maintain EPA's
resolve that the Policy be carried out with equal determination by
all partners in the NPDES program.  We ask that you lend additional
emphasis to this Policy and see that EPA/ State activities are
coordinated in a way that assures the integrity of the Policy.

     We have also asked the technical and legal staffs in our offices
to work closely with you and your staff to resolve any matters of
concern.  Should you need assistance, please contact William Jordan,
Director, Enforcement Division, OWEP at (FTS) 475-8304, or
Glenn Unterberger, Associate Enforcement Counsel for Water, OECM, at
(FTS) 475-8180.



                         Enforcement -Issuest
Issue:   Necessary EPA action where final, enforceable schedules are
         not in place by September 30, 1985.

Action:  OWEP will prepare a summary report of the POTWs in this
         category for the Administrator.  EPA Regions should work
         with their States no* to develop individual action plans
         for each POTW, beginning with those that need long-term
         construction schedules.  Where States do not take action  to
         require schedules or to establish enforceable schedules,
         the Region should take independent actions to do so.  FY86
         SPMS commitments should reflect the most expeditious time-
         table for completing enforceable schedules for the remaining
         majors and a substantial percentage of the minors.

         EPA's position concerning POTWs eligible for grants in
         FYs 1986, 1987, or beyond.

         In all cases, Regions and States are to continue to require
         POTWs to comply with orders to establish schedules and meet
         statutory requirements by July 1, 1988, regardless of future
         eligibility for Federal grant assistance.  POTWs must begin
         the work now to achieve compliance.

Issue:   EPA's response where States extend the 1988 compliance
         deadline in a manner inconsistent with the "extraordinary
         circumstances" provisions of the National Municipal Policy
         (and its associated Regional and State guidance), or extend
         the deadline by using nonjudicial actions.

Action:  Approved States must obtain judicial orders to establish
         enforceable schedules beyond the 1988 deadline to be in
         conformance with the Policy.  If not, they must defer to EPA
         enforcement.  All extensions beyond the statutory deadline
         should receive judicial review, be sanctioned by a Federal
         or State court, and be based on a demonstration of physical
         or financial impossibility.  If a State does not wish to
         use court actions, or subscribe to the physical or financial
         impossibility requirement for extensions, or will not accept
         the Agency's premise that all extensions must be sanctioned
         by a court, Regions should:  1) issue an Administrative
         Order (AO) that specifies a compliance date no later than
         July 1, 1988 (where compliance by the statutory deadline
         is possible), or 2) prepare referrals of these POTWs to
         the Department of Justice, starting with the most serious
         cases.   Regions and States are to confer on all schedules
         that are expected to go beyond July 1, 1988, to assure
         consistency with the National Policy and the accompanying
         Regional and State guidance.

t Detailed discussion papers have been prepared on each issue and
  will be provided to your staEf in the near future.

                                - 2 -
Issue;   Treatment of §301(h) applicants within the Policy.            ^

Action:  in all cases where a §301(h)  waiver is denied, the POTW
         should be placed on an enforceable schedule to achieve
         compliance as soon as possible, but not later than
         July 1, 1988.  In cases where the POTW demonstrates it
         cannot achieve compliance by the statutory deadline, the
         schedule should be incorporated in a judicial order.  If
         a final decision on the waiver application has not yet been
         made, the Region should continue to monitor the permittee
         for compliance with applicable requirements and act on
         those items which the POTW will have to do regardless of
         the decision on the application.

Issue:   Treatment of wet-weather bypasses within the Policy.

Action:  Wet weather bypasses are not a priority category within the
         Policy.  The Policy does apply to dry weather bypasses and
         the Region should use appropriate enforcement action to
         eliminate such activities and assure compliance.

Issue:   Up-front penalties for violations of the July 1988
         compliance deadline.

Action:  As a matter of policy, EPA will seek up-front penalties for
         violations of the July 1, 1988, deadline.  These penalties
         should consider the economic benefit to the municipality
         from noncompliance and the fact that EPA could not obtain
         acceptable action by the municipality short of litigation.
         In addition, these penalties should result from the exercise
         of sound, case-by-case judgment which reflects past violations
         and mitigating circumstances such as good faith efforts to
         comply, other regulatory issues affecting the certainty of
         final limits (revised water quality standards, wasteload
         allocations, pending §301(h) decisions, or §208 studies),
         and the ability to pay.

                            APR  1 2 ;985
51UJJECT:   National municipal Policy Implementation

FROM:      Jack E. Ravan
           Assistant Administrator
            • for Water O?H-55fi)

TO:        Regional Administrators
           Regional Water Manaqenent Division Directors
           Regions I-X

     At the recent National enforcement Conference, Administrator
Lee Thomas publicly reaffirmed the Agency's intention to uphold the
National Municipal Policy in its dealings with States and to enforce
the statutory deadline of July 1, 193ft.  I made similar remarks
during that Conference and during the water Pollution Control
Federation (WPCF) Government Affairs seminar in March.  Also, at the
winter ASIWPCA National meeting, the Director of the Office of Water
Enforcement and Permits (OWEP) again reconfirmed this Agency position.

     Now that we arc mid-way through the year, I would like to take
this opportunity to discuss my current thoughts regarding
inplenentation of the National Municipal Policy,  we must be convinced
and we must assure the States that PY 1985 is not a trial period.
Each Region must have current, workable, and complete State strategies
that reflect the underlying principles of the Policy*  As you know,
enforceable compliance schedules are required, with or without Federal
grant assistance.  It is presumed that all schedules beyond July
will require judicial action.  Strategies should contain updated
inventories that present current compliance status with applicable
effluent limits, as well as, any technical or financial requirements
for full compliance.  Regional municipal strategies (or the State
equivalent) should serve as a current work plan as well as the long-
torm framework for coordinating EPA and State activities to: (1) «*et
as raany schedules as possible by the target date of September 10, 1<»85,
and (2) achieve as much compliance as possible before the final
compliance* date of July 1, 1988.

po tpn r i a 1 Tmplo^* n t* t i on °rob 1 ens

     nunntj our Rational Municipal °olicy workshops  in  the  spring OF
1933, one of the main themes WAS that this pr<"»or2n wnuld  not  become
"business as usu^l."  Current commit "*ents for PY  t^a^,  Fnr  all
facilities thrtt ne«d ^chodules, indicate that only ?°»  of th*> unjvf»».«e
is beinn addressed , including only £7% of t*e -«*jors that *re not on
enforceable schedules.  F.ven if '•**» achieve t*v»se  co-?mj t-nent-s, nuc*
work will have to be don» in the 33 nonths after  FY  i*)35  to meet the
goals of the »olicy.  Fxamination of the first quarter  «?PMS/OWEO
results revealed that, although it appears we exceeded  our commit ment«,
we «*ay not have achieved the solid compliance results w^ wer*> seeking.
For example* we hav» learned that some NPnEn a-
Regions and States move forward to establish  enforceable schedules
pursuant to the conditions of the Policy and  its Regional and «5t*t
Guidance.  Since this is a critical step in the  successful  extension  nust. bB  contained- ini-ail AD -.
                                     "           **

 2.   Can  EPa  or  the  states  issue  an AO thot contain*? a schedule to
     •neet final  effluent limits  th*t extends he»yond July 1, I4*4?'*?

      The National Municipal  Policy does not specifically rerjuir®
 that  schedules  beyon-*  July 19HR  be sanctioned hy a court.  How*»v»r»
 t^e  Pogional and *5tat«» guidance  on th<» Policy tbat I issued on
 Acril 17,  IQkA, pr«.QV!TJs that all s»ich extend-*'! schedules will be
 established  through tho judicial Dime**1***.   This is th<» Aqency's
 enforcement  policy  with respect  to th*» statutory compliance deadiin**.

      Since the  April  17, 1984,  guidance is not binding on State »J*»DC«;
 programs.  a
       7n closing  I want  to  reemphasi?*? how o^^nMdl it i* fni
  and ^tate4? to Have a* "tany nonconplyin^ roTnuniti<»«j as po*MKi<»
  final, enfofc^abie ^chedulos  by SeDte'nhei 3^, 1^«S.  nnle«?«3 we
              result?, w<» will  not ^e ahii* i-o ac^iov^
             f*ea<11ine o^  July li  laB^.   I* *y offico c-in
  in ie«olvin'} a'lc'itional i^nlc^ontation i«^un^» pl«a*«e contact
REVISED: 04-02-85

"Relationship Between the National Municipal Policy and Construction Grants
Extending Beyond FY 1988", dated July 26, 1985.  (See also number 12 above
for a copy of the letter referenced in this document)

     '                     WASHINGTON, D C. 20460
                                                        OFFICE OF
                            2 6 1985

SUBJECT:    Relationship Between National Municipal Policy
           'artd Construction Grants Extending Beyond FY 1988

FROM:       Rebecca"w. Hanmer, Director
            Office of Water Enforcement and Permits

TO:         Water Management Division Directors
            Regions I - X
     There has recently been some confusion about EPA's
policy with respect to award of grant funds for construction
of facilities that will not be completed until after the
July 1, 1988 statutory deadline.  This has promoted me to
reinforce with you the importance of maintaining close coordi-
nation between the staffs assigned to implementation of the
National Municipal Policy (NMP) and those working with Con-
struction Grants for municipalities that are affected by the
policy.  Misinformation and poor coordination can seriously
undermine our efforts to implement the NMP.

     On the policy issue, we recently responded to a Con-
gressional inquiry on behalf of a State official whose staff
was verbally advised that no more Federal grants for sewage
treatment construction projects would be made where construc-
tion would be completed past July 1, 1988.  Furthermore, he
believed that EPA was about to transmit this policy to the
States in written form.  Exactly the same issue was raised
during the House of Representatives floor debate on the Clean
Water Act earlier this week.  I have enclosed a copy of the
transcript of the colloauy between Congressman Young (Missouri)
and Congressman Roe (New Jersey) so that you will better
understand the nature of the concern.

     Our enclosed response to Congressman Jones sets forth
what has always been our position on this issue: neither
the NMP nor EPA policy with respect to fundina construction of
wastewater treatment facilities prohibits EPA or delegated


      States from awarding qrants to municipalities that may not be
      able to complete cons traction by the statutory deadline.  In
      fact, we have been doinq it for years with resnect to fundina
      POTWs that missed the 1977 statutory deadline for compliance.

           I urqe you to distribute copies of this letter and the
      House debate to all members of your qrants and enforcement
      staffs.  Where there seem to be problems, I would also ask
      that you make every effort to set the record straight with
      your States as well.  If we hear of similar problems in any
      other Regions, I have asked Jim Elder to get in touch with
      you personally.


Speech by Assistant Administrator,  OECM to Association of Metropolitan
Sewerage Agencies, dated August 8,  1985»

  /                     WASHINGTON, D.C. 20460
                         AiJS  3 iS85
                                                      of-ricr or rsn>Rt IMIM


SUBJECT:  Speech  by Assistant  Administrator,  OECM to
          Association  of  Metropolitan Sewerage Agencies
FROM:   '   Glenn  L.  Onterberger ,'
           Associate Enforcement  Counsel
             for  Water

TO:        Regional  Counsels
           Regions I -  X

     Attached  is a  copy  of Courtney  Price's  recent enforcement

speech on  the  National Municipal Policy  and  pretreatment.   She

gave the speech  on  July  31 at the summer meeting  of the

Association of Metropolitan Sewerage Agencies  (AMSA)  held  at

the Greenbrier Hotel in  White Sulpher  Springs,  West Virginia.

This forceful  statement  concerning the Agency's responsibi-

lities for the National  Municipal Policy and pretreatment

should be of assistance  to you in the  Region's  water  compliance

and enforcement  program.


cc: Water Management Division Directors,
      Regions  I  - X

                         JULY 31, 1985
     Thank you  for  inviting me here to speak today.   Your
 timing  is excellent, as we are into perhaps the most  momentous
 task your organization and my Agency have undertaken  since
 the passage of  the  Clean Water Act - implementation" of  the
 National Municipal  Dolicy.  I would also like to bring  you
 up-to-date on pretreatment/ a highly significant area which
 we think will strongly reinforce and supplement the National
 Municipal Policy.   I believe you may be familiar with some of
 the things I am going to say, but since this is my first meeting
 with you, I want you to know where I am coming from.
     EPA has set the National Municipal Policy and implementation
 of pretreatment requirements as the two highest priority
 objectives for the Agency in the water enforcement area for
 this year and probably for the rest of this Administration.
 These are the areas where the most remains to be done,  and
 where the most can be accomplished.  Let me turn first  to the
 National Municipal Policy.
 National Municipal Policyr  background
     As you know, the Clean Water Act has never distinguished
 between the fundamental obligations of municipal and  industrial
 sources to comply with the terms of their NPDES permits.
Congress set up various mechanisms for developing effluent
guidelines and obtaining exceptions and waivers, and  put in

                             _ 2 -

different deadlines for different levels of technology.  But
once those requirements are incorporated into NPDES permits,    (
the obligation to comply is absolute.  As we lawyers say, the
Clean Water Act is a strict liability statute.  There are no
     Aware that after decades of neglect, compliance would
be very expensive for many municipalities in the 1970 "s,
Congress appropriated billions of Federal dollars to get
compliance going, and to work out what bugs there were in the
technology.  In the CWA amendments of 1981, however, Congress
reduced appropriations, and made clear its view that ulti-
mately compliance with the Act remained a State and local
responsibility.  As you know, whatever happens in this and
subsequent Congresses, there is little likelihood that
construction grant funding will go back to what it was, and
will never be sufficient to pay for the whole program.
     Therefore, in January 1984 Bill Ruckelshaus issued the
National Municipal Policy.  The policy was issued after a year
of deliberation and extensive consultation with you, with cities,
with states, and with other interested groups.  It has been
strongly endorsed in public testimony and many private meetings
by our present Administrator, Lee Thomas.  As you know, the
National Municipal Policy sets forth two fundamental principles;
     1. All municipalities must achieve compliance with
        their NPDES permit limits as soon as possible but
        no later than July 1, 1988, unless it is physically
        or financially impossible to do so; and

                              _ 3 -

      2. Municipalities must comply on time whether or not

         they receive federal funds.

 In a sentence, the National Municipal Policy decouples compliance

 from Federal fundin-.

      As I mentioned at the outset, carrying out the National

 Municipal Policy has become - and probably will remain - tne

 Agency's top priority  in the water enforcement area for some

 time.  It is particularly important  because in none' of the

 discussions of re-authorization of the Clean Water Act has

 anyone suggested that  the 1988 date  be extended.   It is as

 firm a deadline as any I have seen.

 National Municipal Policy;  progress to date

      When the Agency issued the National Municipal Policy in

 January 1984, we knew  that we had set ourselves and the country

 a highly ambitious goal, one that would require a great deal

 of work, local money and determination to accomplish.

      Nevertheless,  eighteen months into the program,  I can

 report some solid progress.   Knowledge of the National Municipal

 Policy is virtually universal.   Word of its requirements has

 reached every municipality that will have to take action.

 The Agency has received  a good deal  of support for its firm

 position from both  States and localities despite  the  logistical

 difficulties that we all recognize.

      EPA's immediate goal has been to put all cities  required

 to construct on  realistic,  enforceable schedules  by October 1,

 1985.   This is a  big chunk  of work for both the Agency and the

 thirty-six states that manage the  NPDES program:   we  estimate

                             - 4 -

that there are about 1300 - 1400 major POTWs {out of a total
of 3700) which will need construction.  To date, schedules
have been established for almost 50%.  States and EPA Regional
offices are at this very moment drawing up detailed strategies
for finishing work with the rest.
     In the meantime, the Agency is trying to expedite the
process by removing as quickly as possible whatever obstacles
remain to the determination of final effluent limits.  We are,
for example, trying to reduce the backlog of expired permits,
resolve pending §301(h) waiver applications, and speed wats"
quality decisions.  We are also trying to anticipate problems
in such areas as sludge and toxics.  Rebecca Hanmer, the Director
of EPA's Office of Water Enforcement and Permits, will discuss
these areas later at your meeting.  Pursuant to the 1981
amendments to the Clean Water Act, we revised the definition
of secondary treatment to permit some relaxation of effluent
limits, particularly for smaller cities that build trickling
filters and waste stabilization ponds.  Within our own organi-
zation, we in enforcement are trying to work more closely with
the offices responsible for permits and construction grants in
order to take advantage of their accumulated expertise.  EPA's
Office of Water, for its part, is revising the construction
grant regulations to be sure that no one receives further
funding until a schedule meeting the requirements of the National
Municipal Policy is in place.
National MunicipalPolicy - most important message
     In a few words, this is what we are doing.  What do we

                              -  5  -

 expect  of  you?   If  there  is  one message  that  I  want  you  to tane
 away  from  these  brief  remarks/  it is  this:  we  expect  every
 municipality  that is not  in  compliance with final  NPDES  permit
 limits  now to begin work  immediately  to  achieve compliance by
 July  It  1988, or before.   This  applies to each  municipality
 which is presently  in  violation of  the Act, whether  or not it
 received federal funds in  the past, whether or  not it  is likely
 to receive a  grant  in  the  future, whether or  not it  knows if  it
 will receive  a grant.   Even  if you  are certain  you will  receive
 a grant  in 1986 or  1987, we  expect  you to begin construction
 as soon  as you can  and proceed as quickly as  possible, using
 locally raised money if necessary.  We will provide  what
 assistance we can in suggesting methods  to raise funds locally.
 However, I cannot sufficiently stress that the  time  for  action
 is NOW.  Many cities have  already begun  work  on their  own;
 indeed, many  have completed  secondary treatment and  more,  on
 their own.  It can be  done.  Both the Clean Water  Act  and
 fundamental fairness require that the Agency  not allow other
 cities to  continue pollution unabated for years after  the
 announcement of the National Municipal Policy,  in  the  hopes
 that the law will be changed or new funds forthcoming.   The
 best way for a city now in violation to  avoid formal EPA enforce-
ment action - a lawsuit, with penalties  -  is to agree to a
 federal or State administrative order with a  schedule  providing
 for compliance by July 1,  1988.
     On the positive side, Agency analysis suggests  that  most
major POTWs can finance adequate  treatment on their own,  without
imposing undue Burdens on  local residents and ratepayers.

                             - 6 -

Moreover, there are real advantages to 100% local financing.
Cities have found that they can often build projects faster,
and at a significantly lower cost, when they are not subject to
federal construction grant regulations.  Some cities have
found that they can meet all their permit limits with smaller,
more practical, easier-to-operate facilities than those presently
called for in their Facility Plans.
     An active and effective pretreatment program, as now
required by law, should reduce the size or the cost, or both,
of facilities in municipalities with significant industrial
National Municipal Policyt enforcement
     Enforcement is not a particularly upbeat subjectt  clearly
the Agency prefers and expects voluntary compliance, and mam'
cities are already complying as quickly as they are able.  In
addition, of course, the federal government is particularly
reluctant to sue sister governments.  I know too that munici-
palities often have fewer resources and more complicated
management than a private corporation.  Nonetheless, as the
senior Agency official responsible for enforcement, I must tell
you that the Agency plans to enforce the law vigorously against
any municipality that fails to comply with the National Municipal
Policy.  The Administrator feels this is necessary to be fair
                                                        — x
to those cities that have already gone ahead on their own, often
at significant expense.   Stiff enforcement is also necessary
to maintain the momentum of the policy so that the 1988 goal
can be met.  We plan to take action in all Regions and againsc

                              -  7  -

 municipalities  of  all  sizes  that  are violating  the Clean  Water
 Act.   Indeed, about  50% of the  cases filed by the Agency  in  the
 last  two  years  under the Clean  Water Act have been against
 municipalities,  and  frankly,  I  expect  that percentage  to  grow.
      Enforcement of  the National  Municipal Policy comes at a
 time  when the Agency has increased  its enforcement presence
 generally as measured  by the  total  number of Clean Water  Act
 cases filed.  In fact, the number of water cases filed nearly
 doubled between  FY83 and FY84.  In  addition/ a multi-case
 initiative against municipalities is contemplated for FY86 to
 emphasize the importance we attach  to compliance with the
 National  Municipal Policy.
      You  should  also know that  the  Federal courts have uniformly
 upheld the Agency's position  in regard to municipalities  under
 the Clean  Water  Act.   Four courts - including the U.S. Court of
 Appeals for the  6th Circuit last year - have looked at the
 question  of whether a  city can be required to build if it fails
 to receive federal funds.  These courts have decided that Federal
 funding (or lack of it) is irrelevant.   The courts all held
 without qualification  that a city's obligation to comply  with
 its NPDES permit limitations is absolute.  This responsibility
 does not and cannot depend on whether a city receives grant
 funds.  In addition, in at least two recent cases where the
 courts issued written opinions  [Providence, R.I., Woodbridge/
 N.J.], the courts upheld the imposition of stipulated penalties
 against municipalities  for failure to meet compliance schedules
established through judicial consent decree.

                             - 8 -

     Finally, In the last two years, there have been at least
five decided cases holding that Discharge Monitoring Reports
disclosing effluent violations can be sufficient grounds for
summary judgment on liability against a discharger.  While these
were all cases against private industry, there is no reason to
think the result is not equally applicable to municipalities.
A city that gets into difficulty complying with the National
Municipal Policy should not look to the courts for 'relief.
National Municipal Policy; objectives in new enforcement cases
     Therefore, you should know that in every case we file
against a municipality from here on out, we will seek compliance
by July 1, 1988, or sooner, unless it is physically or financially
impossible.  If ability to pay is raised as an issue, we will
bring in financial consultants to scrutinize the numbers.  We
have also asked our Regional offices to take federal enforcemen
action - either an administrative action or a lawsuit - in Lne
case of any state order which goes beyond July 1, 1988, without
adequate justification [Price/Longest memo of July 24, 1985].
     In addition, as a matter of policy, we plan to seek
penalties in National Municipal Policy cases.  Indeed, the Agency
is presently drawing up a formal water penalty policy which
will in part expressly address municipalities.  The Agency's
position on penalties steins at least in part from the fact that
a municipality typically will have failed to respond to an
opportunity to commit to an acceptable, enforceable compliance
schedule in an Administratve Order withou-t penalties before
EPA takes the POT'J to court.  In each of 12 municipal cases

                             - g -

recently  concluded,  the Agency has obtained signficant  cash
penalties in settlement, ranging from several  thousand  dollars
to  $250,000.   In  the  future, the Agency will be  looking parti-
cularly hard at whether a city started to take action to  meet
permit limits  after  the announcement of the National Municipal
Policy, or whether it waited for a grant.  The Agency is  totally
serious about  the expeditious municipal compliance.  Compliance
is  no longer dependent on any grant action.
     Let  me now turn  to pretreatment, where you  and I should
be  on the same side -  national, state and local governments
working together to clean up the environment and spread the
cost equitably.
     In 1977, Congress revised the Clean Water Act to place
the responsibility for developing, implementing  and enforcing
the pretreatment program with those most affected by disruptive
industrial pollutants.  And who is most affected by such
disruption? It is you, the POTWs.  That is why it is very
appropriate for us to talk now about pretreatment.
     After 1977, EPA adopted regulations to implement the
pretreatment program enacted by Congress.  We required  all POTNs
with a design flow greater than 5 million gallons per day, and
other POTWs (as determined by the approved pretreatment State
or EPA)  to obtain approval of pretreatment programs no  later
than July 1, 1983.  Generally,.an approvable program will
contain  mechanisms for identifying the industrial users and
the character of their effluent,  and for establishing local

                                   - 10 -

      limits when necessary.  The approvable program must also provide
      authority for the POTW to require effluent monitoring and to
      enforce both the categorical standards and applicable local
           The objectives of the pretreatment program are (1) to
      provide the POTW with a means of insuring its own operational
      integrity and (2) to place the financial burden of treating
      large amounts of toxic or hazardous pollutants which POTWs
      typically are not built to control where it belongs/ with the
      industry which produces them.
           Of course, in those instances where a POTW is capable of
      removing large amounts of industrial pollutants/ the pretreatment
      program provides that POTWs with approved programs may apply
      for removal credits.  If approved, removal credits allow the
      POTW some flexibility to relax the requirements for one or
      more of its industrial users so long as that relaxation does
      not cause the POTW to violate its National Pollutant Discharge
      Elimination System (NPDES) permit.
      2. Prior Agency focus
           In the last ten years, the Agency has sought to implement
      the pretreatment program by promulgating two types of pretreatment
      regulations*  We issued "general" regulations which interpret
      statutory phrases such as prohibitions against "interference"
      and "pass-through" and set up procedures that apply to indirect
      dischargers.  We also promulgated "categorical" standards,
      which set technology-based numerical limits on discharges of
      toxic pollutants from specified categories of industrial source

                             - 11 -

     The Agency's most notable success is the establishment of

categorical standards for the electroplating category.  Electro-

plating, with approximately 10,000 dischargers, is by far the

largest industrial category to be regulated.

     For EP.Vs part, we have brought nationally cocrcinated

cases against two major integrated elect-oplaters, Chrysler

and General Motors, as well as against several smaller industrial

dischargers.  In a precedent setting settlement, Chrysler

agreed to pay a penalty of $1.5 million in cash in addition to

meetir^ interim and final compliance requirements.  Pursuant

to our Clean Water Act authority, we expect to maintain a

national presence in enforcing the electroplaing standards as

well as other categorical pretreatment standards as they take

effect.  Nevertheless, in the pretreatment provisions of the

Clean Water Act, Cohgress clearly was looking for local munici-

palities such is yourselves to be the primary implementation

and enforcement arm of this program.  Just as clearly, EPA is

ready to use the strong enforcement authorities Congress

established to make sure that all parties, including munici-

palities,  are pursuing their legal responsibilities to implement

successful pretreatment programs.

3. POTW emphasis (1983 - present)

     While the Agency was expending resources on establishing

regulations and standards, very little was done beyond the

issuance of a few guidelines between 1978 and late 1982 to
establish  the local POTW pretreatment programs as required by

40 C.F.R.  §§403.8 and 403.9.   As*a result, in early 1983 about

                             - 12 -

73% of the 1455 POTW's required to develop pretreatment programs
either had not submitted plans or had submitted incomplete
plans.  With the deadlines for the development of approved plans
(July 1, 1983) and for compliance with categorical standards
(April and June 1934 for electroplaters)  rapidly approaching,
the Agency became concerned that an indeterminate portion of
these POTWs without approved plans were not prepared to enforce
pretreatment requirements.
     In February 1984, the Agency convened an advisory committee,
the Pretreatment Implementation Review Task Force (PIRT), to
assist the Agency with implementation of  the pretreatment
program.  The committee was composed of representatives of
industry, State regulatory agencies, POTW's, environmental
groups and EPA personnel.  In January 1985, PIRT submitted its
Final Report to the Administrator.  It recommended issuance
of a strong Agency policy statement to support enforcement of
the national pretreatment program.  PIRT  further recommended
aggressive Agency enforcement action to compel the remaining
1152 affected POTWs (as of April 1, 1984) to submit approvable
pretreatment programs.
     Since April 1984, many POTWs have developed POTW
pretreatment programs which have been approved.  EPA has set
as a national goal in this area to have all required POTWs
obtain approval programs or be referred for court action by
September 30, 1985.  In support of this goal, EPA launched a
Pretreatment Multi-Case Enforcement Initiative earlier this
year.  Lawsuits were filed simultaneously on April 18, 1985,

                              -  13  -

 against  eight  non-complying  POTWs  that  had  failed  to  develop
 apprcvable  programs.  These  cases  are now in  the negotiation
 stage, but  EPA expects  to obtain from each  case a  judicial
 decree requiring expeditious  submittal  of an  approvable  program,
 specific steps to  ensure proper implementation of  that progran,
 and  significant penalties because  the POTW  failed  to  meet
 responsibilities which  many others pursued  more seriously and
 effectively.   If you read the trade press,  you will also know
 that the Agency expects to file a second wave of similar cases
 against  a number of remaining non-complying POTWs  by  our
 September 30 target date.
      There  is  good news that emerges from all this.   By  combining
 your efforts with  those of the State and Federal approval
 authorities, the list of POTWs without  approved programs has
 dwindled  from  1,152 as of April 1, 1984, to 377 as of June  30,
 1985.  The  bad news is  that 377 POTWs still do not have  approved
 programs  or schedules for submitting them.  The Agency and
 States intend  to make every effort to obtain approvable  local
pretreatment programs from this group by the end of FY 1985  by
whatever  means are necessary, including the use of judicial
enforcement and the imposition of penalties.  Indeed, we have
made  it clear to all levels within the Agency that "good progress"
on program developments is no longer sufficient.   If approvable
programs  are not forthcoming, it is time to take the action  to
     In addition,  the Agency is hard at work developing  a
national  strategy  to insure effective implementation of  approved

                             - 14 -

pretreatment plans through Federal State and local efforts.
An important objective for FY36, and beyond, will be to help
yoa to insure that your industrial contributors comply with
the applicable pretreatment standards, both categorical standards
and the highly inportant local standards.  Again, EPa is cuitie
prepared to use the enforcement authority provided to it, not
only against your industrial users where a matter of Federal
interest is at stake, but also against POTWs which are failing
to implement or adequately enforce approved local pretreatment
programs.  Now that I have come on as the "heavy", let me offer
that if we (the States, EPA and the POTWs) work together,
we can jointly obtain three important things.  We can ensure
(1) that all industrial users comply with pretreatment standarcs,
(2) that you are able to remain in compliance with your own
NPDES limits, and (3) that the costs of compliance with the
Clean Water Act are paid by the parties responsible for the
     I have appreciated this opportunity to talk with you about
pretreatment and the National Municipal Policy.  I look forward
to your help as we continue to implement these important


        I MllDM \US[ \\IUON\HM M I'KOIKIION U,l
                            ,ION. i> <
MEV0-L-_. rU' 1

SUBJECT:  "ighljg-ts  fron Deci~ed cu1 3 Settl?'! Cises  under
          the National  lunici^al Folic/

FRCM:     Glenn L. Unterberger _y~*rj,.v*.
          Associate Enforcement Counsel
            for Water
TO:       Regional Counsels
          Reaions I - X
     The Agency has accunulatad considerable enforcement
experience under the National Municipal Policy  (49  FR  3832,
January 30, 1934) during the oast year and a naif since fie
Policy was signed by the Administrator.  I want to  review  some
of the results of this experience with the hope that it will
help you to enforce the National Municipal Policy during the
months ahead.  As 1 lock at our enforcement track record,  I
find it most useful to review (1) relevant decided  cases,  (2)
noteworthy consent decrees and  (3) statistics on the amounts  of
nunicipal penalties obtained.  Accordinaly, I will  briefly
discuss each of these areas.

     I.  Case Law Has Established that POTWs Must Comply
         with the Clean Water ^ct in the Absence of
         Federal Funding	

     As you Vnow, the most important principle established
by the National Municipal Policy is that compliance by publicly
owned treatment works (POTWs} with final effluent limits is
independent of Federal construction grant- funding.  More simply
put, the Policy decouples compliance and Federal funding. Case
law, which establishes the appropriateness of compliance with-
out funding, therefore 'oecor.es strong support for implementation
of the Policy.

     The most significant case establishing the requirement of
compliance in the absence of Federal funding is State Water
Control Board v. Train, 559 F.2d 921 (4th Cir. 1977),  an opinion
seven years older than the National Municipal Policy itself.
In that case, Virginia's Vvater Concrol Board sought a  declaratory
judcrrent that POTWs were not suoject to certain effluent

li-.it?*-.*ons if tnosi-2 PCT.iiS .4?d rot rcceiva-' F«»:er-il crirt
fading.   Tve Fourtr Circuit .ler^o" : .si-cf to Virginia  ar'l *.ie_ I
tne fcllowing:

          "Section 301(c)(i)'s effluent limitations
          are, en their face, u-'cor.'-iticnal, and PC
          otrer provision in^icat^s an;. li~'< ret/.een
          t^e^r erforcea^i lit*, ar . tr-a tirrel.. receipt
          cf  federal assistance."  553 F.2<-. at  924.

     The Si
                       "t~.e -3tat.:~crv xli ration of rariici^ c*re_
                       treat-rent vor':s to co'-ipl/ wit i t--,e J>I>  1, 1977
                       deadline [s Jbseouent i.> *s
                             - 4 -
                   ~/ t.'-e ccurt   *e fi'VJ
          Wooden Jge ' s ""at ion is witnout '^
          borders on the abusive."

     With this backdrop of (1) appellate hoi 2incs and  ;^clicial
orders t>at funding and compliance are independent under the
Clear Uatar \ct ar>^ (2) a District Court order requiring co~pli-
ance by July 1, 1988,  .vniie pointing to the  rea :>re~erts of
the National 'Ivinicipal Policy, I wish to tur- to e>a~ples  ol
recent case settlements.

     II.  Case Settlements Are Being Obtained
          Consistent with the National Municipal Policy

     A detailed review of selected municipal co'nplia'hce cases,
including sone settlements jointly ootained  by SPA and DOJ and
referenced in this memo, is being released by the Prograrr
Evaluation Division of EPA's Office of Management Systems  and
Evaluation.  I urge you to study this excellent analysis.  I
wish here to mention several cases that indicate possible
approacnes to typical problems under the National Municipal

     A.  The Financial Incapabili ty Defense

     An excellent example of how to overcome a financial
incapability defense is the Agency's 1984 consent decree wi«-
St. Bernard Parish, Louisiana.  St. Bernard  argued that it
could not construct a secondary treatment plant due  to financnJ
incapability.  EPVs Region VI and Headquarters engaged an
outside financial consultant to make a detailed analysis of t>e
finances of the parish  (county).  The consultant made  an on-
site analysis of parish financial records and completed a
detailed report that was provided to the parish.  At the same
time, the Agency pressed for trial.  Upon review of  the finan-
cial analysis, the parish accepted its findings of financial
capability to construct by 1987, without any federal funding,
and agreed to pay a $40,000 upfront penalty, a substantial
amount  in light of the size and demographics of the  parish.  A
final consent decree embodying these terms was entered on
December 3, 1984.

     The Agency continues to have contract funds available
through the Office of Water Enforcement and  Permits  to hire
outside financial consultants for cases where the POTWs
financial capability to construct may be an  issue.

     B. From Counterclaim to Upfront Civil Penalty

     Garland,  a Texas  suburb  near Dallas, filed a countercla
against EPA when the Agency sued  to Obtain compliance  with
final  effluent linuts  by July 1,  1988.  Garland argued that
Agency  had given incorrect technical advice  as  to des      fc
past  POTW  construction.  The  Agency aggressively nove<-    d

                              mm  R  «•
t"ie cci'rtercini—, enlisting  the  assistance  of  corstruct!or
•-rev ts attorneys  ir  t ••e  Agency's Office  of  Ce^eral  COui'sol,  „•• c
v.r'ste r.ucp of t>-ie ^rief.  Tho Agency  /ursne^ e/te^sive  <~is>co"er'
an.? negotiations  in  the  case, which sJ^o involved a nv.rn.ec  of
^ri^-ate parties  (cc-1 tractors ) wno hie participated  in t.re  r'CT .
corstx-.-ction   I" tie end, Garland agreed to acnj.eve co-pliapce
c\ Jui/ 1, .933,  =- 2 tr  pay  ar cpfro^t ci"il penalty cf 3150,0^
j." a cc"se~t.  -ecree  fi.ec June 24, 1955.

     C. Co~pliance * ct Ccntingert o",  Federal r^"ci".c

     The ^yoir.ing Valley  Sanitation Authority,  located near  .vil-es
Barre, Pennsylvania  and  irade up  of sor-e  twenty municipalities,
nad oeen slew to  conply  for  years.  In fact, it took_twenty-
five years of State  pressure to  get the  Authority to build  a
priirary facility.  EPA filed suit on  May 3,  1983, to obtain
secondary treatment  by July  1, 19S8.

     Only after  issuance of  the  National Municipal  Policy  did
negotiations with the Authority  oecoir.e productive.   The Authority
tried to tie compliance  to Federal fadding.  However, the
Authority finally agreed to  a consent decree that nade  compliance
by 1938 independent  of Federal funding,  which  is the standard
language we like  to  see  in all municipal consent decrees.   EPn
*nd Pennsylvania  (also a party)  did agree,  however,  to  expedite
consideration of  the Authority's grant application.  The authorit
also agreed to pay an upfront penalty of $66,000 to the Federal
roverment and 556,500 to the State.  The consent decree was
filed on ' ay 6,  1985.

     E-  Use ofEnvironmental Security Account

     One of the most difficult series of recent negotiations
involved Cincinnati's Mill Creek POTW.   This case involved
negotiations with the Sewer  District, the City of Cincinnati and
Hamilton County in which the facility is located.   Mill Creek
had completed secondary  treatment construction in 1978,  but the
POTW's sludge unit,  heat exchangers and  vacuum filters  have
never worked properly.   Consequently, only  a small  portion  of
the effluent received secondary  treatment.  This made the Mill
Creek POTW one of the worst polluters on the Ohio River.  The
case was complicated by State administrative action that could
be construed as permit modification.

     As negotiations continued,  it became apparent  that the
penalty issue was a major obstacle to obtaining a settlement.
In the end,  the Agency obtained  a commitment to final compliance
by 1988,  significant combined sewer overflow relief, and estab-
lishment of a $750,000 Environmental  Security  Account to be
managed by a court-appointed trustee.  The  Account  must be  -
used to finance environmentally beneficial  projects  connected
to the Clean Water Act which will benefit the  general public.
The account should address the particular type of environrental
effect of the defendant's noncompliance  and oe in addition  to an^
                                                               .•-* / -

                             - 6 -
legal obligation -ef endant T.ight have.  n  fi'vil consent  Decree
was locgeu on March 11, 1985, and should be entered snort Ly
M though the Agency no.-/ generally requires, as a Batter  of
policy, ucfrort penalties rather than enviror.rental projects,
a co~oi ^atio" of a substantial cpfront penalt/ {*nich as a
ratter of policy is nov» an Agency objective in all -nunicipal
cases) a"4 2>i en<*ircn~c^tal security acccur.t  •>aj.  ^e accep-anle
in ot~~er ™-virifal ca.se=5   In addition, stipjlateci penalt^^s
tie-i 10 a ce-?l_ance sc^e''jie are required

     III. Penalties Assessed ^oairst POTVvs

     We typically expect to obtain penalties  in POTW cases.
Penalties act as a sJtstant^al deterrent to noncompliance  and
speed the runicipality ' s effort to comply.  As explained below,
in recent cases, penalties have had a demonstrable effect  on
securing POTW compliance.

     Since the passage of the NMP, penalties  have been sought
and assessed against rany POTWs violating  the CWA.  During  the
last three years, from 1933 to 1985, 'the Agency has obtained
penalties in 17 of 27 cases brought against POTWs.

     The two largest penalties are $170,000 and $150,000,
assessed against two Region VI municipalities.  There are
also four cases with $100,000 penalties.   Two of these cases
are in Region VI, one is in Region III and one xs in Region
II.  The retraining twelve cases have penalties under $100,000,
the sirallest oeing the Welch Sanitation Board, Welch, West
Virginia, in Region III.  Noting this community's depressed
economy with 28% unemployment, the court advised the parties
to work out a mutually agreeable solution  in  lieu of litigation.
The Board agreed to pay a penalty of $1,000 each to the  United
States and the State for violations of the CWA.  Finally,  in
four of the ten cases in which cities did  not pay a cash penalty,
they agreed to complete environmentally beneficial projects not
required by »
     An example of a municipal case where a penalty was  not
imposed involved the City of Tallulah, Louisiana,  in  Region  VI
The court  informally advised the United States  that no penalty
would be assessed in this case due to  the community's economic
situation.  -^"here is very  low per capita income  and  many
residents  ar"^ on welfare.)
     Another case where a penalty was not  sought  involved  a
small suburb of Louisville,  in Okolona, Kentucky,  Region IV.
The POTW agreed to  stop dumping the effluent  into a  creek  and
to hook into the County's Municipal Sewer  District (MSD) line.
In order to use the line, the POTW had to  legally dissolve
itself as an entity.  An imposition of a penalty  would have
delayed the POWs  dissolution and MSD's aoility  to  assume its
responsibi liti.es .   In order  to facilitate  O"-;clona's  prompt
compliance, EPA did not see* penalties for past OvA  violations.

     A chart is att^cne'l  Listing  all  reoorte- C'<\ cases
Vri"? 1983 to 1985  inclu line  the a^c^'^t of tie -set a -ties  ve
ortaineri against certai^  POI'.tS.   In sc.e i-'S .arcos ne^alt^es
*ere ret ootained    ^s irentioned  aco.e,  so-e settlements provi<"
for environmental projects  or  trust tunos rather t.^a.^ pe^altias
"ost "lecrees also included  stioulatea "lenaltie4? for future
     I tr~st tne  inf cr-atj.cn  ^.n  t/iis  re^crz^^" .-.ill ce ne_^
to vca.  If you ha- e an.  questions  or correctic^b zo tne
infcr~ation in this report, please  feel free to call me cr
Maria Orozco cf ry staff  at 475-8320.  I anticipate issuing
updates of this report  on a periodic  basis.

cc: Rebecca HarTer
    Jir .Ilder
    Bill Jcrcia.i
    Regional .vater Division  Directors
    OEC"! Water Attorneys
    Cheryl Uasserman
    David Buente
    Carol Green

                                                                                            Pncjo I
                   wini  AND wi'mouT PINAI.TMS ASRI.SSI:D AGAINST  KJIWS
U S. v. CiLy of Maw HjrLmsvi 1 le
U.S.  v.  City of '.fcilch ('Jolcli SnitiL.  P-d)
             U.S. v.  Ptslric I  of Columbia {I'.lue  PKnns        IX-'
             U.S. v.  City of Wilkos  l',irre {VKumiv}            PA
             Vallo/  S.init>iry AuUioriLy)

             U.S. v.  Cily of J.u.kbonvi lie (Dist.  U  WTP       11.
             .iinl Hut knurl Street WIP)

             U S. v.  City of Okoloni                           KY




11 /H/1M
v. M.O.C. (CiLy of 1 Jos ton)
v. City of Providence
v. PKASA (II PR Aqued. K, avr)
v City of Utioi
v. Ci Ly of Philn.lolphl.i
S 1
No ( usli.
c roll t ,

Offer of

C.I). c>sL
Pn vi roil
net ion


,»bl ir>hc«l
                                                                                  tin t nv.  tmsL fund  in
                                                                                  th" niuiiuit of $2,105,000
                          CO dt ex «>{>!•  w/lls
                   i" iri'it after ll>«* t ise w:is
                   it r.M o>.i to
I,«i0() to USI PA «in.l
1,000 to SOtlo
                                                                                  'jO.OfKj |x-n«ilty f),000 to Poiin.

                                                                                  Mo c.i'li.  JOO.OOO fjiviron.

                                                                                  Non»». Dissoltil Mil of
                                                                                  I in1 h 'IVJ  v^Ti'.  i"|Ui r^'il
                                                                                  i n « n •!*  i  t o u c MM)'-.
                                                                                  f i. i I it i.  .

                                                                                                                   i'aqc ?
II S.  v.  City of Raton

U.S.  v  ( Uy of Rosv<:l 1

il.s   v  < ity of tort SmiUi

U.S.  ".  *U . Uf-rnird I'ruish  (Mum.ior
  Tro lU rrit Facil ity)

U.S.  v  City of Tulsa (IOIUA ILiiky Lik)
                        II G.  v.  City of TnlluKih
                        U.S   v.  City of Weot  Huni>lUK
                        U.S   v.  ("i Ly of Von Km ft Colcnoso
 u s. v  City o[   I'l'.t 1  1< I )
U.S. v. City of Orliinilo (iron Hndqe VM\V)       1'L

U.S. v. Gary Sanit. District                      IN

U s. v. City of Cincinnati (Mill Crock WIV)      ON

                                                                           I A

                                                                                              but not
                                                                                      yet entered

|*vl<}i'd lul  not
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                                                                                                          AM H H4T
                     40, OCX)

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                    l/?3/7U, decree inclu-
                    <1i_vl stipulatcsl |>etMltios

                    h'o i nsh.  750,000 environ.
                    :•• on ity  trust tiro * nit
r'niii-. *n
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                    lni|»l  .ict jim. Ori«ji*ial
                    •.tut  c<-trr i',*-J a  jx-n-ilty
                    of  ^.140,000

                    N'>IIP.  City hvi<1  insuffi-
                    i it-nt  »es<»n < "s wi th
                    wlndi to lAiy tiny  jio
                    .nit >'nit




          C.AS1 NAMI.


U.S. v. City of Hirhfield

U.S. v. City of 'JVin Palls

U.S. v. City of 'IWin falls


       lut not
yet entered
None, (old case) stjp.
penalties wore


                                                                 VI. A. 17,

                       WASHINGTON, D C 20460
                          JAN 3 0  .9
                                                     Of-i-llE >f ;NF •<*<

                                                       1SR «P »\

                                                        Mos  IS IV

SUBJECT   Deadlines and the National Municipal Policy

FROM:     Glenn L. Unterberger  ^4.**.
          Associate Enforcement Counsel
            for Water

TO        Regional Counsel I - X


     Recently I have noticed, both in the Agency and outside,
some imprecise language about "statutory deadlines" and the
National Municipal Policy.  I am afraid this may lead to some
confusion, particularly among those who do not have to deal
with the policy often.  Therefore, I have prepared in this
memorandum a brief summary of the legal basis for the July 1,
1988 deadline in the policy, and the legal consequences of that
basis, for anyone who would like a more detailed background
than is presented in the policy itself.

There is no uniform July J. 1988 statutory compliance deadline.
Thelegal compliance deadline for a Publicly-Owned Treatment
Work (WTw) is the date set in its permit.

     The July 1, 1988 date is set forth in the Clean Water Act
to address a single specific situation.  In Section 301(i),
Congress authorized NPDES permitting authorities (delegated
States or EPA) to modify the permits of those POTWs that applied
and qualified to extend the deadline for compliance with final
effluent limits (as described in Sections 301(b)(1)(B)  and (C))
until, but not beyond, July 1, 1988.  For all other POTWs, the
Congressional mandate of 301(b)(1) typically remains in effect:
the permitting authority must issue them permits requiring
compliance with statutory requirements by July 1, 1977.  And
under the Clean Water Act, the POTW is required to comply by
whatever date appears in its permit.
                                                                ' A'

                             - 2 -
     Although July 1, 1977 constitutes in most cases the date
for compliance with final effluent limitations, the Clean
Water Act sets out no uniform statutory deadline which will
apply in all situations.  This legal structure has a number of
consequences for enforcement.  First, any POTW not in compliance
with final effluent limits by the date specified in its permit
(even if it is 1977) is in violation of the Act.  (See pages
6-8 of the attached memorandum from the Office of General
Counsel, dated April 11, 1984.)

     In the National Municipal Policy, the Agency recognized
that many POTWs were in violation of the Act long after 1977,
and that sound policy after promulgation of the 1981 Clean
Water Act Amendments required these POTWs to come into
compliance as soon as possible.  The Policy called for the
development of compliance schedules for municipalities affected
by the Policy.  As a policy matter, the Agency selected July
1, 1983 as the latest date to be included in such schedules
(unless a POTW could demonstrate extraordinary circumstances).
The date seemed a sensible choice, in part because §301(i)
Congress authorized permit extensions up to no later than
1988.  However, it must be remembered that the legal, statutory-
based deadline for compliance for each POTW is and will remain
the deadline in its NPDES permit, which will be July 1, 1988
or earlier.

As a general matter,EPA has clear authorityto sue a POTW
which will not meet the July 1,  1988. deadline only if that
POTW is violating or has violated applicable permit require'-

     The second consequence for enforcement is a corollary of
the first.  As a general matter, a POTW in compliance w'ith its
permit is in compliance with the Act.  Section 402(k) of the
Act states this expressly.  Therefore, in the absence of com-
pelling circumstances, the Agency typically should not sue a
POTW because it will not complete construction by July 1,
1988, Lf it is and has been in compli-ance with all its present
permit requirements.


As a legal matter, administrative or judicial orders
establishing enforcement compliance schedules Lasting beyond
July 1. 1988. are not "extensions" of final compliance deadlines
Although such orders may have the ettect o£ staying further
enforcement action, the legal deadline xs still in effect"

     Section 309 is the basis for Agency enforcement of most of
the provisions of the Clean Water Act, and NPDES permit
provisions.  Section 309 authorizes the Administrator, upon
finding a violation, to issue an administrative order or file

                              - 3 -

 a lawsuit.  Therefore,  an administrative order issued under
 Section 309(a)(5)
"Letter of the Administrator to James Borberg, President of the Association
of Metropolitan Sewerage Agencies", (concerning penalties against
municipalities), dated October 21, 1986, (See No. IV.C.ll this Compendium).

"National Municipal Policy Litigation," dated December 23, 1986.

                     NATIONAL  MUNICIPAL  POLICY
                        ENFORCEMENT STRATEGY
                           Ajgus*-  1987
 I.   Background

     Since  issuance  of  *-he  Nat-ional Municipal  Policy  (NMP)  in
 January  1984, EPA and  *-he  States  have  made  substantial  progress
 Coward bringing  noncomplying  POTWs in*-o  compliance wi*-h *-he  goals
 and  requirements of *"he  Clean Water  Act  (CWA).   However,  *-he
 results  of  *-he nost recent  NMP audi*- show that  a significant-
 number of  facilities have  not yet started construction, and,
 where construct ion  has commenced, many facilities are  in violation
 of the interim milestones  in  their schedules.

     There  are several  different estimates of  *he number of major
 POTWs that  will  not meet *-he  July 1, 1988 deadlines  the Regions
 identified  229 major POTWs  during the  NMP audits; ASIWPCA reported
 230  major  POTWs  (based on  a 42 State survey); and OWEP  estimates
 300  - 400  Tiajor  POTWs  by nex*1  year.  The estimates wi*-h respect
 to minor PCTWs no*-  ir.ee*-ing *-he deadline  are even larger:  the
 Regions  reported 1£7 ninor  ?OTWs; ASIWPCA1s survey  identified 792
 minor POTWs; and OWEP  expects the number to reach 1000  (which is
 about one half of the  universe of uncons*ructed NMP  minors).

     The  NMP audit results  show that, out of a total  of  638 major
 facilities  *-hat  were scheduled to s*-art  construction by 12/31/86,
 82%  had  actually begun construction, leaving  114 facilities in
 violation of their  s*-art construction  date.  In addition,  cu*- of an
 audit sample of  252 facilities, the  Regions/States had  verified
 that 78% of the  major  POTWs scheduled  to start  construction had
 actually done so.   Finally, t-iere are  a  large number of major
 facilities  (412) that  were  not scheduled to start construction oy
 12/31/36, which  puts in  doubt that these facilities  will be able
 to complete construction by the July 1,  1988  deadline.

     In addition  to  problems with  schedule slippage,  there are
 also some problems  witn  the requirements and  provisions in tne
 enforceable schedules  *-ha*-  are in place. Several States have
 recently initiated  or  settled cases  involving NMP facilities »-ha-
 will no- meet *-he July 1,  1988, deadline for  conpliance w^h
 applicaole  effluent limi's: more  *-han  65 cases  nave  been set-led
 in State courts  *-o  da*-e, and  ano*-ner 40  cases have  been referred
 ••o State Attorneys  General  for action.  Based on an analysis of
 availaole set*-lenient s, i*-  appears *-ha«- many of  "he  schedules
allow far too -nuch  *-ime  for compliance wi*-hou*-  sufficien*- jus*-i-
 fica«-ion on either  a technical or financial basis,  extend well
 oeyond *-he July  1,  1998  deadline, and/or are  based  on  receipt of
 cons*-rue*1 ion grants   In aadi*-ion, very few Stages  have oeen

collecting civil penalties or irapos.Tg equivalent sanctions :cr
pas'- violations.

II.   The Regions' Approach *o These Issues

     A* *-he recen*1 Ua«-ional meeting of »-he Compliance and Permits
Branch Chiefs, the Regional representatives from all Regions
discussed the issues outlined above ana how these problems mign»-
be handled.  The discussion resulted m formulation of four bas*c
questions, and, in a subsequent poll of all the Regions,  '•he
majority concluded fhe following:

1.  Q: Should aamnisf rative orders (AOs) be used to establish
    schedules «-hat expend beyond July 1, 1988 (majors and minors 5~

    A: EPA  and *-he S«-a*es should no*- use AOs for major POTWs
    wi«-h schedules -ha*- extend beyond July 1, 1988; all sucn
    schedules should be contained in judicial orders.  EPA should
    also consider judicial action for minor POTWs; where available
    resources preclude judicial action, EPA and the States should
    use AOs with penalties.

2.  Q: How should E?^ respond where Spates establish enforceable
    scnedules that are unnecessarily long or that are based on
    receipt of grant funding?

    A: Where S*a*es establish inappropriate schedules (excessive!/
    long withou*- a sound technical basis or based on receipt of
    a construction grant), EPA should ini^ia^e direct Federal
    action in order to obtain the most  reasonable, expeditions

3.  Q: How should SPA respond where State actions do no»- contain
    appropriate penalties or equivalent sanctions?

    A: Where States assess penalties *hat are grossly deficient  or
    fail to impose equivalent sanctions-, EPA should  initiate
    direct Federal action in selected cases.  Where  resources
    preclude  judicial action. Regions may also wan*  to consider
    using their administrative penally  authority  in  certain

4.  Q: How should EPA respond «-o serious delays  in schedules
    C judicial and non;udicial),  especially where  suci- a  delay
    jeopardizes »-he July  1,  1988 deadline?  What  warrants  an
    escalation of enforcement response?

    A: Where  "nere is significant  slippage  in  needing compliance
    schedules,  EPA should  escalade  enforcement  action  (including
    si*-ua«-ions  in which  hhe  S^a'-e  does  not  fake appropriate
    enforcement  response).   Significant delays  are defined as: 9
    days  or rtore beyona  -ie  s*ar*-  cons'-rue* ion da*e; and 120  ia/

                                - J-
     or  more  beyond  "he end cons"r>.c" ion da"e.   EPA  should escala*e
     enforcement  by  firs*-  exercising  11-3 adiunis"ra"ive penaj."y
     authority, and  la"er  moving  »*o judicial action  if violations

     EPA should consider judicial action in ail  cases where schedule
     slippage for major POTWs  jeopardizes the July 1, 1988 deadline
     (and for minors as resources allow).

III.  Candidates and  Priorities  for  Enforcement Action

     major POTWs  tnat  are  not  yet on  enforceable schedules shoulc
     be  considered candidates  for judicial action except where
     t.nere is a reasonaole expectation that the  POTW can meet *-he
     July 1,  1988 deadline"!  Regions  and States  should "ypically
     place low priority on action against §301vh) facilities,
     except where there are violations of requirements "hat will
     no"  be affecfced by "he v/aiver process.  Where a POTW does no"
     have  final effluen" limits,  "ha" facili"y should be excluded
     from enforcement  until resclu"ion of applicable effluen"

     1988.  Where aa^cr POTVrs  are on  S"ate non^ucicial schedules
     "nat  extend beyond July 1,1988, especially where schedules
    appear to be excessively  long. Regions should initiate judicial
    actions  for those facilities with schedules that extend the
     farthest past the deadline.  In  other cases, especially where
     it  appears "ha" "ae facili"y v.ill complete  construction
     before the deadline bu" not  achieve compliance  until afterward.
     Regions  should  issue adninistra"ive orders  for  penalties.*

     Regions  should also iru"ia"e soae judicial  ac"ions against
    nnor PCTWs  in this category.  Where resources  preclude
     judicial ac"ion,  Regions  should  use adminis"rative orders
     for penalties.

     POTWs on Federal  and  State enforceable schedules are r.ot
    mixing acceptable progress,  Regions "should  escalate the
    enforcement response based on the length  of delay  in aee"ing
    Eey  milestones.  Where major PCTWs are on administra"ive
    schedules and have missec "heir  "s"ar" construction" da"e by
    ^ore  "han 90 days and are likely "o aiss  "-.e July  1, 1993,
    deadline as a result, Regions anc Stages  should "ake  judicial
    action?  ad"u-us"ra»-ive orders £or penal" iss may be used  for
    soae of  "he less  serious  cases involving  major  POTWs and  for
    ninor POTW.S if resources  are no" sufficien" "o  proceed WIT.
     judicial ac"icn.*  In cisen  where major and ninor  POTWs  are  on
    nonjudicial scnedaies ana slippage of 90  days will no"  jeopar-
    dize  nee" ing "he  J-l.. I,  1998 deadline, Regions and S*-a"es
    shouli ^ssue aani-us-r i" ive  orders for penalties.
*  Ir. "fese *«o cases, AOs -c. penal" les only  should  oe  used
ra»--er »--ian AOs »-o ex"end "ie schedule.

    *here any facility fails *-o comply wi*n any aiies»-or.e  in a,
    judicial order, Regions and S"a*-es snould demand S*-ip-ila-a-
    penalties or impose sanctions as defined in «-ne  judicial

    FILED IN A TIMELY MANNER; Where major POTWs are on  S*ate
    "Judicial orders that do""not contain appropriate timetables
    and/or obtain a grossly deficient penalty or equivalent sanc-
    tion EPA should initiate direct Federal action.  Where cases
    have been referred but not filed in a timely manner, EPA
    should initiate direct Federal action.  In making determina-
    tions regarding appropriate timetables, Regions snould consider
    the following factors: schedules '•-ha* do not appear *o have z
    sound technical basis or financial justification; schedules
    t-nat are significantly extended in order *o allow a facility
    t-o obtain a construction grant; and schedules  that  depend  on
    receipt of a construction grant and would be unenforceable in
    »-he event »-he grant is not awarded.  With respect to penalties
    or equivalent* sanctions, Regions should adhere to the  National
    Oversight Guidance *-ha* calls for direct Federal action where
    a penalty (or equivalen*- sa .c^ion) is grossly  deficient  in
    the circumstances of a given case (page 19).   With  respect to
    *iseliness of referrals, Regions should use  the  guidelines in
    the National Oversight Guidance «-ha<- call for  cases to move
    from referral to filing in 60 - 90 days  (page  13).

In carrying ou* *"his entire enforcement strategy,  Regions  s^o^li
be familiar with the "Guidance on S«-ate Actions  Preempting Civil
Penally Actions," which was recently circulated  in conjunction
wi«*h ••he materials prepared to support implementation of the  new
WQA administrative penally authorities.

Regional Comments on the Draft Enforcement  Strategy

    The primary comment's on the strategy  involved  EPA's ability
*o assess administrative penalties when <-here are  violations of
administ-ra'.ive schedules.  A strict reading of  the st-atu*-e shows
that 309Cg) administrative penalties  may  not-  be assessed direc*!/
for violations of a compliance schedule in  an  309(a)  administrative
order.  This, however,  is no*  inconsistent  wifh *"he  enforcement
strategy.  A penalty assessment  in such a  case  would be based on
violations of the underlying permit-  limits  (which were used as
*-he basis for issuing t-he 309(a) order.)   Essentially,  a 309(a)
order implies «-hat EPA  will  refrain  (informally) from enforcing
*-he underlying permi«- violations  if  *-he permif-ee complies wi*h
«-he 309(a) adminis*- ra* i ve schedule,   rfhen the permittee violates
*-ne administrative schedule,  '•he  underlying periii'- viola*-lor.s are
no*-, (informally)  'excused1  ana are  subjec*-  to further enforce-en*-.
In *-his case, *-he  enforcemen1-  is  *-hrough  assessmen*- of an
adminis*-ra*ive penally.   The  scared  basis of a 309(g)  penally  in
"aese cases will alwa/s oe  *-ue underlying pertii*- violations,
      j.s  consis'-ei'-  *if-  fr\e  guidance on ad3iinis«-ra*-ive penal1-.es

       '                     WASHINGTON  OC 20460
                              SEP : . 1387
    SUBJECTS  NMP Enforcement Strategy
    FROM:     James Srr-SKXSt] Director
                     of Water Enforcement & Permits
    TO:       Water Management Division Directors
              Regions I-X

         Attached is the NMP Enforcenent Strategy and the list of
    your Region's enforcement candidates that is the key to carrying
    out the final push to July 1,  1988.  We have reviewed comments
    from nine Regions and have incorporated them into the final
    strategy.  Regional responses were generally positive and sup-
    portive of the strategy.  The draft strategy was also discussed
    with ASIWPCA's Compliance Task Force which agreed in principle.
    There were some concerns expressed over the proper use of §309(_)
    administrative penalties and these have been addressed in this
    strategy as well as the agency guidance on the subject.  Each
    Region should work with its States to carry out this strategy.
    Approximately 60 POTWs in seven Regions have been targeted by
    either the Region or the State for enforcement action.  In most
    cases, this will occur before the end of the first quarter
    FY 1988.

         The Administrator is sending a memorandum to your Regional
    Administrators stating his interest and asking for support- m
    achieving the goals of the Policy.  The Enforcement Division will
    continue to track the progress of these candidates (and others)
    monthly and will keep the Adminstrator apprised of the status of
    the Policy throughout the year.  The status information the Regions
    provided in response to our draft list of enforcement candidates
    gave evidence of good State oversight and we look forward to main-
    taining this level of knowledge.  I encourage you and your staffs
    to wor< closely with my staff to make the best accounting possi  le
    of our achievements.

                        WASHINGTON  DC  20460
                           SEP 2ZI987

                                            —   THE ADMINISTRATOR

SUBJECT:   National Municipal  Policy  Enforcement

TO:        Regi-  -1 Administrators

     Following the Office of  Water's FY  1987 National Municipal
Policy  (NMP) Regional Audits  and mid-year program  evaluations,
I received an update from Larry Jensen on EPA Regional and State
progress  in carrying out the  Policy.  I  then discussed our
progress  with you at the June 25th Regional Administrator's
meeting.   I am convinced we must continue to demonstrate strong
senior management support in  the final phases of the NMP effort.

     We have achieved a great deal since the Policy was signed
in January 1984.  At that time, about 41% of our major POTWs
had not installed the treatment necessary to meet  CWA require-
ments (over 1500 facilities).  Since 1984, over 400 major POTWs
have achieved compliance and  all but 30  of the remaining majors
are on enforceable schedules  or have been referred for judicial
action.  Although this represents an early positive return on our
efforts,  I am still concerned about the  remaining workload that
must be addressed.

     If we are to fulfill the objective  of the Policy, we must
continue  to push for the settlement of more than 100 EPA and
^tate referral actions as well as oversee and enforce over 100
c.PA and State consent decree  settlements or judicial actions.
Further, and equally important, we must  assure that wastewater
treatment system constructior for over 800 major POTWs on permits
or administrative orders is completed in a timely manner to
bring these facilities into compliance.  Recently  surfaced
facts on construction schedule slippage  are alarming.  In the
Office of Water FY 1987 NMP audits, the  EPA Regions estimated
229 major POTWs with schedules  ast July 1, 1988 (96 with
existing post-1988 schedules  a'
                             - 2 -

over 750 minor POTWs will require schedules past July 1988.
SPA and Che States must act to set initial enforceable schedules
for many facilities and take timely and appropriate enforcement
action to stem the mounting number of violated schedules.

     Given the size of the job and the time remaining until
July 1, 1988, I ask that you become personally involved in
seeing that your Region and States work together to:  1) maintain
intensive oversight and tracking of remaining uncompleted POTWs,
2) enforce compliance schedules, and 3) assure that all Region
and State actions are taken in a nationally consistent manner.

     To assist in this final push toward July 1988, I have
approved an enforcement strategy aimed at the following types of
noncomplying POTWs:

     *  Majors not yet on enforceable construction schedules
        or referred.

     0  State nonjudicial construction schedules past July

     *  Construction schedules that are not making acceptable

     0  Deficient State judicial actions and unfiled referrals.

     This strategy has been transmitted to your Water Management
Divisions along with a mutually developed list of candidates
for enforcement action.  I plan to monitor our progress regularly
on the remaining workload.  This activity will continue to be a
focal point of our future meetings and I expect that you will
keep this high on the agenda with your States.  We must work
together in the coming months to successfully complete implemen-
tation of the National Municipal Policy.
                                      Lee M. Thomas

"National Municipal Policy Enforcement", dated  September 22,  1987,  with
                                                                           _ v./

"Interim Guidance on Joining States as Plaintiffs," dated December 24,
1986, as corrected February 4, 1987.  Reproduced at IV.B.32., this

 Petnedial  measures
          For purposes of evaluating and initiating civil
 actions against POTW's, all referral packages should contain
 an analysis of the POTW«a compliance deficiencies and the
 possible  solutions to those problems.  As explained in prior
 conwunicatIons with your office ^/, our goal is to develop
 sufficient information to allow us to present a particularized
 plan of action for compliance, Including practical alternatives,
 to the court.  The need for such Information Is three-pronged:
 1) development of an appropriate remedial program is important
 in these  cases; 2) consideration of available remedies is
 vital to  a financial capability evaluation; and 3) it is
 crucial that we demonstrate that compliance is reasonably
 attainable by the municipality.
          In a memorandum dated December 1M, 19*2, former
Associate Water Enforcement Counsel Louise Jacobs stated that
municipal enforcement referrals should contain the following
 regarding remedy:
          Information about alternatives for
          solving the problem which are likely,
          in the opinion of an informed Individual,
          to be successful.  The informant should
          be someone who knows the plant, is familiar
          with the kind of violations occurring, is
          knowledgeable about sewage treatment systems
          in general, and is of the opinion that.these
          particular violations are possible to solve
          by one of several alternatives posited.  The
     See memorandum of Stephen D. Ramsey dated January 3* 19?3.

                            -  2  -

          Informant should be  identified  In  tbe referral.
          A JRB [diagnostic] report  may ordinarily
          suffice to meet this requirement.

          We concur with these criteria.  Such information should

overcome any threshhold concerns regarding whether  compliance

Is reasonably attainable by the POTW.

          At a minimum each referral should  Include the

following Information concerning compliance:

          1.  A technical explanation of  the causes
          of the violations, Including what  equipment
          and/or management systems  are inoperative or
          ineffective; problems caused by excessive
          hydraulic or organic loadings;  causes  of
          any bypasses of treatment  -or collection
          systems;  and how the breakdown  or  deficiency
          rela: 3 to the particular  violations.

          2.  A description of the types  of  corrective
          act  is which will re-edy  the violations.
          Thl  ;hould Include an analysis, based on
          knov .edge of the treatment works and  load
          characteristics, of whether the problems
          can be cured by changes  In operation  and
          maintenance practices, whether  new equipment
          Is needed, or whether some combination
          thereof is necessary.

          3.  Where construction appears  warranted,
          a general description of the appropriate
          technology should be given, Including
          information on whether any special or
          unique circumstances exist that would
          necessitate more elaborate equipment,
          construction problems, etc.

          4.  Where construction appears  warranted,
          credible estimates of the  costs involved
          and the time needed for implementation'.
          This should include an evaluation  of whether
          the 7/1/F  date can be met.

           5.  A full description of tj-e POTU's
           past and current grant activities  and  future
           prospects, including documentation of
           significant events or agreements.   This would
           Include all funded proje  ts  or eligible
           projects under applicatl  ~.
           Also, evidence and analysis  of a recent plant
 inspection by EPA (or the State) should be included, which
 would document the violations and assess compliance  problems.
 Also, we strongly urge that to the  extent possible each
 referral be accompanied by a JRB report or other detailed
 diagnostic report.  Such information quickly puts us In
 command of salient facts, aiding both  trial  preparation  and
 settlement discussions. V
           The information listed above should be included
 in  all  referrals,  regardless of the potential for quick
 settlement.   To evaluate the merits of settlement or to
 proceed with litigation of any referral, we  need to have the
 background Information necessary to support  a fully-litigated
V   We suggest that, to the  extent  possible,  the "informant"
"""    supplying this information  be FPA  or contractor personnel
who presumably would be available for case preparation and
trial purposes.

 Financial Capacity

           We will contend  In  litigation that a municipality
 must comply with the  Clean Water Act regardless of the availability
 of public grant  funds or the  existence of other municipal
 expenditures.  Thus,  as  a  matter of law, we argue that munici-
 palities  cannot  raise financial impossibility as a defense to
 Judicial  enforcement  actions.  Nonetheless, municipalities
 frequently attempt to make showings of financial hardship,
 often with the sanction  of the court.
           Thus,  where the  region reasonably anticipates at
 the time  of referral  that  the municipality may raise financial
 capability as an Issue in  litigation, civil referrals should
 Include a threshhold  financial evaluation.  Financial evaluations
 are particularly necessary In those cases which will involve
 large  capital outlays  to finance large, long-term plant
 construction, expansion  and/or rehabilitation projects by the
 municipality.  Such projects  typically require outside financing.
 Also,  in  cases where  a large  upfront penalty is sought or
 where  sizeable amounts need to be spent to revamp operation
 and maintenance  practices, financial Information is necessary.
          The analysis should allow a determination that a
 given  remedy or  range  of remedial options, reasonably related
 to compliance, will not  be impossible for the municipality to
finance.  Through  such analysis we should be able to determine,
for purposes of  evaluating the litigation merits of a given

                            - 2 -

 referral, that financial capacity Issues will not be a bar  to
 obtaining relief.  This test would assure that the government
 can expect to rebut competently (at a later stage In the
 litigation) a showing by the municipality that It cannot
 afford to comply.  This Initial analysis would not approach
 the scope or detail of an evidentiary presentation necessary
 to rebut a well-presented financial hardship showing.
          To facilitate a preliminary financial capability
 determination, we recommend that the regions gather and
 analyze two types of basic information: 1) financial condition
 and revenue-raising ability of the municipality and 2) cost
 of necessary remedial measures.
          First, we understand that the Agency will use its
Financial Capability Guidebook and other guidance materials
to do a basic work-up of the municipality's financial picture.
 Information necessary for the analysis should be obtainable
 by the regions from local authorities and other sources.
This basic evaluation would include the following information:
          1.   the current bond rating and capacity
              of the municipality;
          2.   the amount of outstanding Indebtedness
              and other factors which may impinge
              on the municipality's ability to fund
              remedial programs;
          3*   population and Income Information;

           &.   g'rant  eligibility and past grant
           5.   state  or  local laws which Unit the
               municipality's ability to raise funds
               for  remedial programs; and
           6.   the  presence or absence of user charges
               and  whether Increased user charges would
               be an  effective fund-raising mechanism.

           Second,  the Agency should develop credible cost
 figures on the major components of the necessary remedial
 program.   Such information should be generated as part of
 the remedial analysis of the referral.  For purposes of
 preliminarily  evaluating financial condition and preparing
 to rebut financial impossibility showings, we suggest an
 analysis of the "worst  case" scenarios, i.e. the most
 expensive  (but reasonable) compliance options.  For such
 remedies,  or anything less expensive, we can prepare to
 effectively rebut a  hardship claim.
           In this perspective, then, the referral can produce
a rough-cut "snapshot"  of the financial burden of a given
           Should the municipality make claims of financial
hardship in the litigation, we will need to develop this
information further  with the assistance of a municipal finance

expert.  For NMP referrals, we understand that the Agency
will also utilize the services of its outside financial
consultants (who presumably would later be our expert witnesses
as well) for this purpose.  Such an expert should be retained
before discovery commences to enable the expert to participate
in developing   discovery plan, Interrogatories and requests
for production on this issue.

                  UHJTED  STATFS ?IS*"PICT COURT
                          1 DISTPICT OF [
 UNITED STATES OP AMERICA,             )  »
               Plaintiff,              )
       v.                              }         CIVIL ACTION MC.
 and THE STATE OP [        ]            )
               Defendants.             )
          Plaintiff, the United States of America, by authority
 of  the Attorney General of the United States, and at the request
 of  the Administrator of the United States Environmental Protec-
 tion Agency  ("EPA"), alleges as follows:
          1.  This  Is a civil action brought pursuant to
 Sections 309(b) and (d) of the Clean Water Act ("the Act"),
 33  U.S.C. §§ 1319(b), (d) for injunctlve relief and the assessrer.t
 of  a civil penalty  against the [City of   /   Utility Authority] for
 violations of the Act and the [City's/Utility Authority's] National
 Pollutant Discharge Elimination System ("NPDES") Permit
 issued by [EPA   /State of           ] pursuant to Settlor
 402 of the Act, 33  U.S.C. $ 1342, and against the State of
 C            ] pursuant to Section 309 (e) of the Act, 33
U.S.C. § 1319(e).
          2.  This  Court has Jurisdiction over this action
 pursuant to Section 309(b) of the Act, 33 U.S.C $ 1319(b),

and 28 U.S.C. ? IS**1).  Plaintiff has notified the  State  of
[      ] of the commencement of this action pursuant to  Section
309(e) of the Act, 33 U.S.C. § 1319(e), by naming the State
of '[      ] as a party.
          3.  Defendant [City of        /        Utility
Authority] ("the City"/ "Utility Authority"), is a political
subdivision of the State of [    ] within the [          ]
District of [state] and is a "municipality" within the meanin*
of Section 502(1) of the Act, 33 U.S.C. § 1362(U).
          4.  Defendant State of [     ] is a party to this
action for relief pursuant to Section 309(e) of the Act,
33 U.S.C. S 1319(e).
          5.  At all relevant times the [City/Utility Authority]
owned and operated, and continues to own and operate, a
sewage treatment plant known as the [name] Sewage Treatment
Plant ("[   ] STF"), a publicly-owned treatment works located
in the City of [          ], [    ] County, [State],  The
[name] STP treats and treated wastewater from residential,
commercial, and industrial sources located in [city, state ].
          6.  The [name] STP discharged and discharges pollutants
Into [receiving stream], thence into the [name] Fork of the [name]
River, thence into Lake [name] of the [name] River Basin.
These discharges were and are discharges of pollutants into
navigable waters as defined by Sections 502(7) and  (12) of
the Act, 33 U.S.C. $$ 1362(7) and (12).

           7.   Section 301(a)  of the Act, 33 U.S.C. § 131l(a),
 prohibits the discharge  of  any pollutant except in accordance
 with Section  301  of  the  Act,  33 U.S.C § 1311, and as authorized
 by and in compliance with a permit Issued