U.S. Environmental Protection Agency
                               Office of Enforcement and Compliance Assurance
                       Office of Regulatory Enforcement,  Multimedia Enforcement Division

                        GENERAL ENFORCEMENT POLICY  COMPENDIUM
                                              December 1994
        The General Enforcement Policy  Compendium  is a collection of enforcement policies and guidances that
apply to more than one program.  Medium-specific policies are found in their respective statute-specific
compendiums.  All the documents contained in this Compendium are releasable to the public in their entirety.

        The enforcement program established the Compendium in 1982.  At that time, it contained only 11
documents.  By 1993, the Compendium included 90 documents numbered from GM-1 through GM-90.  The Office
of Enforcement  and  Compliance  Assurance (OECA) revised and redesigned the Compendium in  1994.  As part of
this effort, OECA developed a new numbering system for the documents in the Compendium.   In order to allow  for
continuity, those documents retained from the previous version of the Compendium have both the old and new
document  numbers.

        The Compendium consists of three parts.  The first is the Table of Contents, which  is a list  of documents
divided into fifteen subject headings.  The second is  a new Descriptive Index,  containing capsule  summaries of
each of the documents contained in the  Compendium.  The third part  consists of the actual documents themselves.

        If you are searching for a document but  do  not  know its title, we suggest  you  first  look in the Table of
Contents in the appropriate section.  Once you find a document that you think might provide  the needed guidance,
read the summary in the  Descriptive Index to make sure  it is the appropriate one. Some document titles may not
effectively indicate the contents of those documents.  After you think you  have  the correct document, locate it  in
the Compendium in the appropriate section.

        OECA has widely circulated The Table of Contents and Descriptive Index electronically and through hard
copies.  Copies  of the full Compendium can be found  in the following  locations:  EPA Libraries in  Headquarters,  the
Regional Offices, Regional Laboratories and DOJ;  Regional Counsels; Regional Environmental Services Divisions
(those located outside the main  Regional Offices); Office  Directors and Division Directors in OECA (including NEIC in
Denver); Special Agents in Charge; and Office of General Counsel.

        If you have any questions about  the General  Enforcement Policy Compendium, please  contact  Jonathan
Libber of the  Multimedia  Enforcement Division at  (202) 564-6011.

-------
GENERAL  ENFORCEMENT  POLICY




               COMPENDIUM
                   Volume  I

-------
TABLE OF CONTENTS

-------
                                                        12/1/94
              GENERAL ENFORCEMENT POLICY COMPENDIUM

                       TABLE OF CONTENTS
DESCRIPTIVE INDEX
CROSS INDEX
COMPENDIUM DOCUMENTS
I.
REFERRALS
     B.
     RF.l   General Procedures and Goals
     RF.1-1:  Memorandum of Understanding Between DOJ and
              EPA  (GM-3) (June 15, 1977)
     RF.1-2:  Draft DOJ/EPA Litigation Procedures (GM-8)
              (April 8, 1982)
     RF.1-3:  Model Litigation Report Outline and Guidance
              (GM-48)  (January 30, 1986)
     RF.1-4:  General Operating Procedures for EPA's Civil
              Enforcement Program  (GM-12) (July 6, 1982)
     RF.1-5:  Implementing Nationally Managed or Coordinated
              Enforcement Actions  (GM-35) (January 4, 1985)
     RF.1-6:  Policy on Invoking Section 9 of the EPA/DOJ
              Memorandum of Understanding (GM-63)
              (August 20, 1987)
     RF.1-7:  Headquarters Review and Tracking of Civil
              Referrals (GM-26) (March 8, 1984)

     RF.2   Direct Referrals
     RF.2-1:  Expansion of Direct Referral of Cases to DOJ
              (GM-69)  (January 14, 1988)
     RF.2-2:  Implementation of Direct Referral for Civil
              Cases  (GM-18)  (December 1, 1983)

     RF.3   Delays in Filing Cases
II,
          RF.3-1:
          RF.3-2
PENALTIES
              DOJ Procedures for Returning Certain Unfiled
              Cases to EPA for Further Processing  (GM-78)
              (November 12, 1987)
              Hold Action Requests  (GM-90)
              (November 16, 1990)
     A.   PT.l   General Procedures and Goals
          PT.l-l:  Policy on Civil Penalties  (GM-21)
                   (February 16, 1983)
          PT.1-2:  A Framework for Statute-Specific Approaches  to
                   Penalty Assessments  (GM-22)
                   (February 16, 1984)

-------
          PT.1-3:  Documenting Penalty Calculations  and  Justi-
                   fications in EPA Enforcement Actions  (GM-88)
                   (August 9, 1990)
          PT.1-4:  Remittance of Fines and Civil Penalties
                   (GM-38) (April 15, 1985)
          PT.1-5:  Guidance for Calculating the Economic Benefit
                   of Noncompliance for a Civil Penalty
                   Assessment (GM-33) (November 5, 1984)
          PT.1-6:  Division of Penalties with State  and  Local
                   Governments (GM-45) October 30, 1985)

     B.   PT.2	Mitigation
          PT.2-1:  Guidance on Determining a Violator's  Ability
                   to Pay a Civil Penalty (GM-56)
                   (December 16,  1986)
          PT.2-2:  Policy on the Use of Supplemental Environ-
                   mental Projects in EPA Settlements  (GM-77)
                   (February 12,  1991)
          PT.2-3:  Guidance on Calculating After Tax Net Present
                   Value of Alternative Payments (GM-51)
                   (October 28,  1986)

     C.   PT.3   Stipulated Penalties
          PT.3-1:  Use of Stipulated Penalties in EPA Settlement
                   Agreements (GM-75) (January 24, 1990)
          PT.3-2:  Procedures for Assessing Stipulated Penalties
                   (GM-67) (January 11,  1988)

    D.     PT.4  Confidential Information (see Descriptive Index
          for Summaries of BEN and ABEL case memoranda which are
          not contained in the Compendium)

          PT.4-1:  Economic Benefit from Noncompliance: An
                   Analysis of Judicial and Administrative
                   Interpretation (August 1, 1993) (GM-no)

          PT.4.2:  Ability to Pay — for Profit Entities: An
                   Analysis of Judicial and Administrative
                   Interpretation (August 1, 1993) (GM-no)


III. CONTRACTOR LISTING

     A.   CL.l   General Listing
          CL.1-1:  US Environmental Protection Agency Contractor
                   Listing Procedures and Guidance (May  1993)

     B.   CL.2   Discretionary Listing
          CL.2-1:  Guidance on Implementing the Discretionary
                   Contractor Listing Program (GM-53)
                   (November 26,  1986)

-------
   '  C.   CL.3   Asbestos
          CL.3-1:  Asbestos Contractor Listing  (GM-no)
                   (June 30, 1988)
          CL.3-2:  Defining the "Violating Facility" for
                   purposes of Listing Asbestos Demolition and
                   Renovation Companies Pursuant to Section 306
                   of the Clean Air Act (GM-no) (March 11, 1988)

     D.   CL.4   Mandatory Listing
          CL.4-1:  Implementation of Mandatory Contractor Listing
                   (GM-32)  (August 8, 1983)
          CL.4-2:  EPA Policy Regarding the Role of Corporate
                   Attitude, Policies, Practices, and Procedures
                   in Determining Whether to Remove a Facility
                   from the EPA List of Violating Facilities
                   Following a Criminal Conviction  (GM-no)
                   (October 31, 1991)


IV.  SETTLEMENTS

     A.   SE.l   Procedures
          SE.1-1:  Form of Settlement in Civil Judicial Cases
                   (GM-42)  (July 24, 1985)
          SE.1-2:  Guidance on the Use of Alternative Dispute
                   Resolution in EPA Enforcement Cases (GM-62)
                   (August 14, 1987)
          SE.1-3:  Process for Conducting Pre-Referral Settlement
                   Negotiations on Civil Enforcement Cases
                   (GM-73)  (April 13, 1988)
          SE.1-4:  Enforcement Settlement Negotiations (GM-39)
                   (May 22, 1985)
          SE.l.5:  Policy Against "No Action" Assurances  (GM-34)

     B.   SE.2   Terms of Settlement
          SE.2-1:  Multi-media Settlements of Enforcement Cases
                   (GM-80)  (February 6, 1990)
          SE.2-2:  Interim Policy on the Inclusion of Pollution
                   Prevention and Recycling Provisions in
                   Enforcement Settlements (GM-79)
                   (February 25, 1991)
          SE.2-3:  Final EPA Policy on the Inclusion of
                   Environmental Auditing Provisions in
                   Enforcement Settlements (GM-52)
                   (November 14, 1986)


V.   CRIMINAL ENFORCEMENT POLICIES THAT IMPACT CIVIL ENFORCEMENT
     A.   CP.l  Parallel Proceedings
          CP.1-1:  Parallel Proceedings Policy  (June 21, 1994)

-------
     B.   CP.2  Case Management Procedures
          CP.2-1   The  Exercise of  Investigative  Discretion
                    (January  12, 1994).
          CP.2-2   Referral  of Criminal  Cases  for Prosecutive
                   Action  (March  2,  1993).


VI.  PUBLICITY

     A.   PB.l   Civil  Enforcement
          PB.1-1:  Policy  on Publicizing Enforcement Activities
                   (GM-46) (November 21, 1985)

     B.   PB.2  Criminal Enforcement
          PB.2-1   Policy  on Responding  to Public or Media
                   Inquiries Regarding Criminal Cases
                   (December 22,  1989).
VII. REGULATORY DEVELOPMENT

     A.   RG.l   General Procedures and Goals
          RG.1-1:  Issuance of Enforcement Considerations for
                   Drafting and Reviewing Regulations &
                   Guidelines for Developing New or Revised
                   Compliance and Enforcement Strategies (GM-58)
                   (August 15, 1985)
          RG.1-2:  A Summary of OE's Role in the Agency's
                   Regulatory Review Process (GM-47)
                   (January 27, 1986)
          RG.1-3:  The Regulatory Development Process: Change in
                   Steering Committee Emphasis and OE
                   Implementation (GM-59) (February 6, 1987)
          RG.1-4:  Ex Parte Contacts in EPA Rulemaking (GM-4)
                   (August 4, 1977)


VIII. STATE/FEDERAL AGREEMENTS

     A.   SF.l   General Procedures and Goals
          SF.1-1:  Revised Policy Framework for State/EPA
                   Enforcement Agreements (GM-41)
                   (June 26, 1984)
          SF.1-2:  Guidance for the FY 1989 State/EPA Enforcement
                   Agreements Process (GM-57) (June 20, 1988)


IX.  ORDERS AND DECREES

     A.   OR.l   Drafting and Modifying Orders and Decrees
          OR.1-1:  Guidance for Drafting Judicial Consent Decrees
                   (GM-17)  (October 19, 1983)

-------
          OR.1-2:  Procedures for Modifying Judicial Consent
                   Decrees (GM-68) (January 11, 1988)

     B.   OR.2   Monitoring and Enforcing Orders and Decrees
          OR.2-1:  Manual on Monitoring & Enforcing
                   Administrative and JudicialOrders (GM-86)
                   (February 6, 1990)
          OR.2-2:  Guidelines for Enforcing Federal District
                   Court Orders (GM-27) (April 18, 1984)
X.   FEDERAL FACILITIES

     A.   FF.l   Compliance Monitoring and Enforcement
          FF.1-1:  Federal Facilities Compliance Strategy  (GM-25)
                   (November 8, 1988)


XI.  TRACKING ENFORCEMENT ACTIVITIES

     A.   TK.l   General Procedures and Goals
          TK.1-1:  Agency Judicial Consent Decree Tracking and
                   Follow-up Directive (GM-76)  (January 11, 1990)
          TK.1-2:  Guidance on Certification of Compliance with
                   Enforcement Agreements (GM-74) (July 25, 1988)
          TK.1-3:  Revised Regional Referral Package Cover Letter
                   and Data Sheet  (GM-40) (May 30, 1985)
          TK.l-4:  Consent Decree Tracking Guidance  (GM-19)
                   (December 20, 1983)
          TK.1-5:  Procedures and Responsibilities for Updating
                   and Maintaining the Enforcement
                   Docket (GM-60)  (March 10, 1987)
          TK.1-6:  Enforcement Docket Maintenance (GM-61)
                   (April 8, 1988)
          TK.1-7:  Support of the Enforcement DOCKET for
                   Information Management in OECA
                   (October 3, 1994)


XII. CASE MANAGEMENT

     A.   CM.l   General Procedures and Goals
          CM.1-1:  Case Management Plans (GM-71)  (March 11, 1988)
          CM.1-2:  Regional Enforcement Management: Enhanced
                   Regional Case Screening (GM-85)
                   (December 3, 1990)
          CM.1-3:  Guidance on Evidence Audit of Case Files
                   (GM-20) (December 30, 1983)
          (See also Section V, CRIMINAL ENFORCEMENT POLICIES THAT
          IMPACT CIVIL ENFORCEMENT)

-------
XIII.  INSPECTIONS

     B.   IN.l   General Procedures and Goals
          IN.1-1:  Conduct of Inspections After the  Barlow's
                   Decision  (GM-5)  (April 11,  1979)
          IN.1-2:  Visitor's Releases and Hold Harmless
                   Agreements as a Condition to
                   Entry to EPA Employees
                   on Industrial Facilities (GM-1)
                   (November 8, 1972)
XIV.  COMMUNICATIONS

          CO.l  Communications with Litigants
          CO.1-1:  Contacts with Defendants and Potential
                   Defendants in Enforcement Litigation  (GM-6)
                   (October 7, 1981)
          CO.1-2:  "Ex Parte" Rules Covering Communications Which
                   Are the Subject of Formal Adjudicatory
                   Hearings (GM-7)  (December 10, 1981)
          CO.1-3:  Enforcement Document Release Guidelines
                   (GM-43) (September 16, 1985)
          (See also section VI PUBLICITY)
XV.  MISCELLANEOUS

     D.   MI.1   Other
          MI.1-1:  Assertion of the Deliberative Process
                   Privilege (GM-66)  (October 3, 1984)
          MI.1-2:  Strengthening the Agency's Administrative
                   Litigation Capacity (GM-89)  (May 3, 1989)
          MI.1-3:  Professional Obligations of Government
                   Attorneys (GM-2) (April 19, 1976)
          MI.1-4:  Liability of Corporate Shareholders and
                   Successor Corporations for Abandoned
                   Sites Under CERCLA (GM-28)1
                   (June 13, 1984)
          MI.1-5:  Interim Guidance on review of Indian
                   Lands Enforcement Actions  (October
                   21, 1992) attaching EPA Policy for
                   the Administration of Environmental
                   Programs on Indian Reservations
                   (November 8, 1984) (GM-no)
     xThis policy is to be transferred to the CERCLA Policy
Compendium after a generic policy is developed to take  its place.

-------
DESCRIPTIVE INDEX

-------
                                                     12/1/94
              GENERAL ENFORCEMENT POLICY COMPENDIUM

                        DESCRIPTIVE INDEX

I.   REFERRALS (RF)

     A.   RF.l  General Procedures and Goals

(GM-3)                                                  (RF.1-1)
     Memorandum of Understanding Between Department of
     Justice and the Environmental Protection Agency (June
     15, 1977)

     The Department of Justice (DOJ) conducts the civil
litigation of the EPA.  This document is a Memorandum of
Understanding (MOU) that clarifies the roles of DOJ and EPA
attorneys.  This memorandum contains 19 clauses, the first 15 of
which are the more substantive.  They are:

      (1) the Attorney General  (AG) has control over all cases to
which EPA or the Administrator is a party;

      (2) the Administrator may request that the AG permit Agency
attorneys to participate in cases;

      (3) EPA attorneys shall not file any documents in a court
proceeding without prior approval of the AG;

      (4) the AG has control over the conduct of all litigation
and allocates tasks among the attorneys employed by DOJ and
Agency participating attorneys;

      (5) if DOJ and EPA attorneys disagree over the conduct of a
case, the Administrator may obtain a review of the matter by the
AG;

      (6) settlement of any case where DOJ represents EPA requires
the concurrence of the Administrator and the AG;

      (7) EPA and DOJ conduct a joint annual review of DOJ's and
EPA's personnel requirements for Agency litigation;

      (8) DOJ must file cases within 60 days or report why
complaints have not been filed;

      (9) if DOJ hasn't filed within 120 days, the Administrator
can request DOJ to file within 30 days;

      (10) all requests for litigation shall be submitted by EPA
through the General Counsel or the Asst. Administrator for
Enforcement to the Asst. AG for the Land and Natural Resources
Division, and shall be accompanied by a standard litigation
report;

-------
      (11) EPA shall make the file of any matter that  is the
subject of litigation available to DOJ attorneys;

      (12) the Administrator shall review the Agency's procedures
for preparing the record in cases involving direct review  in the
Courts of Appeal;

      (13) negotiation of any agreement to be filed in court
requires the authorization and concurrence of the AG;

      (14) the AG shall defer to the Administrator's
interpretation of scientific and technical matters in conducting
litigation for EPA; and

      (15) this agreement doesn't affect the authority of the
Solicitor General to carry out his functions with regard to
appeals or petitions.


(GM-8)                                                 (RF.1-2)
     Draft Department of Justice/Environmental Protection
     Agency Litigation Procedures (April 8, 1982)

     These procedures were the result of a DOJ/EPA meeting to
strengthen enforcement efforts.  It is divided into two main
parts: a discussion of EPA enforcement goals and objectives, and
the Quantico Guidelines for Enforcement Litigation (reached as a
result of the meeting).

     Three EPA enforcement goals and objectives are stated: (1)
to support and advance the regulatory policies of EPA through the
use of all available enforcement means to ensure compliance,
deter unlawful conduct,  and remove incentives of noncompliance;
(2) to give the regulated community fair notice of EPA's policies
and the requirements they impose on the regulated community; and
(3) to establish regulatory policies and enforcement goals,
priorities and procedures to effectuate its policy initiatives
and to guide the Dept.  of Justice [DOJ] in its role as EPA's
litigation counsel.  The Quantico Guidelines are divided into
five parts:  (a)  goals & purposes; (b)  general observations; (c)
DOJ and EPA commitments; (d)  process [procedures]; and (e)
specific issues discussed (Superfund national strategy guidelines
and existing consent decrees).


(GM-48)                                                (RF.1-3)
     Model Litigation Report Outline and Guidance (January
     30, 1986)

     This guidance has two purposes: (a)  to create a common
understanding among Agency personnel and Dept. of Justice
attorneys as to what the litigation report needs to cover; and

-------
(b) to make the litigation report's form consistent.  This
guidance is a two-part document.  First comes the Model
Litigation Report - Outline.  The Model Litigation Report -
Guidance follows the Outline, addressing and explaining in detail
most of the items in the Outline.

     The Outline includes:  (1) cover page; (2) table of contents;
(3) synopsis of the case; (4) statutory bases of referral; (5)
description of the defendant; (6) nature of the violations;  (7)
enforcement history of the defendant and pre-referral
negotiations; (8) injunctive relief; (9) penalties; (10) major
issues; (11) significance of referral;  (12) litigation strategy;
and (13) attachments.


(GM-12)                                                 (RF.1-4)
     General Operating Procedures for EPA's Civil
     Enforcement Program  (July 6, 1982)

     This document describes the roles and relationships of the
various EPA offices which participate in enforcement activities.
Seventeen sections follow the introduction, the last three of
which are housekeeping clauses.  The substantive sections are, in
order of their appearance: enforcement objectives; roles and
relationships; delegations and concurrence requirements;
reporting requirements and Office of Legal and Enforcement
Counsel oversight; reviewing compliance and determining
responses; escalation; case development process; referral
process; Headquarters review of case development; post-referral
procedures; negotiations; enforcing consent decrees and final
orders; appeals; and communications/press relations.  The section
on roles and responsibilities is further separated into Regional
Administrators, Assistant Administrators, the Regional Counsel,
Enforcement Counsel matters, General Counsel matters, DOJ and
U.S. Attorneys' offices, policy coordination, coordination with
states, and EPA's accountability system.

     These procedures do not apply in any respect to the
development and referral of criminal cases.


(GM-35)                                                 (RF.1-5)
     Implementing Nationally Managed or Coordinated
     Enforcement Actions  (January 4, 1985)

     This guidance addresses how EPA shall handle administrative
and judicial civil enforcement cases which are managed or
coordinated at the EPA Headquarters level.  The policy was
developed to ensure that such actions are identified, developed,
and concluded in a manner consistent with the principles set
forth in the Policy Framework for State/EPA Enforcement
Agreements.

-------
     The guidance covers:  (1) the criteria for nationally managed
or coordinated enforcement cases; (2) roles and responsibilities
in the process for identifying nationally managed or coordinated
cases;  (3) roles and responsibilities in case development; and
(4) press releases and major communications.


(GM-63)                                                 (RF.1-6)
     Policy on Invoking section 9 of the EPA/DOJ Memorandum
     of Understanding (August 20, 1987)

     This policy states EPA policy on the authority of EPA
attorneys to represent the Agency in litigation.  Primary
responsibility for litigating all EPA judicial cases is assigned
under the Memorandum of Understanding (MOU) to the Dept. of
Justice [DOJ] upon referral from EPA.  If a complaint is not
filed within 120 days of the referral, EPA can request the
Attorney General to file within 30 days.  If DOJ does not comply,
EPA may represent itself in court by invoking Section 9 of the
MOU.

     The policy first describes the MOU in detail, then discusses
current (1987) experiences, stating that EPA has rarely notified
DOJ of its intention to invoke Section 9 of the MOU and appoint
Agency attorneys to represent itself, although a number of cases
have fallen within.its scope.  Next, the memo presents
considerations affecting invoking Section 9:  (a)  the reason(s)
why the case remains unfiled; (b)  the Agency interest to be
served by assuring filing of the case sooner; (c)  the ability of
EPA to handle the litigation without DOJ involvement and support;
(d)  the desire to maintain DOJ involvement in cases; and (e)  the
likelihood of filing a complaint in the near future if Section 9
is not invoked and whether or not invoking Section 9 is likely to
accelerate filing.   The GM then describes the procedures for
invoking Section 9 — who, what cases, and how.   It concludes by
stating that the Office of Regional Counsel has the primary
responsibility to provide legal support to prosecute and manage a
case where the Agency has invoked Section 9.


(GM-26)                                                (RF.1-7)
     Headquarters Review and Tracking of Civil Referrals
     (March 8, 1984)

     This policy clarifies the relationship between the Office of
Compliance Monitoring and the Regional offices with regard to the
handling of civil enforcement litigation.  GM-26 is composed of
the following: (1)  Classification of Referrals;  (2)  Evaluation of
Direct Referrals; (3) Tracking All Referrals in the Computer
Docket; (4)  Referrals Requiring Concurrence;  and (5) Managing the
Civil Enforcement Docket.

-------
     The first section, "Classification of Referrals," lists the
four classes of cases in the Agency's civil enforcement program
and briefly describes the appropriate roles of Headquarters and
the Regional offices for each class.

     The next section, "Evaluation of Direct Referrals,"
addresses the review criteria for direct referrals.  It explains
the appropriateness of direct referrals, the format of the cover
memorandum, and the substantive adequacy of direct referral
packages.  In addition, the procedures to be followed in cases of
erroneous direct referrals are briefly explained.

     The third and fourth sections are extremely succinct.  The
third describes the procedures for the tracking of referrals in
the computer docket and the fourth discusses how to handle
referrals requiring concurrence.  The last section explains the
duties of Enforcement Counsels.
     B.   RF.2  Direct Referrals

(GM-69)                                                (RF.2-1)
     Expansion of Direct Referral of Cases to DOJ (January
     14, 1988)

     EPA and the Dept. of Justice [DOJ] agreed to expand the
categories of civil judicial cases to be referred directly to DOJ
from EPA Regional offices without the concurrence of the Asst.
Administrator for the Office of Enforcement [OE].  This
memorandum offers guidance to EPA personnel regarding procedures
to follow in implementing the expanded referral agreement.

     The section covering procedures is divided into six parts.
First, the guidance addresses cases subject to direct referral.
Second, the memorandum explains preparation and distribution of
referral packages (which require a cover letter summarizing eight
listed elements of the case, the litigation report,  and the
documentary file supporting the litigation report).   Third, the
guidance discusses identification and resolution of significant
legal and policy issues (Region has the initial responsibility to
identify the issues, OE and Headquarters [HQ]  program office
review them, and DOJ reviews them and consults with OE and
Region).  Next, the memorandum discusses case quality and
strategic value.  Withdrawal of cases prior to filing and
maintenance of the Agency-wide Case Tracking System are discussed
last.

     There are four attachments: (1) the EPA-DOJ agreement of
January 5, 1988; (2) an outline of the direct civil referral
process as the Agency intends to implement it; (3) a list of
types of cases which will continue to be referred through HQ; and
(4) RF.2-2 (Implementation of Direct Referrals for Civil Cases).

-------
 (GM-18)                                                  (RF.2-2)
     Implementation of Direct Referral for Civil Cases
     (December 1, 1983)

     This document guides EPA Headquarters and Regional personnel
regarding procedures to follow in implementing the 9/29/83 EPA-
DOJ direct referral agreement.  The major part of the guidance
addresses procedures for cases subject to direct referral.  The
other two parts briefly discuss cases not subject to direct
referral (which go through the Office of Enforcement [OE] with a
target 21-day turnaround) and measuring the efficacy of the
direct referral agreement.

     The attached agreement lists categories of cases which can
be referred directly from the Regional Administrator to the Dept.
of Justice [DOJ]; all others must continue to be reviewed by
Headquarters OE and referred by the Asst. Administrator for OE to
DOJ.  The major part of this implementation guidance first
addresses the contents of a referral package: a cover letter
including a summary of eight listed elements, the litigation
report, and the documentary file supporting the litigation
report.  This part next addresses DOJ responsibilities under the
agreement,  then explains Headquarters OE responsibilities.  The
major part concludes with a section discussing settlements in
cases subject to direct referral, where the Asst. Administrator
for OE shall continue to approve all settlements and consent
decree modifications,  even in direct referrals.


     C.   RF.3  Delays in Filing Cases

(GM-78)                                               (RF.3-1)
     DOJ Procedures for Returning Certain Dnfiled Cases EPA
     for Further Processing (November 12, 1987).

     This policy briefly explains 1987 Department of Justice
(DOJ)  procedures to clear its enforcement docket of EPA cases
that remain unfiled at DOJ for more than sixty days after
referral while the Region is negotiating a consent decree or
compiling additional information to support its filing.

     It continues to describe four ways that cases returned under
this procedure could be reactivated by DOJ.  DOJ will reactivate
the case if the Region: (1)  provides the requested additional
information necessary for filing; (2) forwards a signed consent
decree for processing; (3) notifies the Office of Enforcement and
DOJ that the progress of the negotiations no longer justifies
further delay in the filing of the complaint and requests that a
complaint be filed; or (4) EPA resolves and internal policy
conflict affecting the filing.

-------
(GM-90)                                                (RF.3-2)
     Procedures for "Hold Action" Requests (November 16,
     1990)

     This policy gives detailed procedures by which Regional
Counsel and Enforcement Counsel may request that the Department
of Justice (DOJ) delay filing of a case which has been referred
to DOJ.  It begins by stating that such requests are generally
disfavored.  In order to reduce the need for such requests, EPA
is urged to use pre-referral negotiation procedures.  The GM
grants non-delegable authority to request a hold on a referred
civil case to the Regional Counsel.  The authority is limited to
circumstances where additional time is needed to pursue pre-
filing settlement negotiations, to add other counts or
defendants, or to where unspecified realities of litigation
militate in favor of a brief filing delay.

     In all cases, the cumulative delay limit on each case held
is sixty days.  Any hold beyond sixty days (individual or
cumulative) may be requested solely by the Asst. Administrator
for Enforcement.
II.  PENALTIES  (PT)
     A.   PT.l  General Procedures and Goals

(GM-21)                                                 (PT.1-1)
     Policy on civil Penalties  (February 16, 1983)

     This policy provides the basic rationale for why penalties
are critical to effective EPA administrative and judicial
enforcement actions.  The goals of penalty assessment include:
(1) deterrence; (2) fair and equitable treatment of the regulated
community; and (3) swift resolution of environmental problems.

     This document is divided into the following six sections:
(1) Introduction;  (2) Applicability; (3) Deterrence; (4) Fair and
Equitable Treatment of the Regulated Community; (5) Swift
Resolution of Environmental Problems; and (6) Intent of Policy
and Information Requests for Penalty Calculations.

     A Framework for Statute-Specific Approaches to Penalty
Assessments (PT.1-2), the companion document to this policy, is
to be utilized for developing penalty guidance appropriate for
the user's particular program.  In order to achieve the policy
goals, the Policy on Civil Penalties directs that all
administratively imposed penalties and settlements of civil
penalty actions should be consistent, whenever possible, with the
methods enunciated in the Framework.

-------
     Although this document does not address the mechanisms for
achieving the policy goals, it does indicate when new versus old
program-specific policies are to be followed.  In addition, it
lists several statutes that are not subject to this policy.


(GM-22)                                                  (PT.1-2)
     A Framework for Statute-Specific Approaches to Penalty
     Assessments (February 16, 1984)

     This policy provides assistance to persons using the Policy
on Civil Penalties (PT.1-1) to develop a medium-specific penalty
policy.  This framework applies to administratively imposed
penalties and to settlements of administrative and judicial
penalty actions.  The Framework document is divided into two main
sections.  The first of these offers brief instructions on how to
write a medium-specific policy.  The second, an appendix, gives
detailed guidance on implementing each section of the
instructions from the first section and explains how the
instructions are intended to further the goals of the policy.

     Part I, writing a program specific policy, addresses the
following elements of the penalty: (1)  developing a penalty
figure; (2)  calculating a preliminary deterrence amount; (3)
adjusting the preliminary deterrence amount to derive the initial
penalty target figure (prenegotiation adjustment); (4)  adjusting
the initial penalty target during negotiations; (5)  use of the
policy in litigation; and (6)  use of the policy as a feedback
device.

     The Appendix has three sections of its own.   The first
focuses on achieving deterrence by assuring that the penalty
first removes any economic benefit from noncompliance.   Then it
adds an amount to the penalty that reflects the seriousness of
the violation.  The second provides adjustment factors so that
the action will result in both a fair and equitable penalty and a
swift resolution of the environmental problem.   The third
presents some "practical advice" on the use of the penalty
figures generated by the policy.


(GM-88)                                               (PT.  1-3)
     Documenting Penalty Calculations and Justifications in
     EPA Enforcement Actions (August 9, 1990)

     This policy institutes a uniform system for documenting
penalty calculations and explaining how they are consistent with
applicable penalty policy in all EPA enforcement actions.

     First,  every settlement package transmitted from a Region to
Headquarters for concurrence must include a written "penalty
justification" explaining how the penalty (economic benefit and

-------
gravity components) was calculated and discussing the
justification for any mitigation.  When the rationale for
mitigation is litigation risk, the justification should state the
probable outcome of litigation and offer specific legal and
factual analysis supporting that conclusion.  The justification
is prepared for circulation within the Office of Regional Counsel
and for signature of the Asst. Administrator.  It must not be
circulated to the presiding agency official  (as it could
constitute an ex parte communication).  All case files are
required by the GM at all times during the course of the
enforcement action to contain documentation of the current bottom
line penalty agreed upon by the litigation team.  The bottom line
may change, but any modification must be justified by a
documented change of conditions.


(GM-38)                                               (PT. 1-4)
     Remittance of Fines and civil Penalties (April 15,
     1985)

     This policy provides information on the remittance procedure
instituted by the EPA Office of the Comptroller.  EPA adopted the
Nationwide Lockbox System for receipt of payments on debts owed
to the Agency in order to improve the process.  The list attached
to GM-38 shows for each Region and for EPA Headquarters the
lockbox address to which payments of penalties owed the Agency
should be sent.  In addition, it lists the address to which
remittances for Superfund billings nationwide should be sent.


(GM-33)                                                (PT. 1-5)
     Guidance for Calculating the Economic Benefit of
     Noncompliance for a Civil Penalty Assessment (November
     5, 1984)

     This guidance amplifies the material in the Appendix of the
"Framework for Statute-Specific Approaches to Penalty
Assessment," (PT.1-2) describing how to calculate the economic
benefit of noncompliance as part of developing a civil penalty.
The guidance introduces BEN, the computer model, in terms of how
this model resolves the identified problems related to the use of
the prior model, CIVPEN.  It points out the circumstances under
which BEN can and cannot be used in calculating a civil penalty.
The exhibit attached to this document summarizes BEN.  In
addition, the guidance explains the new civil penalty policy
approach, how to use BEN to calculate economic benefit of
noncompliance,  and the advantages of BEN over other calculation
methods.

-------
                                10

 (GM-45)                                                 (PT.  1-6)
     Division of Penalties with State and Local Governments
      (October 30, 1985)

     State and local governments may share in civil penalties
that result from their participation in federal environmental
enforcement actions, to the extent that penalty division is
permitted by federal, state, and local law and is appropriate
under the circumstances of the individual case.  This policy
briefly describes how penalty divisions advance federal
enforcement goals, some concerns with penalty divisions, and the
factors to be considered in deciding if penalty division is
appropriate.


     B.   PT.2  Mitigation

(GM-56)                                                 (PT. 2-1)
     Guidance on Determining a Violator's Ability to Pay a
     Civil Penalty (December 16, 1986)

     This document offers guidance on when and how to adjust a
penalty target figure when a violator claims that paying a civil
penalty would cause extreme financial hardship.

     The memorandum begins by discussing when to apply the
ability to pay factor and the methodology for applying that
factor using the ABEL computer model.  This guidance follows this
with sections discussing: (a)  a violator's options for paying a
civil penalty; (b) information necessary to determine ability to
pay; (c) confidentiality of financial information provided to
EPA; (d) a four-step process to apply the ability to pay factor;
and (e) the financial computer program (ABEL).

     The guidance includes two narrative hypotheticals in Exhibit
1, one assuming that the violator is financially healthy and the
other assuming that the violator is not financially healthy.
Also included in the document is Attachment A, data for an ABEL
example.


(GM-77)                                                 (PT. 2-2)
     Policy on the Use of Supplemental Environmental
     Projects in EPA Settlements (February 12, 1991)

     This policy describes the theory behind supplemental
environmental projects (SEPs)  and the conditions under which they
might be considered.  According to the document, EPA may approve
a supplemental project so long as that project furthers the
Agency's statutory mandates to clean the environment and deter
violations of the law.  The SEPs may be considered if the
violations are corrected through actions to ensure future

-------
                                11

compliance, deterrence objectives are served, and there is an
appropriate relationship (vertical or horizontal nexus) between
the nature of the violation and the environmental benefits to be
derived from the supplemental project.

     The document is divided into twelve sections, some of which
are very detailed.  First,  five categories of projects are
suggested as potential SEPs: (1) pollution prevention projects;
(2) pollution reduction projects; (3) projects remedying adverse
public health or environmental consequences; (4) environmental
auditing projects; and (5)  enforcement-related environmental
public awareness projects.   Next, the document offers three
examples of projects not permissible as SEPs.  It goes on to
define the required nexus of the SEP to the violation.  The other
nine sections follow in this order: status of the enforcement
action; main beneficiary of a SEP; extent to which the final
assessed penalty can reflect a SEP; SEPs for studies; substitute
performance of a SEP; level of concurrence of affected Regions;
oversight and tracking; documenting approval of SEP proposals;
and coverage of this policy.


(GM-51)                                                (PT. 2-3)
     Guidance on Calculating After Tax Net Present Value of
     Alternative Payments (October 28, 1986)

     This guidance provides a methodology for calculating the
after tax net present value (ATNPV) of an environmentally
beneficial project proposed by a violator to mitigate a portion
of a civil penalty.  The document first discusses the basis of
mitigation, the 1984 uniform civil penalty policy (PT.1-1 and
PT»l-2), which permits EPA to accept, under specified conditions,
a violator's investment in environmentally beneficial projects
for mitigation.   (Those conditions are contained in the Policy on
the Use of Supplemental Environmental Projects in EPA Settlements
(PT.2-2)).  EPA cannot mitigate the civil penalty to an extent
greater than the ATNPV of the alternative payment.  This policy
then explains use of the BEN computer model to calculate the
ATNPV of alternative payments.  (By January of 1995, a new model,
PROJECT, will be available to do this calculation.)   Attachment A
closes the guidance with an example of a proposed alternative
payment project with the BEN computer model output showing the
ATNPV of the investment.
     C.   PT.3  Stipulated Penalties

(GM-75)                                                (PT. 3-1)
     Use of Stipulated Penalties in EPA Settlement
     Agreements (January 24, 1990)

     This document provides relatively specific guidance on the

-------
                                12

use of stipulated penalties in the settlement of enforcement
actions.  It addresses multiple issues and gives a preferred
approach and its rationale.  This guidance does not supersede an
existing medium-specific policy, "Guidance on the Use of
Stipulated Penalties in Hazardous Waste Consent Decrees"
(9/21/87). It applies to judicial settlements and to
administrative cases where EPA has legal authority to assess
stipulated penalties.  The asserted primary goal of stipulated
penalties is to provide an effective deterrent to violation of
the settlement agreement.

     This guidance is divided into six sections: (1) Types of
Requirements to Which Stipulated Penalties Should Apply;  (2)
Level of Stipulated Penalties; (3) Method of Collection;  (4)
Timing of Enforcement Responses; (5)  Reservation of Rights; and
(6) Collection of Stipulated Penalties.

     The penalties can apply to any clearly definable event.
This document lists six criteria to apply to set the level of the
penalty: (1) initial civil penalties imposed; (2)  economic
benefit of non-compliance; (3) source's ability to pay; (4)
gravity of the violation; (5)  source's history of compliance; and
(6) an escalating schedule for the length of the violation.

     The guidance provides two methods of collection: the
preferred method, viz.,  the penalty automatically becomes due
upon [non]occurrence of a specified even, or the penalty is
payable on demand by the government.   For additional guidance,
the EPA Manual on Monitoring & Enforcing Administrative and
Judicial Orders should be consulted.   The document concludes by
stressing the necessity of reserving all rights to the government
to pursue any other enforcement responses for violation of
consent agreement provisions (see Guidance for Drafting Judicial
Consent Decrees (OR.1-1)  for model language of a consent decree),
and by urging prompt action to collect stipulated penalties that
are due.
(GM-67)                                                (PT. 3-2)
     Procedures for Assessing Stipulated Penalties (January
     11, 1988)

     This guidance clarifies procedures for assessing stipulated
penalties on account of consent decree violations.  Unless the
consent decree provides otherwise, letters to defendants
demanding payment of stipulated penalties should be sent by the
Department of Justice (DOJ).  This memo lists the following steps
to enlist DOJ assistance:  (1) Region sends letter to DOJ
requesting DOJ to issue a demand letter, containing a summary of
relevant facts, issues,  and proposed solutions; (2) DOJ sends
Region and Office of Enforcement any response to the demand
letter; (3) if the response is unsatisfactory, Region sends

-------
                                13

direct referral package to DOJ, requesting that DOJ enforce the
unresolved consent decree violations; (4) DOJ takes action to
enforce the original consent decree with full participation by
Region; and (5) when the defendant pays a stipulated penalty to
the government without receiving a demand letter, Region notifies
the appropriate Associate Enforcement Counsel.  This document
concludes with a paragraph on making appropriate entries in the
SPMS (now STARS) Consent Decree Tracking Measure.


     D.   PT.4  Confidential Information (Summaries of BEN and
ABEL Case Memoranda not contained in Compendium

(GM-no)                                                (PT. 4-1)
     Summaries of BEN and ABEL Case Memos not contained in
     Compendium

     This enforcement sensitive case memorandum reviews all the
case law in the area of measuring and recapturing of economic
benefit.  It is designed for environment enforcement
professionals at the Federal, State and local level.  It examines
the issue by topic and uses the cases to illustrate the major
points.  The current memorandum is dated August 1, 1993.  It is
usually updated on an annual basis.  Government enforcement
personnel can obtain copies from Jonathan Libber at (202) 564-
6011.
(GM-no)                                                (PT. 4-2)
     Ability to Pay —For-Profit Entities:  An Analysis of
     Judicial and Administrative Interpretation

     This enforcement sensitive case memorandum reviews all the
case law in the area of establishing and proving a violator's
claim of inability to afford compliance, clean-ups or civil
penalties.  It is designed for environment enforcement
professionals at the Federal, State and local level.  It examines
the issue by topic and uses the cases to illustrate the major
points.  The current memorandum is dated August 1, 1993.   It is
usually updated on an annual basis.  Government enforcement
personnel can obtain copies from Jonathan Libber at (202) 564-
6011.

-------
                                14

III. CONTRACTOR LISTING  (CL)

     A.   CL.l  General Listing Procedures

(GM-no)                                                 (CL.1-1)
     US Environmental Protection Agency Contractor Listing
     Procedures and Guidance  (May 1993)

     This document sets forth the procedures for the Contractor
Listing Program (CLP).  It addresses both listing and removal
procedures for both mandatory and discretionary listing.  This
document contains:

     1)  a summary of the legal authority for the contractor
     listing program, including the statutory and regulatory
     authorities governing the CLP;

     2)  a detailed description of the procedures followed
     by the Listing Official  (LO)  in processing both
     mandatory and discretionary recommendations to list;

     3)  a detailed description of the procedures the LO
     follows with processing automatic removals and requests
     for removal from the EPA List of Violating Facilities
     (the List).

     4)  a description of the roles in the process of EPA
     staff in both the Regions and Headquarters; and

     5)  procedures for publishing confirmations of listing
     and removal from the List.

     In addition,  the document contains a number of attached
documents which can be used as guidance when drafting the
documents called for under the CLP's procedures.  The attachments
also include Federal regulations governing the listing program
and copies of policy documents and case decisions pertaining to
the listing program.


     B.   CL.2  Discretionary Listing

(GM-53)                                                 (CL. 2-1)
     Guidance on Implementing the Discretionary Contractor
     Listing Program (November 26, 1986)

     This guidance establishes Agency policy and procedures for
implementing the discretionary contractor listing program in EPA
enforcement proceedings.  After the statement of purpose and the
background sections, this document covers multiple topics as they
apply to contractor listing.

-------
                                15

     First of all, certain statutes and Executive Order 11738
authorize EPA to prohibit facilities from obtaining federal
government contracts, grants, or loans, as a consequence of
criminal or civil environmental violations.  The policy describes
appropriate cases for discretionary listing recommendations:  (1)
violations of consent decrees;  (2)  continuing or recurring
violations following filed civil judicial actions; (3) violations
of administrative orders; (4) multi-facility noncompliance within
a single company; and (5) other circumstances.  The document then
recites the required standard of proof in listing proceedings.
It also addresses fairness concerns in EPA use of contractor
listing, press releases on contractor listing actions,
coordination with the Department of Justice, applicability of
contractor listing to municipalities, use of listing in
administrative orders, obtaining information concerning
government contracts held by a  facility under consideration for
listing, and Headquarters assistance in preparing and processing
listing recommendations.

     This listing guidance includes an appendix entitled "The
Listing Program and Final Revisions to 40 CAR Part 15."  Also
included are five attachments:  (A)  Model Listing Recommendation
Based on Administrative Enforcement Action; (B) Model Listing
Recommendation Based on Judicial Enforcement Action; (C)
attachment to B;  (D) Model Letter to a Facility Violating the
Clean Water Act Requesting a List of its Federal Contracts,
Grants, and Loans; and  (E) [same as D for the Clean Air Act].


     C.   CL.3  Asbestos

(GM-No)                                                 (CL. 3-1)
     Asbestos Contractor Listing (June 30, 1988)

     The subject of this policy is the application of contractor
listing regulations to the specific circumstances of a violation
of a NESHAP by an asbestos demolition and renovation (D&R)
company.  It discusses the issues of listing:  (1) where a company
has repeated violations of short duration, (2) when it is
appropriate to designate the company rather than the demolition
site as the "facility", and  (3) when actions satisfy the
requirement of "correction of conditions giving rise to listing".


(GM-NO)                                                 (CL. 3-2)
     Defining the "Violating Facility" for Purposes of
     Listing Asbestos Demolition and Renovation Companies
     Pursuant to Section 306 of the Clean Air Act (March 11,
     1988)

     A "facility" includes "any...location or site of
operations...to be used i the performance of a contract, grant or

-------
                                16

loan" under the definition in Section 15.4 of the Clean Air Act.
This policy confirms that the business address or the address of
some other property used by an asbestos demolition and renovation
(D&R) company may be used to identify the "violating facility".
This is in addition to the address of the particular site
involved in the violating activity (e.g., the place of business
of a customer).  Based upon this interpretation of facility, EPA
can place a D&R company on the List of Violating Facilities, so
long as the business address of the contractor is fairly
associated with the activity which is the violating conduct.


     D.   CL.4  Mandatory Listing
(GM-32)                                                (CL. 4-1)
     Implementation of Mandatory Contractor Listing (August
     8, 1984)

     The proposed revisions to 40 CAR Part 15 require that the
List of Violating Facilities automatically include any facility
which gives rise to a criminal conviction of a person under
Section 113(c)(l) of the Clean Air Act or Section 309(c)  of the
Clean Water Act.  This document describes the procedures for
mandatory listing and the procedures for removal from the
mandatory list.


(GM-No)                                                (CL. 4-2)
     EPA Policy Regarding the Role of Corporate Attitude,
     Policies/ Practices, and Procedures in Determining
     Whether to Remove a Facility from the EPA List of
     Violating Facilities Following a Criminal Conviction
     (October 31, 1991)

     This policy discusses the AA's determination and the EPA
Case Examiner's decision in Valmont Industries, which established
the principle that the presence of a poor corporate attitude
regarding compliance with environmental standards, thus creating
a climate facilitating the likelihood of a violation, may be part
of the condition giving rise to the conviction which must be
corrected prior to removal of the facility from the List.  Then
it clarifies the extent to which corporate attitude may be a
relevant factor for determining correction in cases involving
knowing or negligent criminal conduct, where evidence of willful
falsification or deception itself is not involved.

     Criteria are provided which will be applied by EPA in
determining whether the condition giving rise to a conviction has
been corrected in a given case.  Factors which EPA will consider
include, without limitation:   (1) the establishment of an
effective program to prevent and detect environmental problems

-------
                                17

and violations of the law (in this regard, six steps are
enumerated which, taken together, satisfy at least minimally the
requirement of the exercise of due diligence); (2) the relation
of the precise actions included in the program to the size,
nature of business, and prior history of the organization; and
(3) any voluntary environmental cleanup or compliance
activities, or pollution prevention or reduction measures
performed.


IV.  SETTLEMENTS (SE)

     A.   SE.l  Procedures

(GM-42)                                                (SE. 1-1)
     Form of Settlement in Civil Judicial Cases (July 24,
     1985)

     In response to a situation in which a case was settled
without a consent decree and the defendant later refused to abide
by the terms of the informal settlement, the Office of
Enforcement decided to place in writing the Agency's general
policy regarding the form of settlement of civil judicial
enforcement cases.

     This policy directs that after a complaint is filed, all
civil judicial cases should be settled only by consent decree, or
where appropriate, by stipulation of dismissal.  The "where
appropriate" in the latter option refers to situations where the
settlement requires payment of a penalty and the penalty has been
paid in full at the time of settlement.

     In cases involving "extraordinary and compelling
circumstances" in which EPA, in consultation with the Dept. of
Justice, decides to settle without a consent decree or
stipulation of dismissal, the Agency attorneys should obtain
advance concurrence from the Asst. Administrator for Enforcement.
(GM-62)                                                (SE. 1-2)
     Guidance on the Use of Alternative Dispute Resolution
     in EPA Enforcement Cases (August 14, 1987)

     According to this guidance, EPA intends to use the
Alternative Dispute Resolution  [ADR] process to efficiently
resolve enforcement actions with results similar to those the
Agency reaches through litigation and negotiation.  This guidance
seeks to: (1) establish policy; (2) describe methods; (3)
formulate case selection procedures; (4) establish
qualifications; and (5) formulate case management procedures.

     First,  the document describes the methods of ADR, such as

-------
                                18

mediation, arbitration, fact-finding, and mini-trials.  Then it
discusses characteristics of enforcement cases suitable for ADR.
Such traits include impasse  (actual or potential), resource
considerations, and remedies affecting parties not subject to an
enforcement action (local/state government, citizen group, etc.).
The document next prescribes the procedure for approval of cases
for ADR — integrating selection of cases for ADR into the
existing enforcement case selection process and creating decision
points and contacts in the Regions, Headquarters, and the Dept.
of Justice to determine whether to use ADR in particular actions.

     Following those sections, the guidance discusses procedures
for selection of a qualified Third Party Neutral.  Then, other
miscellaneous issues are discussed, such as memorialization of
agreements, fees for Third Party Neutrals, confidentiality of
records and communications arising from ADR, and the relationship
of ADR to "timely and appropriate" and "significant
noncompliance" requirements.  It concludes with a section
detailing procedures for the management of ADR cases, with
illustrative attachments for each of the various ADR techniques.


(GM-73)                                                (SE. 1-3)
     Process for Conducting Pre-Referral settlement
     Negotiations on Civil Enforcement Cases (April 13,
     1988)

     This document is (1)  an EPA-DOJ agreement on the process for
conducting pre-referral settlement negotiations of non-Superfund
civil judicial enforcement cases and (2)  an attached set of
protocols establishing a process for providing a Regional office
with pre-authorization to negotiate settlement with potential
defendants before resorting to the full-scale referral/litigation
process.  The document is divided into five main sections
providing guidance and a flow chart with a timeline for achieving
the procedures set out in the text.

     First, to initiate the process, the Regional Administrator
shall send to the Office of Enforcement (OE), Headquarters (HQ)
Program Compliance Office, and the Department of Justice (DOJ)  a
mini-litigation report/case summary addressing eleven listed
topics and a proposed draft consent decree.  Second, DOJ, OE, and
HQ Program Office provide comments on the proposed case, national
issues, terms of settlement, further contact points, and
negotiation/litigation strategy. Third, the EPA HQ must either
approve or disapprove the signed consent decree for civil
settlements.  Simultaneously, DOJ must review the decree and
approve or disapprove.  Finally, if approved, DOJ moves the court
to enter the consent decree.

-------
                                19

(GM-39)                                                (SE. 1-4)
     Enforcement settlement Negotiations (May 22, 1985)

     The Office of Enforcement  (OE) drafted this document as a
result of several Regions submitting settlements for OE approval
that had been communicated to and tentatively agreed upon with
defendants without Headquarters' (HQ) knowledge, involvement, or
approval.  This policy emphasizes that a copy of all draft
settlement agreements should be transmitted by the Regional
Counsel to the appropriate Enforcement Counsel before it is
presented to the defendant.  In addition, the policy briefly
explains the rationale behind this policy and how in the future
OE will handle cases in which Regions have concluded settlements
without prior consultation with HQ.


(GM-34)                                                (SE. 1-5)
     Policy Against "No Action" Assurances (November 16,
     1986)

     This policy reaffirms EPA policy against giving definitive
assurances, either written or oral, outside the context of a
formal enforcement proceeding that EPA will not proceed with an
enforcement response for a specific individual violation of an
environmental protection statute, regulation, or other legal
requirement.

     The policy briefly explains the reasons for not making "no
action" promises, the types of requested assurances to which this
policy applies, exceptions to this policy, and how the policy
relates to state and local enforcement efforts.  In addition,
guidance is given on how to proceed in cases of definitive
written or oral no action commitments.
     B.   SE.2  Terms of Settlement

(GM-80)                                                (SE. 2-1)
     Multi-media Settlements of Enforcement Cases (February
     6, 1990)

     The purpose of this document is to provide guidance which
explains (a) EPA disfavor of case settlements which include
releases of potential enforcement claims under statutes not named
in the complaint and not serving as the basis for any EPA
enforcement action, and (b) the procedure for approval for any
multi-media settlements of enforcement claims in civil judicial
enforcement claims.

     Since standard EPA policy dictates that releases should be
no broader than the causes of action asserted in the complaint,
EPA should grant a multi-media release only in exceptional single

-------
                                20

media enforcement cases.  This guidance lists three factors to
consider in granting such a release:  (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 relief; (2) whether the
settlement provides adequate consideration for the broader
release; and  (3) whether the settling party is in bankruptcy.  It
also prohibits releasing any cause of action not based on an EPA
federal statute.

     The next section is procedural.  Approval for the release
must be secured from the appropriate EPA official.  There must be
cross-media consultation and investigation among all affected
Regional Program Offices.  The Regional Administrator must give
Headquarters notice of the release and an explanation of the
Region's decision.  Finally, the  Office of Enforcement division
with the lead in the settlement must ensure that other affected
divisions don't object to the multi-media release.


(GM-79)                                                 (SE. 2-2)
     Interim Policy on the Inclusion of Pollution Prevention
     and Recycling Provisions in  Enforcement Settlements
     (February 25, 1991)

     This policy offers Agency enforcement personnel a generic
interim policy and guidelines for including pollution prevention
and recycling provisions in administrative or judicial settlement
agreements.  After stating its purpose and giving some background
on the EPA's definition of pollution prevention,  the document is
split into two sections.

     First, the document states the interim policy: EPA favors
pollution prevention and recycling as a means of achieving and
maintaining compliance and of correcting outstanding violations
when negotiating enforcement settlements (civil or criminal and
with all entities).   It continues, offering four situations which
favor the use of pollution prevention conditions in the
settlements.   Then it explains the use of pollution prevention as
a means of correcting a violation and pollution prevention
conditions "incidental" to the correction of a violation.

     The last part of the policy details specific elements of the
interim policy.  It provides factors for establishing timeliness
for implementing the conditions:   (a) seriousness of the
violation; (b) aggregate gain in  "extra" pollution prevention;
(c)  reliability/availability of the technology; (d) applicability
of the technology; and (e)  compliance-related considerations.  It
goes on to discuss general considerations for assessing penalties
and more specific guidelines for  supplemental environmental
projects.  GM-79 concludes with a brief discussion of tracking
and assessing compliance with settlement terms, delegations and

-------
                                21

level of concurrence, and organizational issues.

     Attached to this document are a list of seventeen target
chemicals, the Policy on the Use of Supplemental Environmental
Projects in EPA Settlements (PT.-2-2), and a memo (Attachment B)
announcing the creation of an Agency workgroup on multi-media
enforcement.
(GM-52)                                                (SE. 2-3)
     Final EPA Policy on the Inclusion of Environmental
     Auditing Provisions in Enforcement Settlements
     (November 14, 1986)

     This document provides Agency enforcement 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 terms of any
settlement.

     The first major section of the guidance provides the
statement of policy and suggests that environmental auditing
provisions are most likely to be proposed in settlement
negotiations when there is a pattern of violations attributable
to the absence of an environmental management system, or when the
type of violations indicates the likelihood that similar
noncompliance problems may exist or occur elsewhere in the
facility or at other facilities operated by the regulated entity.
This section goes on to discuss the scope of the audit
requirement (which type of audit to propose), EPA oversight of
the audit process, EPA requests for audit-related documents,
stipulated penalties for audit-discovered violations, and the
effect of auditing on EPA inspection and enforcement.  EPA
employees are instructed in the last major section of the
auditing guidance to follow Implementing Nationally Managed or
Coordinated Enforcement Actions (RF.1-5) and the Revised Policy
Framework for State/EPA Enforcement Agreements (SF.1-2) when
negotiating over facilities located in more than one EPA region.

     There are several attachments to the auditing guidance:

A - Environmental auditing policy statement;

B - Representative sample of environmental auditing settlements
      achieved to date;

C - Model environmental compliance audit provision, with require-
      ment for certification of compliance;

D - Model environmental compliance audit provision, with require-
      ment for submission of plan for improvement of
      environmental management practices;

-------
                                22

E - Model environmental compliance and management audit provision
      with all audit results submitted to EPA;

F - Model environmental compliance and management audit provision
      with extensive Agency oversight; and

G - Model emergency environmental management reorganization
      provision.


V.   CRIMINAL ENFORCEMENT POLICIES THAT IMPACT CIVIL ENFORCEMENT
     (CP)

     A.   CP.l  Parallel Proceedings

(GM-no)                                                 (CP.1-1)
     Parallel Proceedings Policy  (June 21, 1994)

     The purpose of this policy is to define and explain by whom,
why, when, and to what purpose EPA uses parallel proceedings to
maximize results and minimize legal risks for all enforcement
actions and to preserve limited enforcement resources.  The
document states five principles that guide EPA enforcement
personnel as to when to use parallel civil and criminal
proceedings.  I then lists some procedures to follow when during
parallel proceedings.

     B.   CP.2  Case Management Procedures

(GM-no)                                                (CP.2-1)
     The Exercise of Investigative Discretion (January
     12, 1994).

     This policy has been issued by the Director of OCE to give
EPA Special Agents guidance in assessing and evaluating their
cases for potential criminal referral and prosecution.  It
combines expressions of Congressional intent and OCE experience
in operating under existing criminal/civil Regional case-
screening criteria, incorporating by reference GM-85 (recodified
as CM.1-2),  "Regional Enforcement Management: Enhanced Regional
Case Screening" (December 3, 1990).   This policy acquaints civil
enforcement personnel with the criteria under which OCE its cases
so that appropriate referrals are made from civil to criminal
within EPA.

     Congressional intent regarding case selection is summarized
as follows:  criminal enforcement authority should target the most
egregious and significant cases.  EPA's case selection process
for identifying the most worthy cases for criminal case
development focuses on 1)  significance of environmental harm and
2) culpable conduct.  The two selection criteria further
enumerate factors to weigh culpable conduct and seriousness of

-------
                                23

the environmental harm.  Emphasis is placed on equal application
of the criteria and factors to corporations and individuals
alike, based on the evidence of culpability in each case.
Emphasis is also placed on the consideration of administrative
and civil remedies as appropriate alternatives for less flagrant
violations, and correctly distinguishing these latter cases from
appropriate criminal cases in practice.


(GM-no)                                                (CP.2-2)
     Referral of Criminal cases for Prosecutive Action
      (March 2, 1993).

     This policy redelegates authority for criminal case
referrals to DOJ from the Director of OCE to the Director of the
Criminal Investigation Division, to be accomplished in
consultation with the Director of the Criminal Enforcement
Counsel Division.  The policy also incorporates the "Regional
Enforcement Management: Enhanced Regional Case Screening" (GM-85
recodified as CM.1-2) as the starting point of the referral
process, to consider whether violations would be best addressed
by administrative, civil-judicial, and/or criminal investigation
and prosecution.   The role of the Regional Criminal Enforcement
Counsel (RCEC) in the process is to assess the legal soundness of
the case, provide appropriate liaison functions, and assist DOJ
when warranted in prosecuting the cases.

         The policy sets out a system of case initiation and
review beginning with the Special Agent-in-Charge, the RCEC, and
finally the Director of the Criminal Investigations Division.
All cases receive this review prior to referring the case to the
appropriate United States Attorney's Office for assistance in
investigation, grand jury action, and/or prosecution.


VI.  PUBLICITY (PB)

     A.   PB.l  Civil Enforcement

(GM-46)                                                (PB. 1-1)
     Policy on Publicizing Enforcement Activities (November
     21, 1985)

     This document establishes EPA policy on informing the public
of Agency enforcement activities, since publicity is an element
of the EPA's program to deter environmental noncompliance.

     The memorandum begins with a statement of policy: press
releases are to be issued for judicial and administrative
enforcement actions, including settlements and successful rulings
and other significant enforcement program activities.  The main
part of this policy, implementation of the policy, is divided

-------
                                24

 into five subsections.  First, it discusses when to use press
 releases.  Next, it covers approval of press releases.  Then it
 addresses coordination among various EPA offices, the Dept. of
 Justice  [DOJ], and the states.  Distribution of press releases to
 the local and national media and to targeted trade press and
 mailing  lists is discussed in the fourth subsection.  The GM
 concludes by exploring use of publicity other than press
 releases.

     An Addendum of August 4, 1987, is an attached guidance on
 how to address the issue of the "penalty gap" that occurs where
 the difference between the proposed and final penalty is
 appreciable.  The addendum also provides standard text to be
 included in EPA press releases.

     B.   PB.2  Criminal Enforcement

 (GM-no)                                                (PB.2-1)
      Policy on Responding to Public or Media Inquiries
      Regarding Criminal Cases (December 22, 1989).

       Criminal investigations are managed in EPA's criminal law
 enforcement program by trained law enforcement personnel (Special
Agents).  When cases warrant criminal prosecution they are
 systematically referred to criminal prosecutors in the Department
 of Justice for action.  However,  public inquiries regarding
 criminal cases are not directed only to OCE or the Department of
Justice, but may come to other EPA employees who are not in the
 criminal program.  On those occasions when the public or news
media contact any Agency personnel seeking information about (or
even to verify the existence or determine the nature of)  a
criminal case, all EPA personnel,  whether in a civil or criminal
program, should respond:  "EPA has a policy to neither confirm or
deny the existence of a criminal investigation".    EPA personnel
may further explain that the purpose of that response is to
protect the Constitutional rights of the parties being
 investigated, as well as to preserve the integrity of the
Agency's and the Department of Justice's criminal investigation,
which are conducted under strict Federal rules of criminal
procedure for those reasons.


VII. REGULATORY DEVELOPMENT (RG)

     A.   RG.l  General Procedures and Goals

 (GM-58)                                                (RG. 1-1)
     Issuance of Enforcement Considerations for Drafting and
     Reviewing Regulations & Guidelines for Developing New
     or Revised Compliance and Enforcement Strategies
     (August 15, 1985)

-------
                                25

     This document is a two-part directive.  Part I addresses
enforcement considerations for drafting arid reviewing
regulations.  Part II presents guidelines for developing new or
revised compliance and enforcement strategies.

     Part I is intended to provide guidance in the form of a
checklist of minimum considerations for workgroup members to use
during the process of developing a "major rule" or a "significant
rule" that may have enforcement ramifications as well as any
other rule with enforcement implications.  A checklist of thirty-
four questions follows, dividing the major concerns into:
preamble; definitions; scope and applicability of regulation;
performance standards; monitoring and inspection; record keeping/
recording requirements; and demonstrating compliance with
performance standards.

     Part II is structured similarly, providing a guidance
checklist to evaluate the need for new or revised compliance and
enforcement strategies, to assess the appropriate timing for
completing these strategies, and to determine the scope of
strategies that need to be developed.  The checklist applies to
developing new or revised strategies for:  (1) new Agency program
initiatives; (2) new statutory responsibilities delegated to the
Agency; (3) revisions to existing regulations that a program
office determines will have a significant effect on an ongoing
program; and (4) programs with existing strategies that are not
producing adequate environmental results.


(GM-47)                                                (RG. 1-2)
     A Summary of OE's Role in the Agency's Regulatory
     Review Process (January 27, 1986)

     This guidance describes the Office of Enforcement's (OE)
role and responsibilities in the EPA regulatory process and sets
forth procedures for OE staff to follow in reviewing and
concurring in regulation packages.

     The first part of the memorandum, OE's role in the Agency's
regulation review process, is divided into sections discussing
participation in Steering Committee meetings, Start Action
Request (SAR) review, Agency-wide work groups, Steering Committee
review, and red border review (the final interoffice review).
The second part of this document contains procedures for
concurrence on regulation packages under OE review, first
describes procedures under the old system, then describes
revisions to the procedures, and explains in greater detail the
procedures currently followed by OE.

     Appendix 1 provides three charts outlining the regulation
review process.  Chart 1 is the old system, and Charts 2 & 3 are
the new system.  Appendix 2 summarizes EPA's regulation

-------
                                26

development and review process as managed by the Office of
Policy, Planning, and Evaluation  (OPPE).


(GM-59)                                                 (RG. 1-3)
     The Regulatory Development Process: Change in Steering
     Committee Emphasis and OE Implementation  (February 6,
     1987)

     EPA issued this directive to prevent situations where major
issues or concerns are raised at the last minute before a
Steering Committee meeting.  The document is divided into two
sections and several attachments.

     The first section provides a background sketch and statement
of purpose.  The second section proffers two procedures to
follow: (1) at the conclusion of a Steering Committee meeting, a
draft agenda for the next meeting is distributed; and (2) each
Enforcement Counsel should review that draft agenda for matters
applicable to his or her program area and then provide a one page
summary for any issues that should be voiced to the Committee
with respect to each agenda topic.

     Attachment 1 is the memo announcing this change.  Attachment
2 outlines changes and roles in the regulatory development
process, including how the process will work, responsibilities of
workgroup chairs, and roles and responsibilities of Steering
Committee members.  Attachment 3 is a prototype "Working Group
Format" with several "Fact Sheets."
(GM-4)                                                 (RG. 1-4)
     Ex Parte Contacts in EPA Rulemaking (August 4, 1977)

     This document presents guidelines all EPA employees should
follow in discussing the merits of proposed rules with interested
persons outside the Agency during the period between proposal and
promulgation.

     First, during the period between proposal and promulgation
of a rule, all employees should respond to inguiries about the
rule, explain how it would work, and attend public meetings of
interested groups.  Second, during this period, EPA employees may
meet with interested persons for the purpose of better
understanding any technical, scientific, and engineering issues
involved or discussing the broader questions involved.

     In all cases, a written summary of the significant points
made at the meetings must be placed in the comment file.  All new
data or significant arguments presented should be reflected in
the summary.  This requirement applies to every form of
discussion with outside interested persons as long as the

-------
                                27

discussion is significant


VIII.  STATE/FEDERAL AGREEMENTS (SF)

     A.   SF.l  General Procedures and Goals

(GM-41)                                                (SF. 1-1)
     Revised Policy Framework for State/EPA Enforcement
     Agreements (August 25, 1986 - originally issued June
     26, 1984)

     The document is the Agency's policy framework for
implementing an effective state/federal enforcement relationship
through national program guidance and regional/state agreements.
This document was intended to reinforce the Guidance for FY 1987
Enforcement Agreements Process  (4/15/86), and to serve as a guide
for negotiations and implementation of the Enforcement
Agreements.  The revisions incorporate into the Policy Framework
addenda developed between 1984 and 1986 in the areas of oversight
of state civil penalties, involvement of the state attorneys
general in the enforcement process, and implementation of
nationally managed/coordinated cases.

     The policy framework is divided into six sections.  The
first section, State/Federal Enforcement Agreements: Form, Scope
and Substance, sets forth the form and scope of the agreements as
well as the degree of flexibility the Regions have in tailoring
national policy to individual states.

     The second section, Oversight Criteria and Measures:
Defining Good Performance, outlines the criteria and measures for
defining a quality program whether the compliance or enforcement
program is administered by EPA or a state.  According to this
section, the criteria are intended to serve only as guidance and
are not to be adopted word-for-word.  Criterion #5 is a new
section which deals with the definition of what constitutes
timely and appropriate enforcement response.

     The next section, Oversight Procedures and Protocols, sets
forth principles on how EPA should conduct its oversight
function.  This section discusses the approach, the process, and
the follow-up and consequences of oversight.

     Criteria for Direct Federal Enforcement in Delegated States,
the fourth section, explains the circumstances under which EPA
takes direct enforcement action in a delegated state.  It also
covers the manner in which EPA should take action so that state
programs are being strengthened simultaneously.

     Section five, Advance Notification and Consultation, deals
with EPA's policy of "no surprises."  It explains what measures

-------
                                28

must be taken with each state  in  order to ensure that the policy
is effectively carried out.

     The final section. State  Reporting, reviews key reporting
and recordkeeping requirements for management of data and public
reporting on compliance and enforcement program accomplishments.
It lists seven measures for EPA to use to manage and oversee
performance by Regions and states.


(GM-57)                                                 (SF. 1-2)
     Guidance for the Fy 1989  State/EPA Enforcement
     Agreements Process (June  20, 1988)

     This guidance introduces  the regional enforcement strategies
process as a means of addressing state and regional priorities
and reiterates the importance  of timely and appropriate
enforcement responses and federal facilities compliance.

     Attachment 1, the main part of the guidance, covers five
topics: (1) maintaining the enforcement agreements process; (2)
improved management and tracking of enforcement responses (for
enforcement responses that are timely and appropriate & for
tracking and follow-through on cases); (3)  inspector training and
development; (4)  up front agreements on penalty sharing; and (5)
working with states to improve federal facilities compliance.


IX.  ORDERS AND DECREES (OR)

     A.   OR.l  Drafting and Modifying Orders and Decrees

(GM-17)                                                (OR. 1-1)
     Guidance for Drafting Judicial Consent Decrees (October
     19, 1993)


     This document provides guidance on the provisions EPA should
include when drafting a settlement agreement covering a civil
enforcement action for which the federal government has decided
that judicial remedies are appropriate.  The GM explains each
step in drafting a settlement agreement and accompanies the text
with examples for each part of an agreement.

     First, the guidance explains standard front end provisions,
which provide the factual and  legal background for the consent
decree, including the parties, the cause(s)  of action, and the
procedural history.  Next, the GM explains the transitional
clause.  This clause signals the end of the introductory portions
of the decree and the beginning of the court's order.

     The majority of the guidance is a detailed explanation of

-------
                                29

provisions that may be included in the court's order.  These are:
(a) jurisdiction and statement of the claim; (b) applicability
clause; (c) public interest provision; (d) definitions section;
(e) compliance provisions — generally/for repeat violators/
performance bonds; and (f) thirteen provisions defining other
responsibilities of the parties to the decree.  Appendix A
presents a consent decree checklist.  Appendix B is a sample
consent decree.
(GM-68)                                                 (OR. 1-2)
     Procedures for Modifying Judicial Consent Decrees
     (January 11, 1988)

     This document clarifies procedures for modifying consent
decrees and other judicial orders in EPA enforcement cases.  The
memorandum defines a consent decree "modification" as changes to
the consent decree proposed jointly by the government and the
defendant to address circumstances that arose since the entry of
the consent decree.  The policy then prescribes four steps: (1)
when the need to modify is discovered, Region sends a letter to
the Enforcement Counsel and to the Dept. of Justice [DOJ]
notifying them of the intent to open negotiations with the
defendant and summarizing relevant facts, issues, and proposed
solutions; (2) Region proceeds to negotiate a modification in the
manner described in the letter; (3) the Office of Enforcement
[OE] retains authority for approving modifications on behalf of
EPA, and DOJ retains the same for the U.S.; (4) after OE and DOJ
approve the modification, DOJ presents the proposed consent
decree modification to an appropriate court for approval.  The
document concludes with a paragraph on appropriate reporting in
the SPMS (now STARS) Consent Decree Tracking Measure.


     B.   OR.2  Monitoring and Enforcing Orders and Decrees

(GM-86)                                                 (OR. 2-1)
     Manual on Monitoring & Enforcing Administrative and
     Judicial Orders (February 6, 1990)

     This Manual is a large collection of text and appendices
intended to guide EPA enforcement staff on their roles and
responsibilities in monitoring and enforcing final order
requirements.  The Manual applies to all regulatory enforcement
programs except CERCLA (Superfund).  In general, the Manual
outlines the process for working with EPA Financial Management
Offices and the Department of Justice (DOJ) in monitoring and
collecting penalties.

     Chapter One (Monitoring and Reporting the Status of Final
Orders) includes a section defining final administrative and
judicial orders and sections on drafting enforceable orders,

-------
                                30

monitoring systems, reporting requirements, and additional
oversight requirements for administrative orders and for judicial
orders.

     Chapter Two  (Collection of Administrative Penalties)
discusses authority for administrative penalty collection,
financial management collection procedures, and organizational
roles and responsibilities.

     Chapter Three (Collection of Judicial Penalties) includes
sections on payment depositories, organizational roles and
responsibilities, distribution of final orders, monitoring
payments, EPA enforcement reporting of payment status,
coordination of DOJ and EPA accounts receivable reporting
systems, pursuit of outstanding penalty debts, and termination of
judicial penalty debts by various means.

     Chapter Four (Enforcing Final Orders)  provides information
on enforcing administrative and judicial orders, with subsections
on modifications, stipulated penalties, motions to enforce, and
contractor listing.

     Compendium documents RF.2-2, OR.2-2, PT.3-1,  TK.1-1 and
TK.1-2 are attached.   Also included are appendices entitled: (1)
Model System for Administrative Penalty Collection; (2)
Procedures for Modifying Judicial Decrees;  (3) Procedures for
Notifying DOJ of Stipulated Penalties; and (4) Contractor Listing
in Cases of Non-compliance with Administrative or Judicial
Orders.

(GM-27)                                                 (OR. 2-2)
     Guidelines for Enforcing Federal District Court Orders
     (April 18, 1984)

     This guidance outlines how to ensure enforcement of federal
court orders.  The purpose of the guidelines is to establish
uniform Agency objectives in preparing for and in responding to
violations of court orders.  The guidelines apply to the
enforcement of consent decrees and nonconsensual orders entered
in federal district court that remedy violations of any of EPA's
laws or regulations.

     The guidelines explain in some detail how to draft orders to
ensure enforceability.  The guidelines also address how to select
responses to violations of court orders.  Finally, other matters,
such as who should sign a consent decree and what types of
timetables should be established for responding to certain
violations are briefly discussed.

-------
                                31

X.   FEDERAL FACILITIES (FF)

     A.   FF.l  Compliance Monitoring and Enforcement

(GM-25)                                                (FF. 1-1)
     Federal Facilities Compliance Strategy (November 8,
     1988)

     EPA developed the new Federal Facilities Compliance Strategy
in order to "ensure that federal agencies achieve compliance
rates in each media program which meet or exceed those of major
industrial and major municipal facilities."  The document, also
known as the "Yellow Book," establishes a comprehensive and
proactive approach to achieving and maintaining high rates of
compliance at all federal facilities.

     The Yellow Book was written: (1) to serve as guidance for
EPA Headquarters and Regional staff; (2) to clarify state and
federal compliance monitoring and enforcement roles; (3) to
inform federal agencies of EPA's strategy and identifying
procedures to be followed when violations have been discovered;
and (4) to communicate EPA's approach for addressing compliance
problems at federal facilities to Congress, the public, and
concerned interest groups.

     The Yellow Book is comprised of eight chapters which set out
the basic framework for EPA's media programs to follow in
ensuring that federal facilities are fully integrated into
federal and state compliance monitoring and enforcement
activities.  The chapters are:  (1) Introduction; (2) Summary of
Relevant Environmental Statutes and Executive Orders; (3)
Identification of the Regulated Community; (4) Compliance
Promotion, Technical Assistance, and Training; (5)  Compliance
Monitoring; (6) Enforcement Response to Compliance Problems and
Violations of Environmental Laws at Federal Facilities; (7) Role
of the States in Responding to Federal Facilities Violations; and
(8) EPA Roles and Responsibilities for Program Implementation.


XI.  TRACKING ENFORCEMENT ACTIVITIES (TK)

     A.   TK.l  General Procedures and Goals

(GM-76)                                                (TK. 1-1)
     Agency Judicial Consent Decree Tracking and Follow-Up
     Directive (January 11, 1990)

     This policy specifies EPA requirements for how Regional
Offices track compliance with judicial consent decree
requirements and for how Regions select and document decisions on
appropriate EPA follow-up responses to consent decree violations.

-------
                                32

     The document prescribes requirements for:  (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; (5) maintaining data  on the current status of EPA
consent decrees; and  (6) termination of consent decrees and
closing cases.

     The policy first provides some general background
information on the allocation of  consent decree tracking
responsibilities between regional program divisions and Offices
of Regional Counsel.   It then expands on each of the six
requirements listed above.  The fourth section details the
criteria for determining the appropriate EPA response to
violations: the environmental harm caused, the duration of the
violation, the compliance history of the defendant, the
deterrence value, the defendant's ability to respond, and the
economic gain of non-compliance.

     The policy also includes a sample Consent Decree Violation
and Follow-Up Form.


(GM-74)                                                (TK. 1-2)
     Guidance on Certification of Compliance with
     Enforcement Agreements (July 25, 1988)

     Verification of settlement agreements which require specific
performance to achieve or maintain compliance with a regulatory
standard is key to EPA enforcement.  The Office of Enforcement
issued this guidance to assist drafters of settlement agreements
in the effort to make the agreements more easily verifiable and
enforceable.

     The guidance achieves its purpose through two elements: (1)
certification of compliance by a responsible corporate official,
and (2) documentation to verify compliance.   The section
explaining the first element states that a "responsible official"
must sign the compliance reports  (under threat of criminal or
civil contempt sanctions for intentionally deceiving or
misleading the EPA) and that certification is especially
important for entities with a history of non-compliance.  The
other section discusses why documentation to verify compliance
should be identified in settlement agreements.

     Attachment A provides a suggested checklist for
documentation purposes.

-------
                                33

(GM-40)                                                (TK. 1-3)
     Revised Regional Referral Package Cover Letter and Data
     Sheet (May 30, 1985)

     In order to streamline the civil judicial case referral
process, a new standard referral package cover letter and data
sheet were formulated.   (See attached copy of the Cover Letter
and Model Data Sheet.)  Most of the case information is to be
provided on the data sheet so that it is easier to track
referrals. The cover letter and data sheet contain eleven
elements designed to provide a brief, but thorough summary of the
case to the reviewer.


(GM-19)                                                (TK. 1-4)
     Consent Decree Tracking System Guidance (December 20,
     1983)

     This document offers guidance on the use of the tracking
system to enable EPA to track the compliance of consent decrees
for all media on a national basis.

     This guidance begins by defining the scope of the system:
information on all court-entered judicial consent decrees to
which EPA is a party, as well as the status of compliance efforts
required by these decrees.  The memorandum next discusses the
tracking system's objectives.  Then, the document explains the
key tracking system components: (l) the Repository (a collection
of physical copies of EPA consent decrees); (2) the Consent
Decree Library (an automated management information system to
store summaries of each EPA consent decree on file in the
Repository); (3)  compliance monitoring (source reporting and/or
on-site inspections); and (4) compliance tracking (gathering and
compiling compliance information).  Next, the GM briefly
discusses tracking system operation.  It concludes by defining
the office responsibilities of the NEIC, Regional Administrators,
and Office of Enforcement Headquarters.  Included in this
guidance are Attachment A, a sample prospective quarterly report,
and Attachment B, a sample retrospective quarterly report.


(GM-60)                                                (TK. 1-5)
     Procedures and Responsibilities for Updating and
     Maintaining the Enforcement Docket (March 10, 1987)

     This policy declares that an accurate and current docket
data base depends on the initial entry of cases and on the
regular monthly review and case update by the Headquarters (HQ)
and Regional attorneys assigned to the case.  The memo lists
eight steps in the process of maintaining the docket (and states
who performs them and when): (1) prepare Case Data and Facility
Data Forms for the initial entry of cases; (2)  enter all new

-------
                                34

cases;  (3) prepare monthly case updates;  (4) enter monthly case
updates;  (5) run reports to verify overall accuracy of Docket and
distribute for verification;  (6) verify accuracy and make
corrections; (7) enter corrections; and (8) run accounting
reports and complete SPMS (now STARS) reporting instruction
forms.

     The policy continues, offering a further explanation of the
initial entry of a case, major milestone event dates, overall
status, HQ review time, the "Referral Indicator," concluded
cases, HQ Division, and law/section violated and cited in the
complaint.


(GM-61)                                                (TK. 1-6)
      Enforcement Docket Maintenance (April 8, 1988)

     This guidance provides detailed procedures to ensure that
all parties understand their responsibilities for entering cases
into the Docket and for the regular monthly review and update of
the Case Status Report.  The memo first discusses the definition
of a case, then initial case entry, followed by case status
review procedures, and concludes with quality assurance.

     The first section covers DOCKET design,  assigning a case
number, amendments to ongoing cases,  and use of DOCKET for SPMS
(now STARS), accountability,  and with the Workload Model.  The
second part of the document,  initial case entry, directs the
regional attorney to enter the case into the system as soon as he
or she begins case development.  It then instructs the regional
attorney to complete: (1)  a Case Data form [appendix A];  (2)  a
Facility Data form [appendix B]; and (3)  a Case Summary  [appendix
C].

     The third section, case status review procedures, explains
that the lead EPA attorney has primary responsibility for monthly
review and update of all active cases,  particularly concentrating
on: (a) case information;  (b)  major milestones and miscellaneous
events; (c) staff and attorney names; (d)  results; (e) penalties;
and (f) case status comments.   The final section concisely
addresses quality assurance,  which results from OE HQ monthly
review of the overall DOCKET for accuracy and completeness.

     Appendix D gives an example of the nature and method of
entering status comments.   Appendix E charts roles and
responsibilities (who, what,  when, and how).   Appendix F provides
summary "case code" tables.


(GM-no)                                                (TK.1-7)
     Support of the Enforcement DOCKET for Information
     Management in OECA (October 3, 1994)

-------
                                35
     This policy adds formal administrative enforcement actions
to the DOCKET information system.  Prior to this, only judicial
actions were officially tracked.  In addition it states that
Regional Counsels have the primary responsibility for entering
and maintaining enforcement data.  Although it recognizes a role
for the Division Directors in ORE.  The policy further states
that OECA will examine the feasibility of including all formal
administrative orders in DOCKET.
XII. CASE MANAGEMENT (CM)

     A.   CM.l  General Procedures and Goals

(GM-71)                                                (CM. 1-1)
     Case Management Plans (March 11, 1988)

     This document offers a mechanism to enhance the
effectiveness of the environmental enforcement program by
providing a road map for bringing a case from initiation to
conclusion.  The primary elements of the mechanism are organizing
the tasks to be performed, assigning the persons to perform those
tasks, and outlining the dates by which those tasks are to be
completed.  The mechanism is supposed to cover both litigation
and negotiation elements, as well as legal and technical tasks.

     The guidance gives general procedural directions leading up
to the Department of Justice (DOJ) attorney having a case plan in
place by the date of filing of the complaint.  The case plan
addresses the roles of DOJ, the Assistant U.S. Attorney, and
Regional and Headquarters legal and technical staff.  The case
plans are to be updated on a quarterly basis to maintain their
effectiveness.

     A two-page form, "Preliminary Case Plan," is attached.


(GM-85)                                                (CM. 1-2)
     Regional Enforcement Management: Enhanced Regional Case
     Screening (December 3, 1990)

     This guidance is divided into five sections.  First, it
explains the objectives of case screening, including the
strategic value of undertaking federal enforcement, the
appropriate enforcement response, the appropriate considered use
of innovative settlement conditions or tools, the encouragement
of potential multi-media and cross-statutory action, and the
effective integration of criminal and civil enforcement.  The
second section lays out the requirements for a regional case
screening capability.  It lists criteria for an acceptable case
screening process, explains the attached case screening worksheet

-------
                                36

to help assess what further screening might be necessary and to
help identify early on how an enforcement case should be
developed.  This section offers five ways in which Regions can
phase in and focus enhanced case screening, and it requires
coordination and review before and during criminal investigations
in cases of ongoing releases or discharges.

     The third section and attached charts la, Ib, and Ic explain
the OE recommended case screening approach.  It recommends
continued reliance on initial screening on a single media basis
using the case worksheets, detailed monthly review by a multi-
media screening committee of cases identified as having a multi-
media concern, and a third level of committee reviewing
violations identified through the civil enforcement process for
criminal enforcement potential and review of criminal leads and
investigations for priority.  The fourth section declares that,
through strategic planning, the Region can target investigation
and enforcement for a number of factors.  The final section
provides general oversight directions to help the Office of
Enforcement evaluate implementation to help meet EPA's goals for
criminal enforcement and multi-media cases.

     Three charts are attached.   A sample case screening
worksheet is also attached.  Four narrative appendices are also
attached discussing: (1)  choosing between administrative and
judicial enforcement; (2)  identifying candidates for innovative
settlement terms or enforcement tools; (3)  ensuring a multi-media
case screening perspective; and (4)  integrating civil and
criminal enforcement activities.
(GM-20)                                                (CM. 1-3)
     Guidance on Evidence Audit of Case Files (December 30,
     1983)

     This guidance discusses the evidence audit system, which is
designed to establish an overall case document control system, to
provide quick and complete access to records, and to provide a
means for assuring admissibility of the evidence.

     After the introduction, which discusses the purposes and
advantages of evidence audits, the guidance addresses the
proposed procedure.  Under this section, the roles of the
Regional Administrator and the Asst. Administrator for the Office
of Enforcement are first discussed.  Then the required elements
of an evidence audit are listed and briefly explained.  These
are: (1) document assembly; (2) document organization and review;
(3) evidence profiles (graphic or narrative presentations of the
history and chain of custody of evidence from the time of
collection through final disposition); and (4) document storage
and retrieval.  The document concludes with an operational
outlook narrative, explaining how to get assistance from the NEIC

-------
                                37

Evidence Audit Unit.


XIII. INSPECTIONS (IN)

(GM-5)                                                 (IN. 1-1)
     Conduct of Inspections After the Barlow's Decision
      (April 11, 1979)

     This document offers guidance to the Regions in the conduct
of inspections in light of Marshall v. Barlow's Inc., and the
need to obtain warrants and other process for inspections
pursuant to EPA-administered acts.  The guidance focuses on the
preparation for and conduct of inspections, including (1) how to
proceed when entry is denied, (2) under what circumstances a
warrant is necessary, and (3) what showing is necessary to obtain
a warrant.

     The section titled "Conduct of Inspections" is divided into
seven parts.  Preparation, including seeking a warrant before
inspection, administrative inspections v. criminal inspections,
the use of contractors to conduct inspections, and inspections
conducted by state personnel, comes first.  Next, aspects of
entry are discussed, such as consensual entry, withdrawal of
consent, when entry is refused,  and Headquarters notification.
Then, the guidance discusses areas where a right of warrantless
entry still exists: emergency situations, FIFRA inspections, and
"open fields" and "in plain view" situations.  A section on
securing a warrant follows.

     Next, the Barlow7s guidance explains standards and bases for
the issuance of administrative warrants in three contexts: civil
specific probable cause warrants, civil probable cause based on a
neutral administrative inspection scheme, and criminal warrants.
Guidance on inspecting with a warrant and returning the warrant
close out the section.  Two conclusions are drawn: (a) Barlow's
requires EPA to formalize its neutral inspection schemes; and (b)
Barlow's generally precludes initiating civil and/or criminal
actions for refusal to allow warrantless inspections.

     Three attachments are included.  Attachment 1 is a warrant
application, affidavit, and warrant to conduct an inspection,
where the Agency has specific probable cause to believe that a
civil violation of an EPA regulation or Act has occurred.
Attachment 2 is the same three documents, in which the
establishment to be inspected has been selected under a neutral
administrative inspection scheme.  Attachment 3 is a neutral
administrative scheme for CFC inspections.

-------
                                38

 (GM-1)                                                  (IN. 1-2)
     Visitor's Releases and Hold Harmless Agreement as  a
     Condition to Entry to EPA Employees on Industrial
     Facilities  (November 8, 1972)

     Certain firms had required EPA employees to sign agreements
purporting to release the firms from tort liability as  a
precondition to granting entry.  This guidance responds to three
issues this practice presents.

     First, while EPA employees can probably release the entities
from tort liability to themselves, the employees are instructed
not to sign such releases under any circumstances.  Signing
jeopardizes the government's right of subrogation under the
Federal Employees Compensation Act.  Second, while any agreement
to make the government responsible for employee-caused injuries
is probably invalid, employees are instructed not to sign any
agreement purporting to do so.  Rather than sign an agreement,
this guidance directs the EPA employee to cite the statutory
authority granting the right of entry, without mentioning any
civil/criminal penalties.  If access is denied, the employee is
to inform the Office of General Counsel, which will decide how to
proceed.


XIV. COMMUNICATIONS (CO)

     CO.  Communications with Litigants

(GM-6)                                                   (CO. 1-1)
     Contracts  with Defendants and Potential Defendants in
     Enforcement Litigation (October 7, 1981)

     This policy is a short memorandum on five requirements
governing contact with actual or potential defendants in
enforcement litigation.  First, EPA needs to consult with the
Dept. of Justice (DOJ) before contacting defendants in
enforcement litigation or potential defendants in cases referred
to DOJ for filing.   Second,  EPA must give DOJ an opportunity to
participate in any meetings with such persons or firms to review
their compliance status.   Third,  EPA must give DOJ notice of and
opportunity to attend meetings requested by potential defendants
or their counsel.  Fourth, EPA shall coordinate ground rules with
DOJ in advance of any meetings.  Fifth, EPA must provide follow-
up information to DOJ promptly after the conclusion of any
meetings.

-------
                               39

(GM-7)                                                 (CO. 1-2)
     "Ex Parte" Rules Covering Communications Which Are the
     Subject of Formal Adjudicatory Hearings (December 10,
     1981)

     This policy guides EPA staff in recognizing and avoiding
improper ex parte communications and in taking remedial steps if
an improper ex parte communication occurs.  Sections I - III
define ex parte contacts and describe the rules governing them.
Section IV describes measures for minimizing the adverse legal
impact of such communications when they occur.

     The first section discusses why rules about ex parte
contacts exist and to what they apply, listing nine areas where
EPA conducts formal adjudicative hearings and listing
Administrative Procedure Act (APA) reguirements.  The next
section addresses what an ex parte communication is, providing
the APA definition and a "working" definition.  The third section
discusses the rules governing ex parte communications, including
what kinds of communications concern "the merits" of a hearing,
what communications within EPA are prohibited, and what
communications with persons outside EPA are prohibited.  The
final section addresses ways to minimize ex parte communications
and actions to take if they should occur.  In this section are
five illustrations of preventive measures to lessen the
likelihood of problems as well a curative measure, viz.. to make
the content and circumstances a part of the official record of
the proceeding and give the parties a chance to respond on the
record.
(GM-43)                                                (CO. 1-3)
     Enforcement Document Release Guidelines (September 16,
     1985)

     The Guidelines are intended to assist program personnel and
enforcement attorneys in their decisions on whether to withhold
or release enforcement documents requested by the public.  They
are designed to provide Agency-wide consistency in the release of
enforcement related documents and to promote fairness to all
public interests.  The guidance clearly states that it is
intended to provide only interpretive guidelines and general
principles, and that decisions to release documents will vary
with each case depending on each program's statutory and
programmatic needs.

      The goal, scope, and general principles of the Guidelines
are briefly described.  Next, the Guidelines address releasing
general enforcement documents.  These include enforcement policy
documents, enforcement strategic planning documents, management/
administrative documents,  deliberative support documents,
reference files, and documents containing attorney-client

-------
                                40

communications.

     The last section discusses releasing case-specific
documents.  The first part of this section looks at the release
of case files.  It begins with a discussion of the release of
case files in general and then goes on to specifically address
the release of attorney work product and attorney-client
materials, settlement documents, and other documents such as law
enforcement documents which discuss unique investigative
techniques not generally known outside the government.  The
second half discusses the release of case status reports.

     The Appendix briefly describes several statutes and
regulations which place constraints on the Agency's discretion to
release documents to the public.


XV.  MISCELLANEOUS (MI)

(GM-66)                                                (MI. 1-1)
     Assertion of the Deliberative Process Privilege
     (October 3, 1984)

     The purpose of this guidance is to prevent disclosure of
certain materials containing personal advice,  recommendations,  or
opinions relating to the development of Agency policy,
rulemaking, use of enforcement discretion, settlement of cases,
etc., in response to depositions,  motions to compel discovery,
and questions posed at a trial or hearing.  The guidance explains
when, who can, and how to assert the privilege.

     Section I discusses the application of the privilege and
some of its limitations (with supporting case citations).
Section II explains when to assert the privilege.  The Agency
will not assert the privilege in every case where it applies;
therefore, the materials should be released,  except where: (a)
release may cause harm to the public interest; (b)  the materials
are subject to another privilege justifying nondisclosure; or (c)
release would be unlawful.  Section III explains that, in
general, the head of the office responsible for development of
the material in question should assert the privilege.  Finally,
Section IV addresses how to assert the privilege, detailing six
procedural steps that must be undertaken.

     Attached to this guidance are Delegation 1-49 of 10/3/84
(This is the actual delegation of authority from the
Administrator to assert the privilege.) and two short memoranda
from the General Counsel on procedures for obtaining concurrence.

-------
                                41

(GM-89)                                                (MI. 1-2)
     Strengthening the Agency's Administrative Litigation
     Capacity (May 3, 1989)

     This policy provides a mechanism to decide whether or not to
appeal adverse Administrative Law Judge (ALJ) decisions and how
to reply to Respondent appeals to the Chief Judicial Officer of
favorable decisions.  Its purpose is to assure, at minimum cost,
national program input and regional consistency in a timely
manner.  First, the Regional Office must fax a copy of the
decision and a brief summary to the Office of Enforcement Branch
Chief, the appropriate Office of General Counsel Branch Chief,
and the Office of Regional Counsel standing contacts.  A
conference call follows.  The call provides an opportunity to
identify issues for appeal, identify what support will be
available to assist the lead office, and incorporate both a
national and a regional perspective into the briefs.


(GM-2)                                                 (MI. 1-3)
     Professional Obligations of Government Attorneys (GM-2)
      (April 14, 1976)

     This guidance discusses some of the obligations of EPA
attorneys, both under the Canons of Professional Ethics and under
various provisions of law.  The five main areas covered are:  (1)
confidential commercial or financial information; (2) Civil or
criminal investigations;  (3) attorney-client communications;  (4)
commitments on behalf of EPA; and (5) ex parte communications.
Under the broader heading of attorney-client communications are
communications with the Dept. of Justice, legal advice, support
of Agency positions, and dealing with outside parties represented
by an attorney.


(GM-28)                                                (MI. 1-4)
     Liability of Corporate Shareholders and Successor
     Corporations for Abandoned sites Under CERCLA  (GM-28
      (June 13, 1984J1

     This policy identifies the extent to which corporate
shareholders and successor corporations may be held liable under
the law for response costs arising from the release of a
hazardous substance from an abandoned hazardous waste facility.
The first section address the extent of liability of corporate
shareholders, and the second section examines the liability  of
successor corporations.  Each of the two.sections follows the
same format.
     1 This  Policy  is  to  be  transferred to  the  CERCLA Policy
Compendium after a generic policy is development to take its place.

-------
                                42

     First, a short background is provided on whether there is
any statutory language in CERCLA which makes either corporate
shareholders or successor corporations responsible  for cleanup
costs for the release of a hazardous substances from an abandoned
hazardous waste facility.  In the case of corporate shareholders,
the background section also explains why EPA may want to extend
liability to include corporate shareholders and whether
traditional corporate law allows for such an extension.

     The issue of the particular section is set out and then a
short summary section answers the issue in general terms.  Each
discussion section explains in detail what is advanced in the
summary.  In addition, the discussion doctrine of  sections
pertaining to each issue review the courts' traditional approach
to limited liability and the current evolving standards,
specifically as to "piercing the corporate veil."  The discussion
section on corporate shareholder liability also explains how the
"piercing the corporate veil" is applied by federal courts, in
contrast to how it is applied by state courts.  Each section ends
with a short conclusion as to how the Agency should proceed in
cases involving corporate shareholders or successor corporations.


(GM-no)                                                 (MI. 1-5)
     Interim Guidance on Review of Indian Lands Enforcement
     Actions (October 21, 1992)  with attachment, EPA Policy
     for the Administration of Environmental Programs on
     Indian Reservations (November 8, 1984)

     The EPA policy which announces, inter alia, as its eighth
principle,  that Assistant Administrators,  Regional Administrators
and the General Counsel should work cooperatively with Tribal
governments to achieve compliance with environmental statutes and
regulations on Indian reservations,  consistent with the principle
of Indian self-government.   The policy states:

     •    Where tribally owned or managed facilities do not meet
          Federally established standards,  the Agency will
          endeavor to work with the Tribal leadership to enable
          the Tribe to achieve compliance.

     •    Where reservation facilities are clearly owned or
          managed by private parties and there is no substantial
          Tribal interest or control involved, the Agency will
          endeavor to act in cooperation with the affected Tribal
          Government, but will otherwise respond to noncompliance
          by private parties on Indian reservations as EPA does
          to noncompliance by the private sector outside
          reservations.

     •    Direct EPA actions against Tribal facilities through
          the judicial or administrative process will be

-------
                                43

          considered where the Agency determines, in its
          judgment, that (1) a significant threat to human health
          or the environment exists, (2) such action would
          reasonably be expected to achieve effective results in
          a timely manner,  and  (3)  the Federal Government cannot
          utilize other alternatives to correct the problem in a
          timely fashion.

     The policy is attached to Interim Guidance, which assigns
the responsibility to coordinate policy and management issues,
and legal issues in consultation with the Office of General
Counsel, to the Senior Legal Advisor of the Office of Federal
Programs (OFA).  That person will make appropriate
recommendations, and the AA will be advised of enforcement
options.  Until the Indian Policy Implementation Guidance is
formally revised, all future direct EPA enforcement actions
against tribal facilities,  except for emergency situations,
should be submitted to the AA.  The AA will act in consultation
with the OFA, including its Senior Legal Advisor, and the General
Counsel.

-------
CROSS INDEX

-------
                                                      12/1/94
              GENERAL ENFORCEMENT POLICY COMPENDIUM

                           CROSS INDEX
          GM NUMBER                     CURRENT STATUS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
R
R
R
R
R
R
R
R
T
D
D
R
D
D
D
D
R
R
R
R
R
R
T
D
R
R
R
R
D
D
D
R
R
R
R
D
(IN. 1-2)
(MI. 1-3)
(RF.1-1)
(RG.1-4)
(IN. 1-1)
(CO. 1-1)
(CO. 1-2)
(RF.1-2)



(RF.1-4)




(OR. 1-1)
(RF.2-2)
(TK.1-4)
(CM. 1-3)
(PT.1-1)
(PT.1-2)


(FF.1-1)
(RF.1-7)
(OR. 2-2)
(MI. 1-4)



(CL.4-1)
(PT.1-5)
(SE.1-5)
(RF.1-5)

Key:

R = Recodified in New Compendium (New Number in
    Parentheses)
T = Transfered to the Criminal Enforcement Compendium
D = Deleted

-------
          GM NUMBER                     CURRENT STATUS
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
D
R (PT.1-4)
R (SE.1-4)
R (TK.1-3)
R (SF.1-1)
R (SE.1-1)
R (CO. 1-3)
D
R (PT.1-6)
R (PB.1-1)
R (RG.1-2)
R (RF.1-3)
D
D
R (PT.2-3)
R (SE.2-3)
P (CL.2-1)
D
D
R (PT.2-1)
R (SF.1-2)
R (RG.1-1)
R (RG.1-3)
R (TK.1-5)
R (TK.1-6)
R (SE.1-2)
R (RF.1-6)
D
D
R (MI. 1-1)
R (PT.2-3)
R (OR. 1-2)
R (RF.2-1)
D
R (CM. 1-1)
D
R (SE.1-3)
R (TK.1-2)
R (PT.3-1)
Key:

R = Recodified in New Compendium (New Number in
    Parentheses)
T = Transfered to the Criminal Enforcement Compendium
D = Deleted

-------
          GM NUMBER                     CURRENT STATUS

            76                          R  (TK.1-1)
            77                          R  (PT.2-2)
            78                          R  (RF.3-1)
            79                          R  (SE.2-2)
            80                          R  (SE.2-1)
            81                          D
            82                          D
            83                          D
            84                          D
            85                          R  (CM.1-2)
            86                          R  (OR.2-1)
            87                          D
            88                          R  (PT.1-3)
            89                          R  (MI.1-2)
            90                          R  (RF.3-2)
Key:

R = Recodified in New Compendium  (New Number  in
    Parentheses)
T = Transfered to the Criminal Enforcement Compendium
D = Deleted

-------
RF.1

-------
RF.1-1

-------
 «r	'v
/ ^ *i
1 ^25 * '  UNITED STATSS ENVIRONMENTAL PROTECTION AGENCY
\.   .-/                 WASHINGTON. D C. :0^63
                           AUG 2 1 1981
                                               THE
   Honorable William French Smith                             .
   The Attorney General
   Washington, D.C.  20530

   RE:  Memorandum of Understanding Between the Department
        of Justice And the Environmental Protection Agency

   Dear Mr. Attorney General:

        Under Paragraph 10 of the Memorandum of Understanding
   between the Department of Justice and the Environmental
   Protection Agency dated June 15, 1977 (copy enclosed),
   EPA's General Counsel and Assistant Administrator  for
   Enforcement, EPA, were given authority to request  civil
   litigation from the Department of Justice.

        On July 1, 1981, the Environmental Protection Agency
   underwent an internal reorganization which resulted, in
   part, in the abolishment of the Office of Enforcement as
   well as the position of Assistant Administrator for
   Enforcement.  In addition, the Office of General Counsel was
   placed under an Associate Administrator for Legal  Counsel and
   and Enforcement.

        The principal enforcement authorities previously
   delegated to the Assistant Administrator for Enforcement
   •vere redelegated to the Associate Administrator for Legal
   Counsel and Enforcement on July 14, 1981.  Therefore, the
   authority previously vested in -the Assistant Administrator
   for Enforcement under the above referenced memorandum now
   reside* in the Associate Administrator for Legal Counsel and
   Enforcement.

-------
                          -2-
     Accordingly, requests to the Department of Justice for
routine civil litigation under the terms of the Memorandum
of Understanding will now come from the Associate Administrator
for Legal Counsel and Enforcement. The present Associate
Administrator for Legal Counsel and Enforcement is Mr. Frank
A. Shepherd.

     This reorganization and redelegation does not, of
course, affect the authority of Regional Administrators who
may continue to request litigation under Paragraph 10 of the
Memorandum of Understanding in matters requiring an immediate
temporary restraining order.
                           Sincerely yours,
                           Anne M. Gorsuch
ccs  Assistant Attorney General
     Land and Natural Resources Division

     Assistant Attorney General
     Civil Division

-------
                          MEMORANDUM OF UNDERSTANDING
j          '                          BETWEEN
j                           THE DEPARTMENT O? JUSTICE
j                                      AND
:                      THE ENVIRONMENTAL PROTECTION AGENCY
                 KHEREAS, the Department of Justice conducts the civil

            litigation of the Environmental Protection Agency;

                 WHEREAS, the'conduct of that litigation requires a

            close and cooperative relationship between the attorneys
                           •                                    •           f
            of the Department of Justice ar.d of the Environmental

            Protection Agency;

                 WHEREAS, the achievement of a close and cooperative
                                                        •„
            relationship requires a clarification  of the respective

            roles of the attorneys of the Department of Justice *na of

            the Environmental Protection Agency;

                 WHEREAS, the Attorney  General may decline  to represent
            *         •       •         p
            the Agency in particular civil  actions,  in which case  the
                                      •                             .
            Agency nay be represented by  its  o«m attorneys;  and

                 WHEREAS, most  challenges to  and enforcement of regulatory
                                         •
            standards and procedures adopted  by the Environmental  Pro-

            tection Agency  involve; scientific,  -technical,  and policy

            issues and  determinations  developed in lengthy rulemaking

            proceedings in which the Agency's attorneys  have-been  involved

            end can  provide the necessary expertise.

-------
                            - 2 -
       NO/*',  therefore,  the following memorandum of  under-
  standing is entered into between the Attorney General of
  the United States  and the Administrator  of  the Environmental
     •                         •
  Protection Agency  for the purpose of promoting the efficient
  and effective  handling of civil  litigation  involving the
  Environmental  Protection Agency;
       1.    The  Attorney Genera-! of the United States  (herein-
  after referred to  as  the "Attorney General")  shall have
  control  over all cases to which  the Environmental Protection
  Agency (hereinafter referred to  as the "Agency")  or the
.  Administrator  of the  Environmental Protection Agency  (herein-
  after referred to  as  the "Administrator") is a party.
       2.    Khen requested by the  Administrator, the Attorney
  General  shall  permit attorneys employed  by  the Agency
  (hereinafter referred to as •"Agency participating attorneys")
  to  participate in  cases involving direct review  in the Courts
  of  Appeal,  and  shall also permit  such  attorneys to participate
  in, other civil cases to which  either  the Agency  or the
                          •
  Administrator  are  a party, provided,  however,  that:
             (a)   the Administrator or his delegate shall
  designate  a specific Agency participating attorney for
  each case  and sholl communicate the name of such attorney
  •in writing to the Attorney General;
             (b)   such Agency portic.ipatir.rj attorney shall be
  subject to the supervision  and  control of  the Attorney
  General; and

-------
                           - 3 -


           (c)  if required by the Attorney General, an

Agency participating attorney shall be appointed as a
                                                             •
Special Attorney or Special Assistant United States

Attorney and take the required oath prior to conducting

or participating in any kind of Court proceedings.

     3.   Agency attorneys shall not file any pleadings
                     *               .
or other documents in a court proceeding without the prior
     v.
approval of the. Attorney General.

      4.  .It is .understood that participation by Agency

 attorneys under -this memorandum includes appearances in

 Court, participation in trials and oral arguments, partici-
                                             «.
 pation in the preparation of briefs,  memoranda  and pleadings,

 participation in discussions with opposing counsel, -including
                                                         •

 settlement negotiations, and"all other aspects  of  case

 preparation normally associated with the responsibilities

 of an attorney in the conduct of litigation; provided,

 however, that the Attorney-General shall retain control ovtr

 the conduct of all litigation.  Such control shall include
   •
 the ngnt to allocate tasks between attorneys  employed by
                              .        •                 •
 the Department of Justice and Agency participating attorneys.
                                     •
 •In allocating tasks between the Department's and the Agency's
                                                      •
 attorneys, the Attorney General shall give due consideration
                            •  •                    •
 *:o the substantive  knowledge of the respective attorneys
        ** •                •          •
 of the matter at issue so that the Government's resources

 are utilized to the best  advantage.

-------
                          - 4 -

      5.    In  the  event of any disagreement between attorneys
of the Department of Justice and of the Agency concerning
the conduct of any case, the Administrator may obtain a
review of  the matter in question by the Attorney General.
The Attorney General shall give full consideration to the views
and requests-of the Agency and shall make every effort to
eliminate  disagreements on a mutually satisfactory basis.  In
carrying out such reviews, the Attorney General shall consult
with  the Administrator.  In implementing this provision, it
is understood fhat-the Attorney General will not be expected
by the Administrator to interfere with the direction of any
trial in progress.
     6.    The settlement of any case in which the Department
of Justice represents the Agency or the Administrator shall
require consultation with and concurrence of both the Adminis-
trator and the Attorney General.
     7.    The Administrator and the Attorney General shall
make an annual review of both .the Department's and the
Agency's personnel requirements for Agency litigation.  The
Attorney General  and the Administrator will cooperate in
making such appropriation requests as are required to irain-
-2in  their respective  staffs  at a level adequate.to the needs
                                                t»
of the Agency's  litigation.
       .                                          . •
      8.'   The. Attorney General  shall  establish specific
deadlines, not  longer  than  60 days, within which the Depart-
ment's Attorneys must  either  file complaints in Agency cases

-------
                          • 5 •
or report to the Attorney General why any  such complaint
has not been filed.  In the event any Department Attorney
does not file a complaint, he shall thereafter submit further
periodic reports to the Attorney General until the  conplaint"
                                  * •
is filed or a decision is reached that it  shall 'not be filed.
            "                •                                  "
Copies of the reports required by this section shall be pro-
vicec to the Agency.if requested.
     9.   If the Attorney General fails to file  a  complaint
within 120 days, of the referral of a request for litigation
and a litigation report by the Agency to the Attorney General,
then the Administrator nay request the Attorney General to
                                            s
file a complaint within 30 days.  Failure of the Attorney  '.
General to thereafter file a  complaint within the said 30
days nay be considered by tYTe Administrator or his delegate
to be & failure of the Attorney  General to notify the Adminis-
trator within a reasonable time that he will appear in litiga-
tion for purposes of Section  305 of the Clean Air Act, 42
U.S.C. 1857h-3, Section 506 of the Federal Water Pollution
                                                            •
Control Act, 33 U.S.C. 13GG,-or Section 1450 of the Safe
Drinking Water Act, 42 U.S.C. 300j-9; provided, however, that
the failure of  the Attorney General  to  file  a complaint
within the time period requested by  the Administrator  in a
case in which the Administrator requested iracdiatc action
under Sections  311(e) and 504 of the  Federal Water Tolluticn
Control Act, 33 U.S.C. 1321,  136-'; Sortion  303 of  the  Claan

-------
                           - 6 -
Air Act, 42 U.S.C. 1857H-1; or Section 1431 of the Safe
Drinking Water Act, 42 U.S.C. 300i; to protect public
health may also be considered by the Administrator to be
a failure of the Attorney General to so notify the
Administrator'under Section 305 of the Clean Air Act, 506
of the Federal Water Pollution Control Act or Section 1450
of the Safe Drinking Water Act.
  v-.
     10.  All requests of the Agency for litigation shall
be submitted by the Agency through its General Counsel or
its Assistant Administrator for Enforcement to the Assistant
Attorney General for the Land and Nazural Resources Division
                           • •*
or for the 'Civil Division', except matters requiring an
immediate temporary restraining order may be submitted by
regional Administrators of the Agency simultaneously to a
United States Attorney and the appropriate Assistant
Attorney General.  All requests for litigation shall be
accompanied by a standard litigation report which shall
contain such information as shall be determined from time-
to- tine by the Attorney General to bo necessary in order to
prosecute Agency litigation.  Similar reports shall also be
provided for suits in which the Agency or the Administrator
is a defendant, as requested by the Attorney General.
     11.  The Agency shall make the relevant file of any
moitcr that is the; subject of litigation svni.lr.blc to
attorneys  fcr the Department of Justice at a convenient

-------
                         - 7 - .   .


 location when a request  for litigation is submitted or


 when the Department  is required to defend the Agency or


 the Administrator.


      12.  The Administrator shall undertake to review the
                         •

 Agency's procedures  for  the preparation of the record in


 cases involving direct review  in  the Courts of Appeal,


 including analyses  of such natters as assembly, indexing,


 pagination,  timing  of preparation, and the allocation of


 tasks between the Agency and  the  Department. • The Admir.is-
               •

 trator shell consult with  the  Attorney General on the


 re-examination of these  procedures.


      13.  The negotiation of  any  agreement to be  filed  in


 court shall require the  authorization  end concurrence of



 the Attorney General.



      14.  In conducting jLitxgation for the Administrator,, the


 Attorney General shall defer to the Administrator's inter-


 pretation of scientific and technical matters.



      15.  Nothing in'"this agreement shall-e.ffeet any authority


tof  the Solicitor General to authorize or decline to authorize'


 appeal* by the Government from any district court to any
                                           • ..     •      ^
                                    »• •

 appellate court or  petitions  to  such courts  for the issur.r.ce


 of extraordinary writs, such  as  the authority conferred by


 28 Cm 0.20,  or to  carry out  his traditional functions with


 regard to appeals  to or petitions for review by the Su?rr>r.a
                                                              •

 Court.                      	


       16.   In order  to.effectively imp1ftwent  the terns of this


 Memorandun, the Attorney General and the Administrator will

-------
 transmit copies  of this Memorandum to all personnel affected
 by  its  provisions.  This Memorandum shall r.ot preclude the
 Department and the Agency from entering into mutually satis--
 factory arrangements concerning the handling of a particular
 case.
     17.   This Agreement shall apply to all  cases filed on or
 after the*  dite/of  approval  of  this Agreement by the .Attorney
 General  and the  Administrator.
     18.   The  Attorney  General and ths  Administrator nay
 delegate their respective functions and responsibilities
 under, thir- Agreement.
                           • M                          •
     19.   The  Department end the Agency shall adjust the
 conduct  of cases arising before the effective date of this
Agreement  in a manner consistent with the spirit of this
Agreement.
                          GRIFFIN  B.  SELL
                          Attorney General
                          Date;   ^>   / (T
                          DOUGLAS/:;.  ^..;bTLi;
                          Adir.inii/trr.rsr
                          Environmc'-.tnj. Trotcctien Agency
                             i:	n.".t^. tC.  tC'.(l^.
Date

-------
RF.1-2

-------
UNITED CTATES ENVIRCN'.'.i.v. A'_ P9CTECTION AGENCY
              WASHING r- %. =; ;:4to
                                                           -  '-2

                                                          Jfc" $
                                                             ^*^
                                                       orricc or
                                                   AMD CN'OnCCMKMT COUMSCk
MZMORANT3UM
SUBJECT:  Draft DOJ/EPA Litiqation Procedures
FROM:
TO:
  Robert M. ?erry
  Associate Administrator for Legal
    Counsel and General Counsel

  Associate Administrator
  Assistant Administrators
  Regional Administrators
  Office Directors
  Regional Counsels
                                                 Enforcement
     In furtherance of the Adrinistrator's policy to strengthen
and improve this Agency's enforcement capability, particularly
with regard to litigation, a mectir^  with the Department cf
Justice to discuss these matters  occurred yesterday at Quantico,
Virginia.  I an pleased to report tha"; it was highly productive
and successful.  Attached is a  sir-nary of the matters discussed,
the recommendations produced and  a process that will strengthen
our enforcement efforts.  Each  of ycu has a critical role to
insure the success of this vital  endeavor, ar.d I lock forward
to discussing it with you ahd receiving any comments you may
have.
Attachment

-------
         ZX?C?.CZ:*Z::T GOALS ASD OBJECTIVES
                        of
      c~~rcr c? LZSAL A:TD z:T?o?.cs-!s:rr csrasz
       U. S. LKVIRONMSKTAL PSSTSCT2GM AGENCY
1.  The role of enforcement is to support and advance
    the regulatory policies of EPA through use of all
    available enforcement means; to insure compliance
    with applicable laws and regulations; to deter
    unlawful conduct and to remove any incentive to
    non-compliance.

2.  The regulated community is entitled to fair notice
    of EPA's policies and the requirements they impose
    on the regulated community.  All members of the
    regulated community should expect that they will be
    treated in a consistent, fair manner which
-- - removes any- competitive—advantage-gained -by-non.-	J_.
    compliance.

3.  ZPA is responsible for establishing regulatory policies
    and enforcement goals, priorities and procedures to
    effectuate its policy initiatives.  These policies
    and priorities are what guide the Department of Justice
    in its role as EPA's litigation counsel.  This litiga-
    tion will be conducted pursuant to the C-:-*tico Guide-
    lines for Enforcement Litigation developed between
    the Environmental Protection Agency and the Department
    of Justice.

-------
       QVAirriCC- GVIDELINES FOP. ZK7GP.CEMENT LITIGATION
1.  GOALS AXD PUP.PCSIS
          "cr I?A
               To achieve compliance with applicable law
          through effective enforcement.
               To inform the regulated communities, Congress
          and the public that IPA will enforce the statutues
          it administers in a prompt, fair and even-handed manner.
          For DOJ
               To provide the lirigation support necessary to
          aid EPA in the accomplishment of these goals.
                                                                  •
2.  GZSZRAL OBSERVATIONS                           '          '  ••
          A.  Emphasis will be placed on bringing meaningful
          enforcement cases, particularly hazardous waste cases,
          criminal cases and ar.forcene.it of existing consent
          decrees;
          B.  Especially with regard to recently-enacted
                                                                  *
          statutes, DOJ needs policy gx'.idance from EPA to
          give direction on enforcement activity and to main-
          tain consistency;
          C.  Regional offices of EPA will be the lynch-
          pin of the agency fcr identifying and developing
          enforcement matters ;
          trators piay xey rexes in rne enzorctuneuc,
          which are being clarified;

-------
                                 - 2 -

           E.  . Scares, where possible, should be giv-.«n the
           opportunity and incentive to initiate enforce-
           oenc cases.  Effectiveness of state enforcement
           accion5 vill be considered;
           F.   While national enforcement priorities  are
           necessary, flexibility la deiirable for region-
           by-region determinations;
           G.   Criainal enforceaent priorities and
           processes are being developed separately froo
           civil matters;
           H.   United States Attorneys play a critical
           role and should be involved wherever possible;
	I..	Between EPA Headquarters and the regions,
           areas of responsibility will be identified
           to allow regional flexibility.
           J.   Focused use of administrative discovery
           powers is necessary for effective investigation
           of the factual/technical basis for cases.

3.   RESPECTIVE COMMITMENTS
           A*   On enforceaent policy femulation, EPA
           will seek, where appropriate, to confer fend
           coordinate with DOJ concerning potential ia-
           pacts on litigation;
           3.   Pslicy guidance given to K.A.'s ir.d'K.C.'f
                     be provided to DOJ:

-------
                                        - 3 -
                  C.   Informal working groups in all media
                  will continue (or be established) to pro-
                  vide DOJ/EPA-OGC input co address legal issues;
i
                  D.   Associate Adainistrator Ferry and Assistant
i
j                  Attorney General Carol Ł. C-inkins will be avails.:le
                  to diicuii new enforcement guidance with R.A.'s
                  and K.C.'s in U.C.  To be discussed will be R.A.
                  accountability and commitment to a sustained,
                  orderly enforcement program that includes litiga-
                  tion as a desirable component;
                  E.   Associate Administrator Perry will meet with
                  Assistant Administrators on enforcement policy,
                  to clarify roles and secure commitments from
                  program side for sufficient technical support;
                  T.   Assistant Attorney General Dinkins will
                  sake similar presentations to United States
                  Attorneys on policies, processes and roles;
                  G.   Violations vill be discovered through
                  self-reporting, regular inspections, citizen
                  complaints, administrative discovery and
                  trained criminal investigators;
                  n.   Administrative pcvers, to be used for
                  investigatory purposes, should be delegated
                  to rsgicT.s by eliminating need for Head-
                  quarter's concurrence;

-------
                            - 4 -

      I.   Ones a case is referred, the government
      will re=ain open to negotiation but will con-
      tinue to move the case to trial.

P3CCZS3
      A.   DUJ attorneys assigned on a regional basis
      to handle all aedia;
      B.   EPA regional enforcement attorneys are aedia-
      •pecific;   .*'
      C.   A lead agency attorney (generally an attorney
      from the region) will be designated to manage the
      case for the agency and coordinate with DOJ;
      0.   Regular,  monthly meetings will be held in
      the regions, attended by DOJ and EPA attorneys,
      with technical staff present and AUSA's invited
      to discuss:
           1.   general enforcement actions,  in-
           cluding EPA administrative processes
           and investigations exclusive of criminal
           natters;
           2.   eases targeted by EPA as likely
           candidates for litigation, to deterioe
               a.   whether DOJ assistance prior
               to  referral would be helpful; and
               b.   adequacy of agency de-
               velopment of case;

-------
                      - 5 -

     ?,  cases previously discussed as
     tic rrers to be identified for case
     development to DCJ;
     4.  separate meetings will be
     held in the regions with program
     hftads co discuss program enforce-'
     aent priorities and concerns;
Ł.   Following discussions At monthly neetings
regarding potential natters for ease develop-
aent, when region determines that aatter is a
potential civil enforceaent case, R.C. requests
DOJ assistance for case developaent
     1.  te&u is formalized at this point.
     in anticipation of litigation;
     2.  technical support is committed;
     2.  goal is resolution through nego-
     tiated settlement or final Judgment;
F.   Vhen a case hasCgaturedTI^he regional
administrator requests the Associate Admin-
is tator to refer the case to DOJ for litiga-
tion;
                         »
G.   Some cases vill be referred directly to
DOJ without forming a case development teas.
H.   Tor true emergencies, telephonic authori-
zaricr to file vill suffiza;

-------
                      - 6 -

I.   A new reiarral package format, nor.
srreaa-lined and ap?ropria:i; to the case
development process identified above will
be produced;
J.   For cases referred before monthly
neetings begin, DOJ and EPA will confer
informally prior to referral;
K.   Aitociace Administrator Perry and
Assistant Attorney General Dinkins are
available for dispute resolution if
difficulties or disputes cannot be
handled at intermediate levels;
L.   Coordination for all of theee efforts
                             %
will include
     1.  Ferry and Dinkins visits Co
     regions;
     2.  Ferry and Dinkin* bi-weekly
     meetings with staff;
     3.  Ferry and Dinkins monthly
     meetings without staff:
     A.  regular monthly meetings at
     staff level in regions;
     5.  working groups in D.C. on
     CUJ input into policy formulation
     re litigation impact;

-------
               6.   Basic understanding -y  both
               agency and DCJ lawyers  of their
               respective roles and the need
               for a cooperative spirit.
5.  SPECIFIC ISSUES DISCUSSED
          A.  EPA is establishing guidelines for
          Superfund national strategy  including
          especially criteria for which injunctions
          are appropriate and whether  the  regions
          or headquarters has the initiative for
          Superfund enforcement;
          B.  Existing Consent Decrees
               1.   collection and analysis of
               compliance status of all existing
               consent decrees to be accelerated;
               2.   uniform policy to be adopted
               en modification of existing decrees
               through judicial action;
               3.   violations of existing  consent
               decrees are a top priority  for
               enforcement;
               4.   collection cf stipulated pen

-------
RF.1-3

-------
 \       UNITED STATES ENVIRONMENTAL PROTECTION AGENCY  Ł> f?   / -
                       WASHINGTON, D.C. 20460                "
                      JH30TO

MEMORANDUM
OFFICE OF ENFORCEMENT
  ANDCOMFUANCE
   MONITORING
SUBJECT:  Model Litigatiqp^Raport Outline and Guidance
PROM:     Richard Mays/
          Senior Enforcement Counsel
                       \s
TO:       Associate Enforcement Counsels
          Headquarters Program Enforcement Division
            Directors
          Regional Counsels
          Regional Program Division Directors
     Attached are the Model Litigation Report Outline and the
Model Litigation Report Guidance.  All litigation  reports
referred to OECM or the Department of Justice after March 1,
1986r should follow the Outline in regard to format and the
Guidance in regard to content.  The purposes of these two
documents are (1) to create a common understanding among Agency
personnel and DOJ attorneys as to what the report needs to
cover and (2) to make the litigation report's form consistent.
These two documents have been prepared by a workgroup consisting
of Jack Winder, OECM-Water; Bill Quinby, OECM-Policy; Mike
Vaccaro, Region III; Robert Schaefer, Region V; and Tom Speicher,
Region VIII.  They also reflect extensive review and input from
the Regions, OECM, and the Environmental Enforcement Section of
the Department of Justice.

     While we anticipate that the Model Guidance will be parti-
cularly useful to the less experienced attorney, it will also
serve as a reference for the experienced attorney.  The Outline
will be of use to all Agency enforcement personnel as it will
serve as a checklist to determine if all the parts of the pack-
age are complete and in the correct format.  By utilizing the
models  in preparing litigation referral reports, we will be able
to expedite the referral process.

-------
                              -2-

     If you have any questions regarding these two documents,
please contact Bill Quinby of the Legal Enforcement Policy
Division.  Be can be reached on FTS 475-8781, his mail code is
LE-130A, and his E-Mail Box is 2261.

cc:  Chief, Land and Natural Resources Division, DOJ

-------
        OFFICE OF ENFORCEMENT AND COMPLIANCE MONITORING
               Model Litigation Report - Outline
Any section of this outline may be addressed in the litigation
report by the entry of "not applicable (N/A)" It the section
is not relevent to the referral, or by "see section 	• if
the specific information requested in the outline has been
fully supplied in another section.  In addition, this outline
is not applicable to $107 CERCLA cost recovery cases; to CERCLA
$106, TSCA $7 or RCRA $7003 cases.
1.  Cover Page:
    a.  Region, Act involved and judicial district.
    b.  Name and address of defendant.
    c.  Name and address of facility.
    d.  Regional contacts (program/legal).
    e.  Stamp date Region refers report on cover page.
2.  Table of Contents.
3.  Synopsis of the Case.
4.  Statutory Bases of Referral:
    a.  Applicable statutes; cross-media coordination.
    b.  Enforcement authority; jurisdiction and venue.
    c.  Substantive requirements of law.
5.  Description of Defendant:
    a.  Description of facility.
    b.  State of incorporation of defendant.
    c.  Agent for service of process.
    d.  Defendant's legal counsel.
    e.  Identity of other potential defendants.
6.  Description of Violations:
    a.  Nature of violations.

-------
                               -2-
     b.   Date and  manner  violations identified.
     c.   Dates and duration of violations.
     d.   Pending regulatory changes.
     e.   Environmental  consequences (past,  present and future)
7.   Enforcement History  of Defendant and Pre-referral
     Negotiations:
     a.   Recent contacts  with  defendant by  EPA/Region, (e.g.,
         AOs,  permits, grants).
     b.   Pre-referral negotiations.
     c.   Contacts with defendant by state,  local agencies and
         citizens, and actions  taken.
    d.   Prior enforcement history of defendant.
R.   Injunctive Relief:
    a.   Steps to be taken  by defendant to  achieve compliance.
    b.   Feasible alternatives.
    c.   Cost and technology considerations.
9.  Penalties:
    a.   Proposed civil penalty and legal authority.
    b.   Penalty analysis/calculation.
    c.  Present financial condition of defendant.
10.  Major Issues:
    a.   Issues of national or precedential  significance.
    b.   Bankruptcy Petitions.
11. Significance of Referral:
    a.   Primary justification for referral.
    b.   Program strategy.
    c.  Aqency priority.
    d.  Program initiatives outside of stated strategy.

-------
                              -3-
    e.  Relation ot reterral to previous or concurrent  cases
        or actions.
12. Litigation Strategy:
    a.  Settlement potential/plan for settlement.
    b.  Need tor interrogatories and requests for  admissions.
    c.  Potential for summary judgment.
    d.  Need for preliminary Injunction.
    e.  Identity of potential witnesses.
    f.  Elements ot proof and evidence and need for additional
        evidentiary support.
    g.  Anticipated defenses (legal and equitable) and  govern-
        ment responses.
    h.  Resource commitments.
    i.  New evidence.
13. Attachments, where applicable:
    a.  Index to attachments.
    b.  Draft complaint.
    c.  Draft discovery.
    d.  Draft consent decree.
    e.  Draft motions.
    f.  Table of Violations.
    g.  Documentation of violations.
    h.  Permits and contracts.
    i.  Significant correspondence between EPA, defendant
        and/or state.
    j.  Penalty analysis/calculation; BEN printout.
    k.  Diagram ot facility.

-------
                          -4-

1.  Case Plan.

itu  Dun and Bradstreet report; SEC Form 10K; Annual Report;
    Papers relating to corporate status from Secretary of
    State's office; ABEL printouts and legal description
    of property, as necessary and if obtainable.

n.  Other relevant information.

-------
        OFFICE OF ENFORCEMENT AND COMPLIANCE MONITORING
               .Model Litigation Report - Guidance
Any section of this outline nay be addressed in the litigation
report by the entry of "not applicable (N/A)" it the section
is not relevent to the referral, or by "see section 	• if
the specific information requested in the outline has been
fully supplied in another section.  In addition, this guidance
is not applicable to $107 CERCLA cost recovery cases; to CERCLA
S106, TSCA $7 or RCRA $7003 cases.
1.  Cover Page:
    a.  Region, Act involved and judicial district.
    b.  Name and address of defendant.
            Include names, addresses and telephone numbers
        ot all defendants (corporate/individual).
    c.  Name and address of facility.
             Include names, addresses and telephone numbers
        of all facilities subject to the referral.  Include
        county for venue purposes.
    d.  Regional contacts (program/legal).
             Include names, addresses and telephone numbers of
        the regional program-technical and legal contacts who
        prepared the report.
    e.  Stamp date Region refers report on cover page.
2.  Table of Contents:
        Include headings, all sub-headings and page numbers.
3.  Synopsis of the Case:
        Limit this synopsis to two pages (double-spaced), when
    possible.

-------
                               -2-
         The synopsis should contain a summary or brief descrip-
     tion of (1) the tacts (causes) which led to the  violation,
     (2)  the legal  basis of the violation and its environmental
     seriousness, and (3)  the  proposed relief.   Indicate need  for
     expedited  filing here.
 4.   Statutory  Bases  of  Referral: Ł/
     a.   Reference  all applicable federal  statutes by USCA cita-
         tion and by  section of the Act.   State  whether  coordina-
         tion across  media has  occurred.   Discuss reasons for
         including  or omitting  cross media claims.
    b.   Summarize  the enforcement  authority and the juris-
         diction and  venue provisions  of applicable statutes.
         If there is  reason to  file the action in a district
         other  than where the  facility is  located, note each
         available district and Indicate the reasons for tiling
         there.
    c.   Present the  substantive requirements of the law (federal/
         state) and applicable  regulations and permits.  Pertinent
         excerpts from federal/state laws and regulations should
\/ Careful cross-media regional review should ensure that all
'available causes ot action are included.  OECM recognizes that
in some cross-media cases, the initial cause(s) of action may
be ready tor referral, but that a secondary cause ot action
under a different statute may be a low priority matter or
require substantial development before the case is ready for
referral.  Where the secondary cause of action is minor, or
where the case development will take a substantial amount of
time, the case should be referred with the excluded secondary
cause of action clearly identified.  However, it the secondary
cause of action is major, or if development will not unreasonably
delay the referral, all such causes ot action should generally
be referred toqether.

-------
                              -3-
        be indent!fled and set forth here or attached  to the
        report.
5.  Description of  Defendant:
    a.   Description of facility.
        1)   Describe the violating  corporation or  individual
            and  the particular facility  in question.   Note  any
            relevant corporate or personal interrelationships
            or subsidiaries.   Indicate it the violator is a
            governmental entity.  If there is a question as to
            whether the corporation has  been dissolved or
            subsumed into a different entity, ascertain status
            ot corporation and attach Dun and Bradstreet report
            and  corporation papers  from  Secretary  of State's
            ottice  under section  13 n.
        2)   Briefly discuss the business of the defendant,
            providing  details  about the  facility in question.
            When the defendant is a manufacturer,  describe
            what is produced.   Emphasis  should  be  on the
            particular process that is causing  the problem.
            Describe the plant and  processes  used.  Include
            legal description  of  the property under section
            13 n.,  it  needed.   Reference and  attach diagrams
            to the  litigation  report.  Photographs and  video
            tapes ot the source may be helpful  in  that  they
            often improve the  "show" quality  of a  case  should
            it reach court.

-------
                               -4-
                 If  defendants  include  corporate  officers,
            discuss  tacts  Indicating participation ot the
            corporate officers  in the  activities resulting
            In the violations.
    b.  State of incorporation  of defendant.
             Include state of incorporation and the principal
        place of business.
    c.  Agent for service of process.
                     • ;,^
             Incl-ude name, address and telephone number of agent
        for service of process.
    d.  Defendant's legal counsel.
             Include full name, address and telephone number
        of legal counsel.  It corporate counsel, so state.
    e.  Identity of other potential defendants.
             It it is not immediately clear who should be
        named defendants, discuss all potential defendants
        including the state, and their relation to other
        potential defendants and to their potential liability
        tor the violations that give rise to the reterral.
        Cover all of the facts having a bearing on which
        potential defendants should be named and evaluate all
        reasonable options.
6.  Description of Violations:
    a.  Nature of violations.
            Discuss the types of pollutants being discharged.
        Also indicate the sources ot the pollutants, their

-------
                          -5-
    nature, quantity or size, and the relation to the
    statutory, regulatory or permit provisions violated.
b.  Date and manner violations identitled.
        Indicate earliest date when violation became known
    to EPA and manner In which It was discovered (e.g.,
    inspection, notice from state, etc.).
c.  Identify dates and duration of violations, any mitigat-
    ing actions by defendant to reduce or correct violations
    and any recalcitrance.  Include Table of Violations at
    section 13 f.
         Describe all EPA/State site inspections, sampling
    and other investigative activities, the dates ot the
    activities and the conclusions drawn.  Attach inspec-
    tion reports under 13 g.
        State present compliance status of the defendant:
    in compliance, in violation, unknown.
d.  Pending regulatory changes.
        Identify pending regulatory changes which do or
    may impact the enforcement action, e.g., requests tor
    SIP revisions, variance applications, pending revisions
    to NPDES permits, pending RCRA permit applications or
    challenges to applicable regulations.
e.  Environmental consequences (past, present and future).
        Indicate briefly what environmental damage, if
    measurable, has occurred in the past, is now happening
    or will occur in the future if not abated.  Include

-------
                       -6-
 reasonable estimates of total damage to human health and
 to the environment as a consequence ot the violations.
      Although the seriousness of the violation is not
 technically a requirement of proot in enforcement of
 certain statutes, it is sometimes relevant to the
 assessment ot penalties and equitable relief.
     Consider the following factors in assessing the
 seriousness of the violation (a) the release  ot toxics
 or mutagens or carcinogens is more serious than the
 release ot so-called conventional  pollutants; (b)  the
 release of large quantities of pollutants  is  more
 significant  than the release ot  small  quantities;  (c)
 bi©accumulative  wastes  posing long-term threats are
 more serious  than  biodegradable  wastes; (d) the release
 of pollutants  in an  area not  attaining primary ambient
 air quality standards is more  significant than the
 release  in an  area not meeting secondary standards;
 (e) the  release  ot pollutants  which directly and demon-
 strably  affect health or the  environment is more serious
 than those which have no direct or obvious effect;
 (f) ongoing present violations which the government
 seeks to stop are more significant than episodic viola-
 tions which have ceased, and  (g)  a violation which
undermines the ability ot the Agency to make sound
regulatory judgments (e.g., the submission of fraudulent
toxicity data in support of a pesticide registration)
 is more  serious  than a single  instance of false reporting,

-------
                              -7-
7.  Enforcement History of Defendant and Pre-referral  Negotiations:
        Attach copies of relevent documents referenced below,
    if available, under section 13 g.
    a.  Recent contacts with defendant by EPA/Region and
        actions taken including administrative actions.
            Indicate recent contacts and enforcement actions
        taken by EPA/Region, e.g., letters, oral communications,
        administrative requests/orders, etc.  Include  recent
        actions in all media and under all statutes.  Include
        any related or pending administrative enforcement
        proceedings e.g., (CAA $120, TSCA $16(a), RCRA $3008,
        FIFRA $$13 or 14(a), and MPRSA $105(a) proceeding).
        State defendant's responses.
            Also indicate recent contacts by/with permits and
        grants staff, if any.  With regard to grants,  indicate
        likelihood source will obtain grant, compliance schedule
        associated with proposed grants, relationship  of grants
        to financial capability and any problems in  grant his-
        tory that may affect injunctive relief or penalties.
    b.  Pre-referral negotiations.
            Include a brief summary of all attempts  at negotiating
        a settlement prior to referral of the case,  including
        attempts by state.  Fully describe attempts  at compromise
        and why process failed.   Consider use of Alternative
        Dispute Resolution (third party neutrals)  as method of
        resolvinq case.

-------
                           -8-
 c.   Contacts  with  defendant  by  state,  local  agencies and
     citizens, and  actions  taken.
         Include  recent  contacts or  actions taken  or antici-
     pated  by  state,  local  agencies  and  citizens.   In par-
     ticular discuss  history  of  state involvement  including
     any  state civil  or  criminal enforcement  actions taken
     or pending,  if state met  timely and appropriate criteria,
     and  it state-anticipates  additional enforcement actions.
d.   Prior  enforcement history of defendant,  if available
     and  practical.
         This  item relates  to  all prior actions and results
     other  than those noted above taken by any governmental
     entity against the violator.  (Include citizens' suits
     or notices ot intent to file.) In some cases compilation
     of this history will be impractical.  If so, include
    only the most recent or most significant actions taken
    under any environmental statute.
Injunctive Relief:
a.  Steps to be taken by defendant to achieve compliance.
         Indicate in general terms  what  affirmative relief
     should be requested.  Consider use  of an environmental
    audit  (compliance and management)  as an element of  the
    remedy.  If a series of acts are required, so state.
    Also Include basic but  not elaborate technical informa-
    tion, if available,  to support the  proposed remedy.

-------
                          -9-
     Specify  technology  which will meet  regulatory require-
     ments, and  indicate the time requirements tor a schedule
     of  compliance which considers time  necessary for design,
     contracting, construction and start-up.   (This is not
     inconsistent with EPA policy of not prescribing specific
     compliance  technologies.  This information may be neces-
     sary  in  court to illustrate what remedy will bring the
     source into compliance and/or to demonstrate technical
                                                   \
     feasibility if contested by the defendant.)  If no
     known technology can assure compliance, describe what    .
     in particular EPA expects the source to do, including
     plant closure where applicable.  Indicate if another
     source has  adopted  the recommended control technology.
b.   Feasible alternatives.
        Describe alternative remedies if appropriate and
     discuss  why the primary remedy and/or sanction was
     selected.   Consider  "studies" by defendant as a remedy
                 t
     where a  precise course ot action cannot be detined at
     time of  referral.
c.   Cost and technology considerations.
        Indicate cost of compliance of the remedy.   Base
     these costs on the Region's best estimates.  Indicate
     technological feasibility problems.
Penalties:
a.  Proposed civil  penalty and legal authority.

-------
                          -10-
     1)  Bottom line and opening negotiation figure.
             Include two figures here  (1) the proposed bottom
        line or the amount for which  EPA will agree to settle.
        Calculate this figure by use  of the appropriate
        medium-specific penalty policy (see section b. below.),
        and  (2) the proposed figure with which EPA will open
        any negotiations or settlement talks.  This second
   '     fioure will be higher than the bottom line figure
        but will be related to it.
    2)  Statutory maximum amount.
            Include amount, how calculated and legal author-
        ity for the statutory maximum amount.
b.  Penalty analysis/calculation.
        Include here a brief summary of the penalty analysis
    and calculation, including a specific estimate (based on
    BEN) of economic benefit of non-compliance.   Attach the
    actual detailed analysis and calculations using the
    appropriate medium-specific penalty policy under sec-
    tion 13 j.
c.  Present financial  condition of defendant.
        Indicate known financial condition of defendant,
    ability to pay penalties and meet other objectives of
    litigation and source of information.  ABEL, a computer
    model that evaluates a defendant's financial ability to
    comply and pay penalties, may be of assistance here.
    The model will be available in the spring of 1986.
    Include necessary bonding requirements and reasons

-------
                              -11-
        therefor, if applicable.  If there is a question as to
        defendant's tlnancial capability, include Dun and
        Bradstreet report, ABEL computer printouts,  SEC Form
        10K and Annual Report, if obtainable, under  section 13 m.
10. Major Issues:
    a.  Issues of national or precedential significance.
            Indicate it reterral is case ot tirst impression or
        has other legal, national or precedential significance.
    b.  Bankruptcy Petitions.
            Describe the status of bankruptcy petition, if any,
        including (1) whether Chapter 7, 11 or 13, (2) whether
        reorganization plan filed, and (3) bar .date  for proof
        of claim.
11. Significance of Referral:
    a.  Primary justification for referral.
            If a case does not present obvious "serious" health
        ettects or environmental harm, but is compelling for
        some other reason, e.g., deterrence of continued,
        blatant violations ot the law, this should be indicated.
        A defendant with a history of violations is  usually more
        worthy of attention than a first time offender.
    b.  Program strategy.
            Indicate if the case is part of the national pro-
        gram's stated strategy and briety show how it tits
        into that strategy.  Indicate if violator is in SNC.
    c.  Agency priority.
            Indicate briefly if the violator is of a class listed
        in the prr-..- am strategy for priority monitoring, and ir

-------
                               -12-
         the  violation  is  of  a  class  listed  in  the  strategy for
         priority  case  action in  fiscal year operating guidance.
    <3.   Program initiatives  outside  of stated  strategy.
             Indicate briefly the initiative such as  (1) enforcing
         a new or  existing provision, regulation or statute for
         the  first timer (2)  actions  against municipalities for
         pretreatment violations, (3) targeting a geographic area
         or industry/ or (4)  "batch or cluster* cases against one
         type of industry or  violator.
    e.   Relation ot referral to previous or concurrent cases or
         actions.
             Indicate briefly if this case relates to any concur-
         rent or previous case or action (administrative or
         judicial)  brought by the Agency or by a state.
             It there is or has been a state or federal criminal
        proceeding pending against the defendant involving the
        same or a related matter, indicate the nature of the
        proceeding, its relationship to this case,  and state
        reasons tor a parallel  civil proceeding.
            If this referral involves overfiling of a state
        enforcement action, indicate this and state reasons
        for overfiling.
12. Litigation Strategy:
    a.  Settlement potential/plan for settlement.
        1)  Indicate it there is a realistic potential for
            settlement, and  if so, what that settlement plan

-------
                          -13-
        is.  Include present contacts with defendant by
        EPA, DOJ or the U.S. Attorney's ottice.
    2)  Present negotiating posture and comparison of
        this posture with "bottom-line" settlement
        figure from section 9 a.
b.  Need for interrogatories and requests for admissions.
        Indicate need for interrogatories and/or requests
    tor admissions.  Include potential names and addresses,
    if available.
c.  Potential for summary judgment.
        Indicate it case has potential for summary judgment„
    and if so, briefly describe why, and how case can be
    prepared for tiling.  Include draft motion with support-
    ing memorandum and affidavits, if possible.  Attach
    under section 13 e.
d.  Need for preliminary injunction.
        Emphasize urgency and reasons tor requesting prelim-
    inary injunction and time frame, if applicable.
e.  Identity of potential witnesses.
    1)  Government's case
            Indicate witnesses and witness needs both as
        to liability and remedy.
            Identify all lay witnesses and any already
        known expert witnesses by name, address, place of
        employment and business phone.  Include substance
        ot anticipated/actual testimony and it statements

-------
                           -14-
         are  attached  or are  on  file.   For expert witnesses
         include  (1) tield  ot expertise and qualifications,
         (2)  past cases  where retained, (3) if under EPA
         contract, and (4)  if not under EPA contract, which
         office/contract will be available to retain the
         expert.
             Indicate whether any further investigation is
         necessary to identify lay witnesses.  Indicate any
         additional expert witnesses needed beyond those
         already known by area ot expertise and testimony
         needed and state which office/contract will be
         available to retain the experts.   In particular,
         indicate if expert witnesses will be necessary to
        analyze and/or testity in regard  to environmental
        consequences,  technological remedy development or
        tinancial capability.
    2)   Defendant's case.
            Identify all lay or expert defense witnesses
        anticipated, including their employment addresses,
        expertise and  likely content of testimony.
f.  Elements  ot proof  and evidence and need  for additional
    evidentiary support.
    1)  List  the necessary elements of proof to establish
        the violation  under each statute/section involved.
    2)  Present a detailed, objective, factual analysis
        oi the strength or weakness ot all available real,

-------
                          -15-
        documentary and testimonial evidence corresponding
        to each necessary element ot proot set torth in the
        above list.  New or stale evidence is relevant, as
        is the dependability ot testing techniques and legal
        status of test methods.  Therefore, spell out any
        assumptions made as to the quality ot this evidence.
        Identify missing facts and holes in data.
    3)  Identify and indicate location ot all real evidence.
        Identify all documentary evidence, and if possible,
        attach (or state location of) each Item ot documen-
        tary evidence under section 13 g.  Include a list
        ot all ongoing and planned evidence gathering efforts?
        e.g., ongoing DMR analysis, new stack tests, CEM data,
        or RCRA information request for further inspection.
    4)  If evidence will be obtained at a later date, state
        how and when.
    5)  If evidence is to be made available by discovery,
        suggest discovery plan.  Indicate (1) type of
        evidence to be developed, (2) person or organization
        currently in possession ot evidence, and (3) draft
        of initial discovery to be used.  Identify areas
        where swift action on discovery is needed.  To
        preserve testimony or records attach initial draft
        discovery documents under section 13 c.
g.  Anticipated defenses (legal and equitable)  and govern-
    ment responses.

-------
                           -16-
     1)   Indicate all  actual  or anticipated legal  and
         equitable defenses favorable to the defendant,  and
         briefly set forth  the  government's response thereto.
         For  defenses  such  as governmental  estoppel, laches
         or attlrmative defenses based on Rule  12  ot the
         Federal  Rules of Civil Procedure,  EPA  need only
         identity the  detense and the underlying tacts and
                  • • ,f
        merits.   The  DOJ attorneys will  usually be familiar
        with the  legal issues.  On the other hand, EPA
        attorneys are usually more familiar with defenses
        based on Agency statutes, regulations and policies,
        or Agency involvement in matters central to the
        case.  For these defenses the Region should not
        only identify the defenses and underlying facts,
        but fully discuss their legal bases and merits.
    2)  Include all technical data and test results
        favorable to the violator both as to prima tacie
        case and defenses.  Indicate any relevant or
        mitigating tactors that may bear adversely on the
        government's contentions.  Reference defense
        witnesses under section 12 e. 2.
h.  Resource commitments.
        Describe estimated case budget;  indicate what
    resource commitments both budgetary and personnel  will
    be required and if the Region is prepared to provide

-------
                              -17-
        them.  If not, state where they will be obtained.   In-
        clude here costs tor experts and additional  testing.
    i.  New evidence.
            Update all new evidence and information  and forward
        it to Headquarters, DOJ and/or the U.S. Attorney,  as  it
        becomes available.
13.  Attachments, where applicable:
    a.  Index to attachments.
            List attachments and use tabs if possible for
        ease ot reference.
    b.  Draft complaint.
            Include draft complaint.  Headquarters and DOJ
        consider the complaint a useful document,  although at
        a later date the complaint may change.
    c.  Dratt discovery.
            If discovery is needed, include initial  interroga-
        tories and request for production,  etc., as  appropriate
        or known.
    d.  Dratt consent decree.
            Unless the case is straightforward, minor or
        negotiations have reached a productive  stage, inclusion
        of a draft consent decree at this point in the case
        development would not be practical  or advisable.   If
        attached,  indicate the stipulated penalties.

-------
                       -18-
 Draft motions.
     Inclusion of draft notions depends somewhat on the
 urgency, complexity and litigation strategy ot the
 case.  Include when necessary and appropriate.
 Table of Violations.
     The Table of Violations should specify dates for
 each alleged violation, and tor each, the statutory/
 regulatory provisions  involved.
 Documentation of violations.
     Include here documentation of violations and
 enforcement history of defendant referenced in section
 7.   Include copies of  inspection reports.  Also include
 here documentary evidence referenced under section 12
 f. 3.
 Permits and contracts.
    Include copies of all applicable permits and con-
tracts.
Significant correspondence between EPA, defendant
and/or state.
    Attach all correspondence relative to the viola-
tion/case.
Penalty analysis/calculation; BEN printout.
     This attachment is a detailed analysis ot the brief
 summary in 9 b. above.  Indicate the proposed bottom
line settlement figure (based on the appropriate
penalty policy) and an opening negotiation position.

-------
                          -19-
    The settlement figure should briefly discuss how the
    bottom line figure was determined, particularly in
    regard to any economic benetlt contained in this figure.
    The proposed opening negotiating position should con-
    tain a briet statement why that particular figure is
    appropriate.  Attach BEN printout.
k.  Diagram of facility.
        Include any official or unofficial diagram of the
    facility, or the actual workings (drawings) ot the
    violation.  Any diagram, if not misleading or factually
    incorrect, will be useful.  The diagram need not be to
    scale or one made by a professional artist or draftsman..
    State if video tapes were made and where located.
1.  Case Plan.
        Attach a case plan here if prepared by the Region.
m.  Dun and Bradstreet report; SEC Form 10K; Annual Report;
    Papers relating to corporate status from Secretary of
    State's oitice; ABEL printouts and legal description
    of property, as necessary and if obtainable.
n.  Other relevant information.
         This is a catch-all category and includes all
    other relevent documents, technical data and information,
    etc., which may aid the AECs, DOJ and the U.S. Attorney
    in preparation and prosecution of the case.  Please list
    in the Index to Attachments all such documents included
    here.

-------
RF.1-4

-------
12/1/94


                         REVISERS NOTE


General Operating Procedures for the Civil Enforcement Program

(RF.l-4)




     There have been many changes in the structure and function


of the Agency's enforcement program since the Agency issued this
                                  /

memorandum.  While the approach stated in this document is still


valid in many areas, it must be read in conjunction with more


current descriptions of the structure and function of the


enforcement program.

-------
            UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                          WAtMIMOTON. DC *M«0            p
                           JUL   e
                                                          •wet *r
                                                       AMB
MEMORANDUM
SUBJECT:  General Operating Procedures for the
            Civil Enforcement Program
FROM:     Robert M. Perry
          Associate Administrator for Lrgal snd Enforcement
            Counsel and General Counsel
                        • \tr

TO:       Associate Administrator for
            Policy and Resource Management
          Assistant Administrators
          Regional Administrators
          Staff Office Directors


2.   Introduction

     This memorandum provides general guidance regarding EPA's
enforcement process, consistent with new Regional and Headquarters
structures.  The memorandum describes the respective roles and
relationships of the various EPA offices which participate in
enforcement activities.

     I greatly appreciate tne contributions which you and yovr     -
respective staffs have Bade In participating in th*» *  jlopment
of this general guidance.  This guidance has reached the point
at which it has received the consensus support of all affected
Agency offices on virtually all matters which it addresses.
More detailed guidance on operating procedures for eac.v media-
specific program will be forthcoming from the responsible
Assistant Administrators and ayself. •

     The guidance contained in this document on responsibilities
and wcr*t:r.j relationships of all offices involved in the enforce-
ment process (which includes both enforcement compliance activities
and enforceaent legal activities) has received a strong endorsement
from the Administrator.  The prescribed procedures provide explicit
guidance for implementing the Administrator's general policies on
these natters and are consistent with

     •  The Administrator's June 12, 1961 announcement of a new
        Headquarters structure;

-------
                             -2-


     -  The Administrator's September IS, 1981 memorandum regarding
        a new regional organization structure;

     -  My May 7, 1982 memorandum regarding the reorganization
        of the Offices of Regional Counsel;

     -  The June, 1977 Memorandum of Understanding between the
        Department of Justice and EPA.

     The operating procedures specified in this document are
designed to help accomplish the following objectives of the
Regional reorganizations stated in the Administrator's September
IS/ 1981 memorandum:             /

          "Reorganization Objectives.   Regional organization
     decisions include consideration of the following objectives:

          -  Clarifying accountability for regional programs.

          •  Facilitating communication links between related
             Headquarters and regional components.

          -  Improving regional policy and management
             decision-making.

          -  Placing functions in organizations where they can
             best be integrated with related activities.

          -  Favoring fewer and larger organizations to avoid
             subsequent further consolidation and reorganization
             in a time of declining resources.

     ".  .  .  .  Major features of the authorized organization
     include the following:

         "1.  Enforcement functions of permit issuance and related
     compliance monitoring are assigned to the appropriate program
     divisions.  This includes issuance of notices of violation and
     administrative orders/ after consulting with the Office of
     Regional Counsel.  (Permit coordination functions and place-
     ment are optional.)

         •2.  Legal work associated with enforcement litigation and
     current Regional Counsel functions will be performed in newly
     structured and expanded Offices of Regional Counsel reporting
     to the [Associate Administrator for Legal and Enforcement
     Counsel and] General Counsel with the following provisions:

              •a.  Regional Counsels will provide the Regional
     AdministratorfsJ with legal advice and assistance for all
     program areas in an attorney client relationship.

-------
                               -3-
              •b.  The Regional Administrator will continue to
     initiate enforcement actions.   These actions will  be based
     upon guidance from the [Associate Administrator for Legal
     and Enforcement Counsel and General Counsel, through]
     the Enforcement Counsel .... and with legal concurrence
     of the Regional Counsel.  ±/

              •c.  As in the past the Regional Administrators
     will participate in and concur with the [Associate Adminis-
     trator for Legal and Enforcement Counsel and) General Counsel
     in selections, promotions, awards and disciplinary actions
     for Regional Counsels.  Regional Administrators will be a
     party to performance agreements for and will participate in
     the performance ratings of Regional Counsels by the [Associate
     Administrator for Legal and Enforcement Counsel and) General
     Counsel.

              "d.  The Regional Administrator will also continue
     to manage the resources of the Office of Regional Counsel and
     will provide certain administrative support such as space
     allocations, processing of personnel actions, and the management
     of travel and training accounts."
I/  Note that the Regional Counsel's formal concurrence
responsibility for enforcement actions as referenced in paragraph
2(b) (when read in conjunction with paragraph 1 of this excerpt)
arises at the point at which the Regional Administrator is prepared
to initiate a case referral by forwarding a case to the Office
of Legal and Enforcement Counsel for subsequent referral to the
Department of Justice.  For further specifics on these procedures,
please see Section IX below.  Note also "hit enforcement actions
(i.e. actions responding to specific instances of detected
violations), and enforcement activities generally, also should
be consistent with relevant guidance from Headquarters program
offices.

-------
                             -4-


     The  guidance  in  this memorandum on the enforcement process
applies to  the  internal Agency working relationships and
processes involved in identifying and resolving violations
using  informal, administrative and judicial enforcement
activities.   It does  not apply in any respect to the development
arc*  referral  of criminal cases, which is being addressed in
a  separate  memo on general operating procedures for the criminal
enforcement program.  Moreover, any existing program-specific
guidance  on enforcement operating procedures remains in
effect until  it can be expressly superseded by new guidance
which  is  consistent with the policies and procedures articulated
in this document.                 /

II.  Enforcement Objective's

     This guidance prescribes operating procedures which the
the Adminstrator has  endorsed as vital to assist EPA in
discharging its responsibility to administer a strong,
aggressive, and fair  enforcement program.   The procedures
described here also are designed to achieve the following
enforcement objectives along with the general objectives
associated with the Regional reorganizations:

     - Establishing an enforcement program which deters unlawful
       conduct and advances the regulatory policies of EPA through
       use of all  available enforcement means.

     - Maintaining a  credible enforcement program which encourages
       prompt, voluntary compliance, bj .  Jeals firmly with
       significant violations which cannot be resolved rooperatively
       and includes the use of litigation where appropriate.

     - Directing all  enforcement activities towards the achievement
       of maximum  environmental benefits.

In order  to help achieve these objectives, these procedures
emphasize:

     - Continuing  close and cooperative relationships
       among the Office of Legal and Enforcement Counsel
       (OLEC), which  includes the Regional Counsel offices,
       the Department of Justice (DOJ), and all EPA program
       offices with enforcement responsibilities.

-------
                               -5-
       *
       4                                                   »

     -  Working closely with States as partners in the enforcement
        process. 2/

III.  Roles and Relationships

     EPA's enforcement program is intended to induce regulated
parties to meet environmental requirements and to rectify instances
of noncompliance.  In order to accomplish these goals, EPA's
enforcement effort includes both compliance-oriented activities
and  legal-oriented activities.  The compliance activities are
primarily the responsibility of EPA's program offices, while the
legal activities are primarily charged to OLEC (including the
Offices of Regional Counsel).

     While there are certain enforcement activities in which lead
responsibility is clear, there are other EPA activities which
include both compliance and legal elements.  Moreover, different
activities for which a given office has lead responsibility can call
for  varying degrees of involvement with other EPA offices.  It is
crucial to the success of the Agency's enforcement program that
OLEC and the program offices work closely together in developing
policies, establishing coordination procedures and implementing
actions in areas where both elements are present.  Similarly, it
is important that both OLEC and the program offices diligently
coordinate activities in their respective areas of primary responsi-
bility to ensure that EPA appropriately focuses all phases of its
enforcement program on achieving common objectives.

     In the area of enforcement policy development, Assistant
Administrators have the lead in developing policies governing
compliance activities, while the Adminstrator has assigned me to
take the lead in developing policies governing legal natters.
OLEC and the Assistant Administrators are responsible for working
together in developing enforcement policy regardless of who has
the  lead, and should jointly issue those policies which significantly
involve both of their respective areas of primary responsibility.
The Administrator has decided that I shall be responsible for
ensuring that all enforcement policies which EPA develops are
capable of being applied effectively and are consistent with the
goals of the Administrator under Federal law.  The Associate
Administrator for Policy and Resource Management is responsible
for overseeing the fcrmulation of all Agency policy.
2/  For a more specific discussion on coordinating enforcement
Activity with States, see Section III(H) below.

-------
                               -6-
        * »

     Program offices in Headquarters and the Regions are responsible
 for  identifying and establishing priorities for handling instances
 of noncompliance within their respective areas of authority,
 evaluating the technical sufficiency of actions designed to remedy
 violations, identifying for formal action those cases which cannot
 be resolved less formally, and providing the technical support
 necessary for developing cases and conducting litigation.

     OLEC (including the Offices of Regional Counsel) serves
 EPA's respective program offices in enforcement matters in an
 attorney-client relationship.  This means that OLEC is respon-
 sible as legal counsel for providing client program offices with
 support for informal and formal administrative resolution of
 violations, for the conduct of litigation (which includes
 identifying evidence needed to support litigation), for interpreting
 statutes, regulations and other legal precedent covering EPA's
 activities, and for advising program managers on the legal
 implications of alternative courses of action.

     Close cooperation among all parties (including DOJ) during
 the  case development process is critical to a successful and
 legally supportable enforcement program.  Early and frequent
 consultation of Regional Counsels by the Regional programs is
 vital in case identification and development.  Moreover, a close
 working relationship with program or technical staff is vital
 to the Regional Counsels to ensure that the Regional Counsels
 can  serve the clients' interests.

     Regional Counsels are responsible for consulting with
 the Associate Administrator for Legal and Enforcement Counsel and
General Counsel, through the Enforcement Counsel, and with
DOJ, where appropriate, to ensure that unresolved legal issues
do not subsequently become impediments to litigation.  Similarly,
Regional Administrators are responsible for consulting early
with Assistant Administrators on program policy matters to resolve
expeditiously any issues that may cause problems in developing a
 case for litigation.  Representatives of EPA and DOJ offices
with enforcement responsibilities will work as a case development
team on a particular matter to coordinate their efforts and to
minimize or eliminate all problems prior to the Regional Counsel's
concurrence in a civil referral.

     Finally, OLEC will develop management procedures to ensure
 that Enforcement Counsel and General Counsel attorneys work
 closely together to identify and resolve expeditiously any legal
 issues pertaining to enforcement matters, and thus enable EPA to
 speak with one legal voice.

-------
                             -7-


     The following synopsis of roles and relationships  state  in
more detail the respective organizational responsibilities  regarding
enforcement natters:

     A.  Regional Administrators.  The Administrator's  September
15, 1981 memorandum makes clear that Regional Administrators
have responsibility (consistent, as explained in Section IV
below, with applicable delegations of authority and concurrence
requirements) for enforcement compliance functions such as
issuing permits, monitoring compliance, collecting compliance
information according to Headquarters' guidance, and issuing
notices of violation and administrative orders.  They are also
responsible for initiating enforcement legal actions arising  out
of these functions.  In executing these functions, the  Regional
Adr.iristra tor's responsibilities include building relationships
with State compliance programs, identifying violations  of Federal
environmental laws, resolving those violations in a timely  fashion
and a cooperative manner whenever possible, handling administrative
enforcement action*  and referring cases to Headquarters vi.en
judicial action is necessary.  Because the Regional Administrators
are primarily responsible and accountable for the successful
operation of Regional enforcement programs, they are the principal
clients in enforcement matters.

     Notices of violation, administrative orders, administrative '
civil penalty complaints, and many intermediate decisions are
actions with legal consequences.  Since the Regional Administrators
must bear the responsibility for the legal sufficiency  of their
actions, they should consult with their respective Offices  of
Regional Counsel prior to taking these actions, as indicated  in
the Administrator's September 15, 1981 memorandum.  In  addition,
because the Regional Administrators also are responsible for  the
technical sufficiency of their actions, they are further responsible
for budgeting and supplying the necessary technical resources
and support, or otherwise arranging for that support (e.g., from
a Headquarters program office or the National Enforcement
Investigation Center), to permit the Agency to develop  and  pursue
enforcement actions, including litigation where appropriate.
The Regional Administrators are also responsible for'obtaining
adequate Regional Counsel participation in preparing a  case
(including final formal concurrence of the Regional Counsel)
prior to forwarding the case to Headquarters for formal referral
to DOJ.

-------
                               -8-


     The Regional Administrators will be responsible for
ensuring that they follow all policy directives from an Assistant
Administrator.  The Regional Administrators must ensure early in
the case development process that proposed enforcement actions
in response to specific instances of noncompliance are consistent
with national program policy directives established by the respon-
sible Assistant Administrators), and that Assistant Administrators
have the opportunity to participate in and review case development
activity.  The Regional Administrators also must ensure that
they satisfy any national program review or concurrence require-
ments/ consistent with Section IV below.  OLEC normally will not
take responsibility for those program concurrences or reviews,
although staff attorneys will be available to assist throughout
the review process.

     Regional Administrators also are responsible for following
up on enforcement actions (including litigation) to ensure that
violations remain corrected and that regulated parties are complying
with the requirements which those enforcement actions impose.

     B.  The Assistant Administrators.  As the national program
managers, the Assistant Administrators are responsible for
establishing enforcement compliance priorities, providing overall
direction to and developing accountability measures for their
respective Regional enforcement compliance programs, k'eeping
compliance statistics (based on input as necessary from Regional
offices), providing technical support (including appropriate
Headquarters technical support for litigation activity), providing
resources in Regional program budgets to support enforcement
activities, taking the lead role in preparing guidance and policy
decisions on enforcement compliance issues, and concurring as
necessary on enforcement actions at as early a stage in the case
development process as possible.  In addition, Assistant Adminis-
trators may retain responsibility for issuing civil administrative
complaints and other administrative orders in cases of first
impression, overriding national significance, or violations by
any entity in more than one region.

     The Assistant Administrators are responsible for developing
and implementing program policies, and should rely on OLEC to
help them put enforceable, defensible programs in place.  The
Assistant Administr*.Trs also are responsible for participating
with OLEC in handling enforcement legal issues and rcr preparing
joint guidance for areas in which compliance and legal issues
overlap.

-------
     OLEC acts as attorney to the Assistant Administrator and
the Headquarters program offices on enforcement matters.   OLEC
attorneys are available to consult with program staff during the
development of program regulations, policies and guidance in
order to ensure the legal sufficiency of decisions and documents
relating to enforcement natters.

     C.  OLEC; The Regional Counsel (Enforcement Functions).  In
accordance with the Administrator's September 15, 1981 memorandum
and the Nay 7, 1982 memorandum regarding reorganization of the
Offices of Regional Counsel, the Regional Counsels are to provide
the Regional Administrators and Regional program managers with
legal advice and assistance for all program areas in the attorney-
client relationship.' Thus, for example, in enforcement matters
cJie Regional Counsels are available to assist the Regional program
managers in drafting or reviewing the terms and conditions of
permits, notices of violation, administrative orders, or adminis-
trative complaints (particularly where new or unique matters
are involved).  Because the Regional Administrators .*i
-------
                              -10-
       t


 of DOJ and Headquarters Enforcement Counsel attorneys so as to
 resolve  any potential legal problems for litigation as early in
 the  ease development process as possible.  Regional Counsels
 also provide legal representation for the Agency in administrative
 hearings originating in the region, including NPDES evidentiary
 hearings, and administrative appeals from those hearings.

     Let me emphasize that in all these matters the Regional
 Counsels must make every effort to ensure that they continue
 to maintain the close working relationships with their counterparts
 in the Regional program offices, aod that they also maintain
 clear and open lines of communication.

     D.   OLEC; Enforcement Counsel Matters.  Consistent with
 attorney-client relationships, the Associate Administrator for
 Legal and Enforcement Counsel and General Counsel provides,
 through  the Enforcement Counsel, legal advice regarding enforce-
 ment matters to the Assistant Administrators to assist them in
 performing their programmatic functions, including advice on
 enforcement activities for which Headquarters program offices
 are  responsible.  The Associate Administrator for Legal and En-
 forcement Counsel and General Counsel, through the Enforcement
 Counsel,  also develops legal enforcement policies and guidance;
 confers,  where appropriate, with DOJ on the potential impact of
 enforcement policy on litigation; and cooperates with the Assis-
 tant Administrators in the development of enforcement policies
 which involve both enforcement compliance and enforcement legal
 activities.

     The Enforcement Counsel checks both cases forwarded from
 the Regions for referral to DOJ and consent decrees prior to
 submitting them for approval to the Associate Administrator for
 Legal and Enforcement Counsel and General Counsel to ensure that
 they are  complete and that they identify and properly address
 all precedential or nationally significant questions.  (See
Section X below.)  Enforcement Counsel attorneys may be assigned
 a more active role in case development or litigation-related
 activities in a limited number of actions involving precedential
or overriding nationally significant .issues as described in
 Section VII(B) in the May 7, 1982 OLEC memorandum on regional
 reorganization*  Otherwise, Regional Counsel attorneys will
 assume the Agency lead, and Enforcement Counsel attorneys will
 function  in a supporting role by keeping apprised of the issues
 from the  start of the case development process as OLEC's Headquar-
 ters representatives and by coordinating legal activity and the
 contribution of case information to the case development effort
 from Headquarters and the Regions.

-------
                               -11-
       *


     The National Enforcement Investigation Center (NEIC),  which
reports to the Enforcement Counsel, is a national technical resource
with special expertise in natters asociated with investigations,
case development, litigation support, and evidence.   The Regional
Administrators and Assistant Administrators, in support of  enforce-
ment compliance and case development activities, nay draw upon
the NEIC's resources as they deem necessary, consistent with
priorities which OLEC establishes regarding NEZC's availability.
Regional and Assistant Administrators should give closest
consideration to involving NEZC in cases which have  precedential
implications, national significance, or are multi-Regional  in
nature, as opposed to cases which 'involve more routine matters.

     E.  OLEC: General Counsel Matters.  Within the  Agency,
tne Associate Administrator for Legal and Enforcement Counsel
and General Counsel, through the Deputy General Counsel, will
continue to be responsible for interpreting statutes and regula-
tions, reviewing proposed policy for consistency with national
law, providing national legal interpretations, and assisting in
resolving legal issues which arise in connection with policies
and regulations, in order to assure that the Agency speaks with
one legal voice.  Consistent with present practices  and existing
guidance, the Associate Administrator for Legal and Enforcement
Counsel and General Counsel will manage, through the Deputy
General Counsel, all matters resulting from judicial appeals
(with either General Counsel attorneys or Regional attorneys
acting as lead Agency counsel, depending on the nature of the
matter).  The Regional Counsels will manage the Agency's legal
role in hearings and administrative appeals of actions origina-
ting in the Regions, including proceedings relating to permits
and administrative civil penalty actions.

     F.  The Department of Justice and the U.S. Attorneys*  Offices.
The Agency's working relationship with the Department of Justice
and the U.S. Attorneys continues to be governed by the June 1977
Memorandum of Understanding.  DOJ's and the U.S. Attorneys'
primary roles will normally be that of conducting judicial enforce-
ment matters and participating in case development activities as
described in Section VIZI below.  OLEC's Headquarters and Regional
components are expected to use their best efforts to ensure that
they maintain constructive working relationships with DOJ in
these areas.

     G.  Policy Coordination.  As indicated above, the Assistant
Administrators and Z should work closely together during the
formulation of all policies which affect enforcement to make
sure that the Agency conducts its enforcement activity in a
credible and legally supportable manner.  The Administrator has
affirmed my responsibility to take the lead in coordinating

-------
                               -12-


work on establishing systematic procedures for developing and
tracking Agency enforcement policy.  As part of this effort, I
am planning  to propose the joint development with each of the
Assistant Administrators of a comprehensive set of enforcement
operating procedures for each program, in order to provide
consistent guidance for all stages of the case development
process.  Program guidance which is currently in effect remains
operative except to the extent it is inconsistent with the
operating procedures prescribed in this document and is not
superseded by future guidance.

     As policy or guidance documents affecting Regional enforce-
ment programs are developed, Regional offices should be consulted
or otherwise receive an opportunity to be involved at an early
ztsgc to make sure that the final guidance documents can be
implemented effectively.

     H.  Coordination with States.  Coordination with States is
normally the responsibility of the Regional Administrator, subject
to national guidance.  Because this responsibility encompasses
many areas in addition to enforcement, this memorandum does not
cover general issues associated with the Region-State relationship.

     On enforcement matters, however, Regional Administrators
should maintain close working relationships with appropriate
State program officials.  As part of enforcement planning activities
independent of the case development process. Regional offices (with
participation from Headquarters program offices and consistent
with national guidance) should consult with States to develop
general strategies for handling noncTr"1 iance, for promoting
local resolution of noncompliance problems, and for facilitating
open lines of communication by

     • Consulting on which enforcrrrsr.t actions States should
       manage and which Regional Offices should manage.

     • Agreeing on appropriate time frames and parameters for case
       resolution.

     • Agreeing on circumstances under which EPA may assume the
       lead on a case from the' State.

     • Coordinating activity on tracking the progress of enforcement
       actions.

     • Following up on the application of agreed-upon strategies to
       ensure their effectiveness.

-------
                               -13-


     On legal matters specifically, the Office of Regional Counsel
should develop a close working relationship with State Attorneys
General and/or other appropriate legal authorities in each State
in order to support the Regional Administrator in coordinating
activity with that State.  The Office of Regional Counsel is also
available to consult with the Regional program managers regarding
delegations/ the legal sufficiency of State remedies, or other
legal aspects of State actions.

     National environmental laws do assign major roles to the
States for administering pollution control programs.   Those laws
also place ultimate responsibilities for effective enforcement
on the Federal Government.  The States' respective abilities to
enforce environmental' requirements can vary according to the
•Lolutory authorities, personnel, or other resources available
to them,  zt is the Administrator's policy to uphold the
environmental statutes which EPA administers, and the Regional
Administrators are responsible for complementing State efforts
with Federal action in order to achieve compliance with those
laws in a timely manner.

     I.  EPA's Accountability System.  EPA's accountability system,
overseen by the Associate Administrator for Policy and Resource
Management, monitors the performance of the Agency's entire enforce-
ment program, including both compliance and legal activities.
It is the Administrator's policy that pursuant to national program
direction from the Assistant Administrators, Regional Administrators
will establish specific measures of compliance and enforcement
performance for which they will be held accountable in the
accountability system.  As the Agency's 'law firm", OLEC will be
similarly accountable for providing consistent legal advice,
decisions and policies; for expediting all referrals; and for
reducing backlogs of cases which have already been filed or
referred to the Department of Justice.

IV.  Delegations and Concurrence Requirements.

     The Administrator has endorsed an initiative to streamline
the enforcement process through a. high-priority review of both
existing delegations of authority and concurrence requirements
i.nposed through those delegations or through other actions.
Each of the Assistant Administrators and OLEC should expeditiously
review all delegations and concurrence requirements relating to
enforcement activities in their respective areas of responsibility
to identify requirements which are unnecessary or inconsistent
with a streamlined approach to enforcement.  Until the Administra-
tor has an opportunity to act on the recommendations resulting .from

-------
                             -14-


this review, existing delegations  (with any conditions) remain
in effect and should be followed until appropriate changes are
approved to implement the guidance provided in this document.
The Assistant Administrators and I shall announce any changes
of specific enforcement concurrence requirements in our respec-
tive areas of responsibility.

V.  Reporting Requirements and OLEC Oversight

     OLEC's Enforcement Counsel will keep to a minimum requests
for case development records and reports from Regional or
program offices.  Enforcement Counsel staff will place priority
on direct access to files or tracking and reporting systems for
case information to minimize additional information collection
and reporting burdens.  I expect the Regional Counsels to continue
to update the automated enforcement docket for cases which will
be or which already have been referred from the Regional offices,
and to provide periodic updates on all cases as necessary.

     Consistent with historical practices, Regional Counsels must
keep complete records of recommendations, decisions and documents
relating to the legal aspects of all cases, including cases which
are in early stages of development.  This requirement .is intended
to ensure that an adequate legal record exists for each case that
the Agency ultimately refers for judicial action and to facilitate
•valuations of Regional Counsels' performance on enforcement
matters.

     The Regional Counsel should work closely with the Regional
Administrator to assist the Regional Administrator in following
similar recordkeeping practices to ensure that maintained files
are legally sufficient.

VI.  Reviewing Compliance and Determining Responses.

     The process of identifying violations and conducting Federal
compliance activities is the responsibility of the Regional
Administrator, consistent with national guidance and statutory
authorities and with applicable working agreements with States.
This process includes the following activities:

-------
                              -15-


     - Identifying noncomplying sources and potential  enforcement
 -  	targets.

     - Coordinating enforcement actions with States, as  appropriate.

     - Determining the appropriate Agency response  to  violations,
       including:

          • Requests for information (formal or informal).

          • Informal discussions with the source.
                                  /
          • Warning letters or notices of violation.

          • Administrative orders or administrative civil penalty
            complaints.

          • Referrals to Headquarters for civil judicial action.

     - Participating in a client's role in settlement  discussions
       to resolve administrative or judicial proceedings.

     Throughout the process, the Regional Counsel will act as
attorney to the Regional program client.  Since the Regional
Administrator must make decisions and take actions  with  legal
consequences, the Regional Administrator should ensure that the
Regional Counsel is consulted as appropriate throughout  the process*
particularly with regard to the legal consequences  of  selecting
alternative enforcement tools.  Attorneys are available  to
ensure that all enforcement documents, especially administrative
orders and administrative civil penalty complaints, meet all
Agency legal requirements and are enforceable.  Regional program
officers should avail themselves of Regional Counsel attorney
participation in discussions with an outside party  who is represented
by counsel.

     As the likelihood increases that judicial remedies  will
become necessary to resolve a case, the importance  of  attorney
involvement also increases.  This includes meaningful  coordination
with DOJ attorneys at early stages of the case development process
consistent with the procedures specified in Section VIII below.
Rigorous standards of evidence and conduct will apply  in any
adjudicative proceeding; thus, it is crucial that cases  be built  from
the outset in a legally supportable wa>,  This memorandum discusses
in more detail in subsequent sections the referral  process and the
conduct of settlement negotiations.

-------
                              -16-


VII.  Escalation

     The Regional Administrator is responsible for the timeliness
of informal solutions to violations of environmental laws and
for  initiating the case development process.  This concept is
central to a credible enforcement program.  The Regional
Administrator (subject to Headquarters program office guidance)
and OLEC share responsibility for achieving timely resolution of
cases once the case development process begins.

     Responses to violations should be meticulously tracked within
each Region to make sure that each violation is responsibly resolved
as expeditiously as practicable. ' Time deadlines or goals should
be established within each Region as optimum response times; in
«?*• areas, these deadlines or goals have already been established
in national guidance.

     The Administrator has given strong general support to the
use of reasonable 'deadline* dates in conducting negotiations to
ensure that negotiations do not become a means for delay.  In
any particular case, the Regional Administrator (in consultation
with the Regional Counsel) should always be prepared to escalate
to the next-most-serious response, when necessary, to avoid pro-
tracted, negotiations resulting in unreasonably delayed remedial
action.

     It remains the Administrator's policy to take formal enforce-
ment action when negotiations or other efforts fail.  I shall
accept--and the Administrator will encourage--well-documented
civil judicial referrals from Regional Administrators whenever,
in their judgement, such action is necessary to ensure continued
progress toward compliance, even though active negotiations
still may be underway.

VIII.  The Case Development Process

     A group from OLEC (including Regional Counsel representatives)
has been conferring with DOJ for the purpose of, among other things,
formulating a process for developing, cases for civil litigation.
This process involves periodic meetings in the Regions, at which
EPA attorneys and technical staff will meet with DOJ attorneys
(and invite Assistant U.S. Attorneys) to:

-------
                              -17-


     -- discuss approaches to developing cases targeted  as  likely
        candidates for litigation;

     — review appropriate ways to handle developments relating  to
        cases discussed at prior meetings)

     — provide information on program enforcement issues and
        priorities;

     — refine procedures for handling enforcement actions  generally!
        and

     — form litigation teams and assign case preparation and
        responsibilities.where the Region has identified matters
        which require a litigation enforcement response.

     Once the Regional Administrator determines that a case has
a strong potential for referral, the Region will form a case
development team consisting of the lead Agency attorney and
representatives from the Regional program staff and DOJ. 3/ The
goal of this team is to reach a resolution of the enforcement
action, based on the technical support of the Regional Administrator*
through negotiated settlement or final judgement in litigation.

     For each case, EPA will designate a lead Agency attorney.
As stated in the Hay 7, 1982 memorandum regarding reorganization
of the Office of Regional Counsel, the lead Agency attorney will
normally be a Regional attorney, but may be a Headquarters  attorney
under some circumstances.  Section VII(B) of that memorandum
provides a more detailed discussion of circumstances in which a
Headquarters attorney might be assigned the Agency lead (for
example, in cases of overriding national significance or in some
cases in which the Agency is involved in enforcement and defensive
litigation).  The lead Agency attorney will coordinate case
development activities with DOJ.
3/  Headquarters program and Enforcement Counsel staff may participate
more actively in the case development process if precedential or
nationally significant issues are involved, especially under newly
developing programs.

-------
                              -18-
IX.  The Referral Process
     Consistent with the Administrator's September 15, 1981
memorandum, the Regional Administrator will initiate referrals
of enforcement cases in which settlement negotiations outside
the context of litigation either have been unsuccessful, or are
otherwise inappropriate due, e.g., to the need to halt the
violation quickly.  The Regional Administrator initiates a
referral by forwarding a case to me with a recommendation to
refer that case to DOJ for litigation.  The Regional Counsel's
formal concurrence shall ensure that the initiated referral is
legally sufficient and consistent'with national guidance.  Early
involvement by appropriate EPA and DOJ staff, through the case
development procedures articulated in Section VIII above, is
impoitant to the successful development of a judicial referral.
This early involvement will reduce the need for development and
review of documents in a formal referral package late in the
case developrent process.  Regional Administrators are responsible
for supporting this practice within their programs.

     As the initiator of the referral, the Regional Administrator
is ultimately responsible for the completeness and quality of the
development of the forwarded case.  This includes conformance with
all applicable-national guidance and policies established by OLEC
and by the appropriate program office.

     Inasmuch as a case developed for referral can require the
drafting of important legal documents (e.g.  complaint, consent
decree, memoranda on points of law), it is highly advisable that
the Regional Administrator assign the actual task of preparing
those documents in conjunction with DOJ to the lead Agency attorney
on the litigation team.  A case developed for referral will rely
upon technical information and support from the Regional program
office and, where appropriate, from the Headquarters program
office.  This method is likely to ensure the legal sufficiency
of the case when the Regional Administrator initiates the referral.
Every request for judicial action must have the formal concurrence
of the Regional Counsel before the Regional Administrator initiates
referral by forwarding the case to Headquarters.

     To support a referral', the Regional Administrator must be
in a position to identify all technical assistance needed to
bring the case to successful completion.  Jhe act of forwarding
the case to Headquarters for referral constitutes the Regional
Administrator's commitment to ensure that this technical assistance
and technical support which may later be identified is available
when needed.

-------
                               -19-


X.  Headquarters Review of Case Development

     Under the June 1977 EPA/DOJ Memorandum of Understanding,
the Associate Administrator for Legal and Enforcement Counsel
is responsible for formally transmitting a civil referral to the
DOJ. 4/  Headquarters attorneys will conduct a limited final
legal~"review on my behalf of cases forwarded for referral from
the Regions primarily to ensure completeness, consistent applica-
tion of law and enforcement policy, and appropriate development
of legal precedent.  For some cases involving important precedent
or issues of overriding national significance. Headquarters
attorneys also may be assigned a more active role in the case
development process.              /

     Again, Regional Counsel lead attorneys must undertake
«ai*ly consultation with Headquarters and DOJ attorneys through the
case development team format as cases are being prepared.  In
this manner, case development teams can identify precedential
or nationally significant issues early and can reduce the likeli-
hood that DOJ or the U.S. Attorney will raise concerns late in
the referral process regarding the advisability of pursuing
civil litigatic.:.
47The term "Assistant Administrator for Enforcement" in the
Memorandum was changed to "Associate Administrator for Legal
and Enforcement Counsel" by letter of the Administrator to the
Attorney General, in order to reflect the Agency's new organi-
xational structure.

-------
                             -20-
       4

     Similarly, close coordination by the lead Agency attorney
with technical personnel in the Regional program office (who
in turn should work closely with the Headquarters program office)
and any NEZC participants is also essential in order to achieve
early  agreement on appropriate remedies, schedules, and other
technical aspects of the case prior to referral.  Headquarters
program review of case development on behalf of Assistant
Administrators also will begin early in the process to identify
and resolve problems quickly and will focus1 on ensuring technical
completeness and appropriate application of program policy.  In
this area as well. Headquarters program officials may be assigned
a more active role in cases involving important precedent, overrid-
ing national program significance, or activity in more than one
region.  Headquarters program officials must ensure that they
perform their review function in a manner that avoids impeding
the expeditious referral of cases to OOJ once the Regional
Administrators have forwarded those cases to Headquarters.

XI.  After EPA Refers a Case to DOJ

     Following the referral of a case to DOJ, the lead Agency
attorney on the case will be responsible for coordinating responses
to all requests for supplemental information by the Department
r»r by the U.S.  Attorney's Office.  Program office staff will be
responsible for providing needed technical support.  The lead
Agency attorney is responsible for keeping program officials and
other previously involved Agency attorneys apprised of case
developments after referrals.

XII.   Negotiations

     The Regional Administrators will normally be responsible for
ensuring a sound technical and scientific basis for resolutions of
identified violations.  Prior to EPA referring an enforcement case
to DOJ, the Regional Administrators normally will be responsible
for directing or conducting informal settlement negotiations (subject
to the program-specific guidance which will be forthcoming).  The
Regional Counsel should be present at discussions in which outside
parties are represented by counsel.  Once the case has been referred,
DOJ normally is responsible for managing settlement discussions,
with the active participation of Regional personnel, in the context
of an attorney-client relationship.  Regional Counsels will make
»very effort to identify resources needed for negotiations
in close consultation with program managers.

-------
                               -21-
       *
       4

     The Administrator has affirmed that I urge OLEC staff at
Headquarters and in the Regions to caution their "client" program
offices and others within the Agency about the sensitivity of
contacts with persons or firms that are involved in cases
referred to DOJ for filing.  There are siany matters unrelated
to a specific enforcement action—e.g., processing of grants,
development of rules—in which a party nay be interested and
which may 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.  ,11 natters related to • pending
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.

XJJI.  Enforcing Consent Decrees and Final 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 nay be appro-
priate.  The decision to file for contempt 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 Administrator
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 nanner as the original consent decrees.

XIV.  Appeals

     Generals-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

-------
                              -22-
       tt


working closely with the lead Agency attorney appointed to the
original enforcement case, as veil 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 verve 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 normally provide legal representation for the
Agency on matters arising in the Regions, including permit conditions
and administrative civil penalty decisions.  However, in accordance
with the OLEC memorandum of May 7, 1982, on regional reorganization,
when issues of overriding national significance exist, or when
Headouarters 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.  Communications/Press Relations

     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 infor-
mation  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 w'-hin the Agency and in DOJ.


     The  Regional Administrator and the Regional program managers
are responsible for communicatir- 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 endorsement 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 should be consulted before interacting with the .
press.

-------
                               -23-


      In  the  event  of  inquiries from Congress, OLEC will work
 closely  with the Regional Administrators, the appropriate
 Assistant Administrator, and  the Congressional Liaison Office
 prior to releasing any  information or making any public
 statements.

 XVI.   Reservation

      The policy and procedures set forth herein, and internal
 office procedures  adopted pursuant hereto, are intended
 solely for the guidance of  government personnel.  They 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  to  litigation with the United States
 Environmental Protection Agency.  The Agency reserves the
 right to take any  action alleged to be at variance with
 these policies and procedures or not in compliance with
 internal office procedures  that may be adopted pursuant to
 these materials.

 XVII.  Delegation  of  Authority

      Through a memorandum  issued as a  cover  to this document,
.the Aiir.ir,istrator  is  delegating  to me  the authority to construe,
 interpret or amend the  guidance  prescribed here.  She similarly
 has delegated to me the authority  for  issuing any follow-up
 guidance for implementing  the general  operating procedures
 prescribed here, unless the follow-up  guidance is limited to
 matters  for  which  a single  Assistant Administrator or Regional
 Administrator is solely responsible.   Of course, I shall work
 closely  with affected Assistant  or Regional Administrators
 in deciding  how to exercise these delgated authorities, and
 in appropriate cases  shall  issue national guidance jointly with
 the relevant national program managers.

 XVIII.   Superseded Policy

      These procedures supersede  the policies and procedures  issued
 by the Enforcement Counsel  on February 26,  1982, which are revoked
 in their entirety.

-------
RF.1-5

-------
            UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                        WASHINGTON. D.C.  20460
                           » •  I   4    C                      OfFICE OF

                          JKSh   ^ iŁb5                   ™E *OMIN,ST»«
MEMORANDUM

SUBJECT:  Implementing Nationally Managed or Coordinated
          Enforcement Actions:  Addendum to Policy Framework
          for State/EPA Enforcement Agreements
FROM:     Alvin L. Aim
          Deputy Administrator

TO:       Assistant Administrators
          Regional Administrators
          Regional Enforcement Contacts
          Steering Committee on the State/Federal Enforcement
            Relationship
          Associate Administrator for Regional Operations


     I am pleased to transmit to you a ccpy of SPA's policy
statement on Implementing Nationally Managed or Coordinated
Enforcement Actions, as an addendum to the Agency's Policy
Framework for State/EPA Enforcement Agreements, issued on
June 26, 1984.

     The policy statement was developed at the request of
Courtney price and myself by an OECM work group with repre-
sentatives from the Headquarters Program Offices and Regions.
The draft policy statement was reviewed by the Steering
Committee on the State/Federal Enforcement Relationship.
This final policy statement reflects the Steering Committee's
comments.

     I think this policy is an important addition to our
efforts to build both a more effective national enforcement
program and a strong working relationship with the States.
Coordinated case preparation will have an increasingly
important role in establishing precedent for cur new programs,
in creating a greater deterrent effect when dealing with
numerous snail sources and in addressing recurring patterns

-------
                            - 2 -
of noncompliance within regulated entities.  This policy
clarifies not only the circumstances under which nationally
managed or nationally coordinated cases are appropriate/ but
most important, it clarifies the roles and relationships
among EPA headquarters, Regions and State or local governments
with delegated programs.

     This additional policy guidance, in concert with the
recently completed State/EPA Enforcement Agreements, should
provide a consistent framework for enhancing our joint Federal
and State efforts to achieve a strong and effective national
enforcement presence.

Attachment

-------
                                                             12/2fi/R4
       SPA POLICY ON IMPLEMENTING NATIONALLY MANAGED OP
               COORDINATED ENFORCEMENT ACTIONS
     This policy addresses how EPA will handle the small
subset of federal civil enforcement cases, both administrative
and judicial, which are managed or coordinated at the EPA
Headquarters level.  The policy was developed to ensure these
actions are identified, developed and concluded consistent
with the principles set forth in the Policy Framework for
State/EPA Enforcement "Agreements."  It covers the criteria
and process for deciding what cases might best be managed or
coordinated nationally; the roles and relationships of EPA
Headquarters and regional offices and the States; and protocols
for active and early consultation with the involved States
and Regions.

A.  Criteria for Nationally Managed or Coordinated Enforcement
    Cases

     Most enforcement cases are handled at the state, local
or EPA regional level for reasons of efficiency and effectiveness
and in view of the primary role that States and local governments
have in enforcement under most of the major environmental
statutes.  The Policy Framework identifies several instances
in which direct enforcement actions may be taker, by EPA, which
in most instances will be handled by EPA Regions pursuant to
the State/EPA Enforcement "Agreements."  However, some of
those cases may most appropriately be managed or coordinated
at the national level by SPA Headquarters.

     In addition to instances in which en EPA Regicn requests
Headquarters assistance or lead in an enforcement case, these
"national" cases will usually arise within the context of
three of the criteria for direct EPA action mentioned in the
Policy -Framework:

     —  National Precedent (legal or program precedent): the
         degree to which the case is one of first impression
         in law or the decision is fundamental co establishing
         a basic element of the national compliance and
         enforcement program.  This is particularly important
         for early enforcement cases under a new program or
         issues that atfect implementation of the program on
         a national basis.

     —  Repeat Patterns of Violations and Violators; the
         degree to which there are significant patterns of
         repeat violations at a given facility or type of
         source or patterns of violations within multi-facility
         regulated entities.  The latter is of particular
         concern where the noncompliance is a natter of national
         (e.g., corporate) policy or the lack of sound environ-
         mental management policies and practices at a national

-------
                             -  2 -


          level which can best  be remedied  through settlement
          provisions which affect such national policies and
          practices.

     —   Interstate Issues  (multiple States or Regions): the
          degree to which a  case may cross  regional or state
          boundaries and requires a consistent approach. .
          This is particularly  important where there may be a
          potential for interregional transfers of pollution
          problems and the case will present such issues when
          SPA Regions or States are defining enforcement remedies.

     EPA's response to any  of  these circumstances can range
from increased headquarters oversight and  legal or technical
assistance, to close coordination of State and Regional
enforcement actions, to direct management  of the case by
Headquarters.

     There are essentially  two types of "National" cases.  A
nationally managed case is  one in which EPA Headquarters has
the responsibility for the  legal and/or technical development
and management of the case(s)  from the time the determination
is made that the case(s) should be nationally managed in
accordance with the criteria and process set forth in this
policy.  A nationally coordinated case(s)  is one which preserves
responsibility for lead legal and technical development and
management of the cases within the respective EPA regions
and/or state or local governments.  This is subject, however,
to the oversight, coordination and management by a lead
Headquarters attorney and/or program staff on issues of
national or programmatic scope to ensure that all cf the
cases within-che scope of the nationally coordinated case are
resolved to achieve the sane or compatible results in furtherance
of EPA's national program and enforcement goals.

     Section C below describes more fully  the roles and
relationships of EPA headquarters and regional and state
personnel, both legal and technical, in either nationally
managed or nationally coordinated cases.

     There are several factors to apply to assess whether, in
addition to the normal Headquarters oversight, a case should
be handled as:  (1) nationally managed;  or (2) nationally
coordinated.  None of these factors may necessarily be sufficient
in themselves but should be viewed as a whole.  These factors
will include:

         availability or most efficient use cf State or SPA
         Regional or Headquarters resources.

         ability of the agency to affect the outcome through
         alternative means.  One example is issuance of
          timely policy guidance which would enable the States,
          local governments  or  EPA Regions  to establish the
         appropriate precedent through independent action.

-------
                            - 3 -
     —   favorable venue  considerations.

          environmental  results which could be achieved  through
          discrete versus  concerted  and  coordinated action,
          such  as potential  for affecting overall corporate
          environmental  practices.

     —   location of government  legal and technical expertise
          at  EPA Headquarters  or  in  the  Regions/ recognizing
          that  expertise frequently  can  be tapped and  arrangements
          be  made to make  expertise  available where needed.

     To  the  extent possible,  where  cases warrant close  national
 attention, EPA Headquarters will coordinate rather than
 directly manage the case  on a national  basis thereby  enabling
 Regions  and  States to better  reflect facility-specific  enforcement
 considerations.

 B.   Process  for Identifying Nationally-Managed or Coordinated
     Cases — Roles and  Responsibilities

     EPA recognizes the importance  of anticipating the  need
 for  nationally managed  or coordinated cases to help strengthen
 our  national enforcement  presence;  and  of widely sharing
'information  both on patterns  of  violations and violators  and
 on  legal and program precedent with EPA Regions and States.
 To do  this:

     Headquarters program offices,  '.n cooperation with  the
     Office  of Enforcement and Cornyiiance Monitoring  should
     use the Agency's Strategic  planning process to help
     identify  upcoming  enforcement,  cases of national  precedence
     and importance.  They also  should  develop and disseminate
     to  Regions information on anticipated or  likely  patterns
     or  sources of violations for specific industries and
     types of  facilities.

     Regional  offices are responsible for raising to  Headquarters
     situations which pose significant  legal or program
     precedent or those in which patterns of violations are
     occurring or which are likely  to be generic industry-
     wide or company-wide which  would make national case
     management or coordination  particularly effective.

     State and local officials are  encouraged  to raise  to EPA
     Regional  Offices situations identified above which would
     make national case management  or coordination particularly
     effective.

     Whether a case will  be managed or  coordinated at the national
 level  will be  decided by  the  Assistant  Administrator  for  Enforce-
 ment and Compliance Monitoring after full consultation  with  the
 affected program Assistant Administrators, Regional Administrators
 and  state or local governments with approved or delegated programs
 in what  is intended to  be a consensus building process.  There
 will be  a full discussion among  all of  the parties of all of

-------
 the ramifications  for  the program and a review of all of  the
 important criteria  involved  in  the decision.  In the event of
 a lack of consensus as to whether the case should be managed
 or coordinated at  the  national  level, the AA for OECM shall
 make the determination, with an opportunity for a hearing
 and timely appeal  to the Administrator or Deputy Admini-
 strator by the Regional or other EPA Assistant Administrator.

     The Regions will  be responsible for communicating with
 any affected States using mechanisms established in the State/
 EPA Enforcement "Agreements," to raise the possibility of
 national case management or coordination and to ensure that
 timely information on  the status of any independent state,
 local or regional enforcement actions can and would be factored
 irito the decisions regarding:   (1) whether to manage the case
 nationally; (2) whether to coordinate the case nationally; (3)
 what legal and technical assistance might be provided in a state
 lead case; and (4) what facilities to include in the action.

 C.  Case Development — Roles and Responsibilities

     Nationally managed cases are those that are managed out
 of EPA Headquarters with a lead headquarters enforcenent
 attorney and" a designated lead headquarters program contact.
 Notwithstanding headquarters lead, in most instances, timely
 and responsive Regional office legal and technical support
 and assistance is expected in developing and managing the
 case.   In these instances, the Regions will receive credit
 for a case referral (on a facility basis) for this effort.
 The decision on the extent of Regional office involvement
 and case referral credit will be made at the time of decision
 that the case should be nationally managed.  Regions which
play a significant role in the development and/or prosecution
of a case will be involved in the decision-making process in
 any case settlement proceedings and the Regional Administrator
will have the opportunity to formally concur in 3ny settlement.

     Nationally coordinated cases are those that are coordi-
 nated out of EPA Headquarters with lead regional and/or state
 or local attorneys and associated program office staff.  The
 headquarters attorney assigned to the case(s) and designated
 headquarters program office contact have clear responsibility
 for ensuring national  issues involved in the case which
 require national coordination are clearly identified and
 developed and in coordinating the facility-specific actions
 of the regional offices to ensure that the remedies and
 policies applied are consistent.  This goes beyond the normal
 headquarters oversight role.  The headquarters officials have
 both "a facilitator role in coordinating information exchange
 and a policy role  in influencing the outcome for the identified
 issues of national concern.

-------
                            - 5 -
     Whether a case is nationally managed or nationally
coordinated, as a general rule if SPA is managing a case,
States will be invited to participate fully in case develop-
ment and to formally join in the proceedings if they so
desire by attending meetings and planning sessions.  States
will be consulted on settlement decisions but will be asked
to formally concur in the settlement only if they are parties
to the litigation.

     On a case-by-case basis, the National Enforcement and
Investigations Center (NEIC) may be asked to play a role in
either type of national case to coordinate evidence gathering,
provide needed consistency in technical case development
and policy, witnesses and chain of custody, and/or to monitor
consent decree compliance.

D.  Press Releases and Major CcmmufSSbations

     A communications plan should be developed at an early
stage in the process.  This should ensure that all of the
participating parties have an opportunity to communicate
their role in the case and its outcome.  Most important, the
communications plan should ensure that the essential message
from the case, e.g., the anticipated precedents, gets sufficient
public attention to serve as a deterrent for potential future
violations.

     All regional and state co-plain.tiffs will be able to
issue their own regional, state-specific or joint press
releases regarding the case.  However, the timing of chose
releases should be coordinated so that they are released
simultaneously, if possible.

     It is particularly important that the agencies get
maximum benefit .from the deterrent effect of these significant
national cases through such mechanisms as:

         more detailed press releases to trade publications
         i.e., with background information and questions and
         answers
     —  development of articles
     —  interviews with press for development of more in-
         depth reporting
         press conferences
     —  meetings with public/environmental groups — including
         meetings on the settlement of national cases which
         have generated incense local or national interest
         speeches before industry groups about actions
         communications with congressional committees

-------
RF.1-6

-------
         UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                       WASHINGTON, D.C. W4«0          ft F.
                           ALB 20 B87
OFFICI OF EVFO*CEMF\T
  AND COMPLIANCE
   MOSITOIUVG
MEMORANDUM
SUBJECT:  Policy on Invoking Section 9 of the EPA/DOJ
      •'.    Memorandum of Understanding

FROM*     Thomas L. Adams, Jr.     Vj	  .    VO  	
          Assistant Administrator * v*"       **^

TO:       Regional Administrators
          Regions I-x


     Section 9 of the EPA/DOJ Memorandum of Understanding concerning
civil litigation provides authority to the Administrator to appoint
Agency attorneys to represent the Agency in certain circumstances.
This is an important but virtually unused authority.  The lack of
use to date may be due, in part, to the absence of a policy and
procedure for invoking Section 9.

     We anticipate greater use of Section 9 in the future on a
•elected basis to carry out its intended purpose.  To facilitate
its future use, we have developed the attached policy.  We look
forward to working closely with you in its implementation.

     If you have any questions about the policy, please feel free
to call Ed Reich at FTS 382-3050.

Attachment

cc:  Deputy Regional Administrators, Regions I-x
     Regional Counsels, Regions I-x

-------
POLICY INVOKING SECTION 9 OF THE EPA/DOJ MEMORANDUM OF UNDERSTAND]
Background

     In June 1977, EPA and the Department of Justice entered into a
Memorandum of Understanding concerning the conduct of environmental
litigation.  The MOU was intended to ensure that Federal court civil
litigation under EPA statutes was effectively conducted to the best
interests of the government and the public.  It was also intended to
resolve differing views of the appropriate roles of DOJ and Agency
attorneys and establish a close and cooperative relationship between
the attorneys of the two agencies.  The MOU dealt specifically with
civil litigation under the Clean Air Act, the Federal Water Pollution
Control Act, and the Safe Drinking Water Act, although it has
become the model for litigation under other environmental statutes
as well.  The MOU received legislative sanction in 1977 when Congress
specifically incorporated the MOU in Section 305(b) of the Clean
Air Act.

Primary Responsibilities Under the MOU

     The MOU creates a number of important responsibilities for
each agency, reflecting the roles and areas of expertise of each.
The major provisions of the MOU can be summarized as follows:

     (1)  The Attorney General "shall have control over" all case:
          to which EPA is a party.

     (2)  When requested by the Administrator, the Attorney General
          shall permit Agency attorneys to participate in ca*es
          "subject to the supervision and control of the Attorney
          General."

     (3)  The Attorney General retains the right to allocate tasks
          between attorneys, giving "due consideration to the
          substantive knowledge of the respective attorneys of the
          matter at issue so that the Government's resources are
          utilized to the best advantage."

     (4)  Settlement of any case in which DOJ represents the Agency
          requires the concurrence of both the Administrator and
          the Attorney General (or their delegatees).

     (5)  The Attorney General shall establish specific deadlines,
          not longer than 60 days, by which time DOJ attorneys must
          either file complaints or report to the Attorney General
          why such complaint has not been filed.

-------
                                -2-


     (6)  If a complaint is not filed within 120 days of  referral,
          the Administrator may request the Attorney General  to
          file a complaint within 30 days.   Failure to thereafter
          file within said 30 days may be considered by the Agency
          as a failure of the Attorney General to notify the
          Administrator within a reasonable time that he will
          appear in litigation for the purposes of Section 305
          of the Clean Air Act, Section 506 of the Federal Water
          Pollution Control Act, or Section 1450 of the Safe
          Drinking Water Act. (Under such circumstances,  the
          Administrator is authorized by the cited statutory
          provisions to appoint Agency attorneys to appear and
          represent him.)

     (7)  Failure to file a complaint within the time period
          requested by the Administrator in cases seeking
          immediate action under the emergency provisions of  the
          three statutes also would constitute a failure to so
          notify the Administrator, also authorizing Agency
          attorneys to assume representation.

     (8)  In conducting litigation, the Attorney General shall
          defer to the Administrator's interpretation of
          scientific and technical matters.

Current Experience

     Experience has shown that the 60 day target for filing cases
has not been consistently met.  There are a number of explanations
for the disparity between the 60-day deadline created by the  MOU
and the actual performance in implementing  it.  In some instances,
the complexity of the case makes review and filing within 60  days
an unrealistic target.  In other cases, further pre-filing prepara-
tion is required or the case is held after referral at EPA's
request for reasons of litigative strategy or to conduct pre-filing
settlement negotiations.  However, cases may also be delayed  in
filing for reasons relating purely to management and utilization of
DOJ resources and DOJ's own sense of priorities.  Certain cases may
be important to EPA because of the principle involved and yet may
be viewed by DOJ attorneys as being only marginally worth their
time, thui affecting the relative priority such cases receive.  In
a few cases, differences in statutory or regulatory interpretation
or unresolved policy issues can also delay filing.

     An analysis of unfiled cases pending at DOJ shows that a
number of cases fall within the scope of Section 9 of the MOU,
affecting cases unfiled after 120 days.  However, the Agency  has
only rarely notified DOJ of its intention to invoke that section
and appoint Agency attorneys to represent itself, let alone
actually appoint such attorneys under that section.

-------
                                -3-


Consideration Affecting Invoking Section 9

     Section 9 is clearly intended to give the Agency the discretion
to assume responsibility for representing itself in cases unfiled
after 120 days, after 30 days notice to DOJ.  There are a wide
variety of considerations that go into deciding whether it is
appropriate to invoke the MOU.

     The threshold consideration relates to the reasons for the
case remaining unfiled.  Obviously, if the case is unfiled because
EPA agrees that further pre-filing preparation is required or
because EPA has asked for a delay for litigative strategy reasons
or to conduct pre-filing settlement negotiations, invoking
Section 9 would be inappropriate and unwarranted.

     However, if a case is unfiled simply due to unavailability of
DOJ resources, consideration of invocation may be appropriate.
Further, if DOJ believes that a case should not be filed due to
technical deficiencies in the evidence but EPA does not agree,
consideration should be given to invoking Section 9 in light of
DOJ's failure to defer to the Agency's expertise in accordance with
Section 14 of the MOU.  Finally, if the delay is due to differences
over interpretation and application of Agency policy or priorities,
and DOJ does not defer to the Agency's proper role in establishing,
interpreting, and implementing policy or priorities, consideration  ~
of Section 9 would also be appropriate.

     Even within the classes of cases identified in the previous
paragraph, invoking the MOU should be viewed as an unusual action
when other attempts to resolve the problems in a case have proven
fruitless.  Within these classes of cases, the Agency must weigh
such additional factors as:

     (a)  the Agency interest to be served by assuring filing of
          the case in a more timely fashion.  Where the case is
          necessary to validate an Agency policy objective, this
          may be a particularly important consideration;

     (b)  the ability of the Agency, both in terns of attorney
          availability and experience levels, to handle the
          litigation without DOJ involvement and support;

     (c)  the desire to maintain, as much as possible, DOJ
          involvement in cases since combined use of Agency
          and DOJ resources normally provides the most effective
          government representation; and

     (d)  the likelihood of filing of the complaint within the near
          future if the MOU is not invoked, and whether invoking the
          MOU is likely to accelerate filing by DOJ.

-------
                                -4-
     (Note that invoking Section 9 in the sense of  sending  a  letter
to the Attorney General requesting him to file within  30  days does
not, in itself, commit the Agency to assume the lead after  that
period.)

Procedures for Invoking Section 9

     Section 9 may be invoked only by the Assistant Administrator
for Enforcement and Compliance Monitoring.  It may  be  invoked at
his own initiative, upon the request of a Regional  Administrator or
his delegatee, or at the request of the Assistant Administrator
for Air and Radiation for cases arising under Sections 203  and 211
of the Clean Air Act.

     A request by the RegionV to invoke Section 9, which would
normally involve enforcement litigation, should be  in  memorandum
form and should be directed to the Assistant Administrator  for
OECM.  The memorandum should briefly summarize the  facts  of the
case, especially any relevant information not previously  contained
in the referral package, and the appropriateness of invoking
Section 9 in light of the criteria discussed in this memorandum.
The memorandum should detail, to the best of the Region's knowledge,
the reasons for the case remaining unfiled, and all efforts made to
get the case filed.  If DOJ had asked for any additional  informa-
tion before filing, the memorandum should detail specifically what
was requested and how the Agency responded.  The request  should
also contain a proposed case management plan, a recommendation as
to which EPA lawyers should be designated to represent the  Agency,
and a commitment by the Region to provide the resources (technical
and legal) necessary to prosecute the action.

     Upon receipt and review of the memorandum, or  after  discussion
with the Regional Administrator and the Regional Counsel  or their
delegatees where the Assistant Administrator raises the issue on
his own initiative, the Assistant Administrator may decide  to
invoke Section 9.  If so, prior to the Agency's sending a letter
under Section 9, the Deputy Assistant Administrator -  Civil
Enforcement and the appropriate Associate Enforcement Counsel will
meet with the Chief, Environmental Enforcement Section to see if an
acceptable resolution can be achieved or if any circumstances exist
of which the Agency nay not be aware.  The appropriate Regional
Counsel, or designee, will be given notice and opportunity  to
V As used in this section, the terms "Region" and "Regional
   Administrator and Regional Counsel* shall mean, for cases
under Sections 203 and 211 of the Clear! Air Act, the Office of Air
and Radiation and the Assistant Administrator for Air and Radiation,
respectively.

-------
                                -5-


 attend any such meeting.  Assuming the matter is not acceptably
 resolved  in  this manner, the Assistant Administrator shall send a
 letter to the Assistant Attorney General, Land and Natural Resources
 Division  requesting him to file within 30 days in accordance with
 Section 9.

     During  this 30-day period, the Agency will continue to make
 all reasonable efforts to obtain the filing of the complaint.  If
 at the end of the 30-day period the case remains unfiled, the
 Assistant Administrator will again discuss the case with the
 Regional Administrator and Regional Counsel to determine the
 appropriate  action.  If determined to be appropriate, the Assistant
 Administrator shall appoint Agency attorneys to represent the
 Agency in the case and so notify the Assistant Attorney General in
 writing of this action.

 Support of Cases Where Agency Invokes Section 9

     It is primarily the responsibility of the Office of Regional
 Counsel to provide the legal support to prosecute and manage a case
 where the Agency appoints its own attorneys under Section 9.  This
consideration should be factored into both the recommendation to
 invoke Section 9 and in the case management plan.  However, if the
Regional Counsel so requests, the appropriate Associate Enforcement
Counsel in OECM will endeavor to provide assistance to supplement
Regional resources available for the case.

     Where a case is to be nationally-managed in accordance with
existing guidance, the appropriate Associate Enforcement Counsel
will be primarily responsible for providing legal support.  For
cases arising under Sections 203 and 211 of the Clean Air Act,
attorneys in the Field Operations and Support Division of the
Office of Air and Radiation will exercise primary responsibility.

-------
RF.1-7

-------
                                               6n
       UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                       WASHINGTON. D.C. 20460


                           llAR 4
                                                       l**MCtMINT AMD

MEMORANDUM
SUBJECT:  Headquarters Review^and Tracking /AŁ Civil Referrals
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 clarify 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.


I.   CLASSIFICATION OF 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 nay 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).

-------
                               -2-

    Class II:    Cases involving issues of  significance which
                may be unique or precedential, or  which  are
                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 from
                Headquarters.

    Class III:   Cases which are significant and  important to
                Agency enforcement goals,  but which are  not
                likely to  raise issues which  are unique  or
                precedential.  The lead  legal and  technical
                responsibilities in  such cases rest in the
                Regional offices. Headquarters  involvement
                will be limited to general oversight to  ensure
                that Agency policies are followed  and that
                cases are  being prosecuted in an expeditious
                manner.  Routine communications  should take
             .  place directly between Regional  attorney
                staff and  the Department of Justice or U.S.
                Attorneys.

    Class XV:    Cases which may be  referred directly  from the
                Regions to Department of Justice (DOJ)
                Headquarters pursuant to the  September 29,
                1983 letter agreement between Alvin L. Aim
                for EPA and F. Henry Habicht, II for  DOJ
                (copy attached).  Direct referrals are
                presently authorized for the  more  routine
                cases in the Air and Water programs.
                Headquarters attorney involvement  in  those
                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.
                Attorneys.

    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  Enforr
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
miscategorized, he or she should consult with the Regional
Administrator-or the designated  Regional enforcement contact

-------
                               -3-

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,  1  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 justify a reclassification.
Either the Associate Enforcement Counsel  or  the Regional
Administrator  (or the designated Regional enforcement contact
person) nay  suggest reclassification of a case or modifi-
cation of lead responsibilities.  The decision on reclassifi-
cation will  be made as described above for original classifi-
cation.
 II.   EVALUATION  OF  DIRECT REFERRALS

      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 d;rect  referral process were detailed in a
 November 28, 1583,  memorandum I addressed to Regional
 Administrators,  Regional  Counsels and Headquarters  staff  (copy
 attached).  As a point  of clarification, it is my intent  that
 conterr.pt actions may also be handled as direct referrals  if the
 original case would meet  the current criteria for direct  referra

      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  of direct referral

     The  case should be  clearly  within one of the categories
 enumerated in the September  29, 1983, letter from Alvin Aim to
 P. Henry Habieht, 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
elements:

       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
          custody 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;  and

-------
                               -5-

      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 which is not within the category for direct
referral is erroneously tent 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 the direct referral was erroneous to a withdrawal
from the Department of Justice.  If a case which should have
been directly referred to the Department of 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
justice will be sent to the  Region.
 III.  TRACKING  ALL REFERRALS  IN  THE COMPUTER DOCKET

     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, November  23, 1963, and  November  28, 1983  (copies
 attached).   The following  docket guidance supplements and,
 where inconsistent, supersedes  those 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

-------
                               -6-

OECM division, and will give the Case Data Form,  the Facility
Data Form, and a copy of the cover letter referral memorandum
to Headquarters Docket Control for entry of the case into
the Docket System.  Keg ions with Regional Docket Control should
give copies of the Case and Facility Data Forms and the
referral memorandum directly to regional data analyst for entry
into the system.  Failure to attach those forms nay result in
the cases not being entered in the Docket System, and the
Region not receiving credit for the case at the tine of
referral.

     Copies of direct referral packages are to be sent simul-
taneously to the Department of Justice and EPA Headquarters.
The "Date to EPA Headquarters" and the "Date Referred to
DOJ" shown in the Case Docket System will be the date on the
cover letter from the Regional Administrator.  The System is
being modified so that direct referrals will be identified
and can be separately retrieved from the System.  A new
event for "Date Received EPA HO" will also be added.  This
event will be used as an approximate date when the Land
and Natural Resources Division, Department of Justice,
receives the referral package and, consequently, when the
thirty day clock begins to run for determining whether
Headquarters DOJ or the U.S. Attorney will have the lead*
litigation responsibilities as provided in the September 29,
19B3 letter agreement between Alvin Aim and Henry Habicht, II.


IV.  REFERRALS REQUIRING CONCURRENCE

     The review criteria for direct referrals contained in
this memorandum also apply to cases which require Headquarters
concurrence.  Rather than incorporating the 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.   If 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 enforceable 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  "Guidance
          for Drafting Judicial Consent  Decrees"  (GM-17)
          issued October 19, 1983 for a  complete description
          of consent decree requirements.


V.   MANAGING THE CIVIL ENFORCEMENT DOCKET

     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 where national guidance is
needed,  in addition it will prepare us to respond quickly
when settlement proposals are submitted for approval.  Me    *
must ensure that litigation is expeditiously 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  Department
of Justice.  Where  quick  resolution cannot be informally
achieved, the Associate should corwr.unicate in writing on the
subject to the  Regional Office and Department of  Justice and
place a copy of the nemo  in the  Headquarters case file.  X
rely on the  judgment of each  Associate  as to when a natter is
of sufficient  importance  that it should be called to my
attention.

     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 nay, of  course,  proceed on a parallel
track, but  they generally should not result in suspension of
litigation  activities.  My  November 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

-------
                               -8-

or not the case was directly referred, the Associates should
identify and call to my 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 Enforcement Counsels will 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 itself into individual Class
III or Class XV cases.  Headquarters 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 forwarded
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 meets
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  final
settlements before they are filed in court.


Attachments

cc: Office Directors, DECK

-------
                .....    INDEX OF ATTACHMENTS


1.  Memorandum fron Courtney M. Price, Assistant Administrator
    for Enforcement and Compliance Monitoring to Regional
    Administrators, Regional Counsel, Associate Enforcement
    Counsels and OEM Office Directors (November 28, 1983)
    (concerning implementation of direct referrals beginning
    December 1, 1983)*

2.  Memorandum  from Courtney M. Price, Assistant Administrator
    for Enforcement and Compliance Monitoring to Regional
    Counsels (November 23,  1983)  (concerning further instructions
    for maintenance of the  enforcement docket system).

3.  Letter from Alvin L.  Aim,  Deputy Administrator, U.S. EPA to
    F. Henry Habicht, II, Acting  Assistant Attorney General,
    US Department of Justice  (September 29, 1983)  (concerning
    direct referral of classes of cases)..
                                          •
•         .                                                    •
A.  Memorandum  from Courtney  M^ Price, Assistant Administrator
    and General Counsel to  Associate Enforcement Counsels,
    Regional Counsels, OLEC Office Directors and Correspondence
     Control Unit (April 21, 1983) (concerning procedures for
    maintenance of enforcement docket system).

 5.   Enforcesent Docket System Case Data and Facility Data  Forms.

-------
  \                                  	
  I     UNITED STATES ENVIRONMENTAL PROTECTION A!
                       KV 28 B63
HEMORANIOM

SUBJECT: Implementation of Direct Referrals for Civil  Cas<
          Beginning December 1, 1983
FROM:    Courtney M. Pricey	
         Assistant Administrator fof Enforcement
          and Compliance Monitoring

TO:      Regional Administrators, Regions 1 - X.
         Regional Counsels, Regions I - Z
         Associate Enforcement Counsel*
         OECM Office Directors
I.  BACKGROUND

     On September 29. 1983, the Environmental Protection'
Agency (EPA) and the Land and Natural Resources Division of
the Department of Justice (DOJ) entered into an agreement
which, beginning on December 1. 1983, allows certain
categories of cases to be referred directly to DOJ from EPA
Regional offices without my prior concurrence.  A copy of
that agreement is attached to this memorandum.

     This memorandum provides guidance to EPA Headquarters
and Regional personnel regarding procedures to follow in
implementing this direct referral agreement.  Additional
guidance will be issued as required.

II. PROCEDURES TOR CASES SUBJECT TO DIRECT REFERRAL

     The attached agreement lists those categories of
cases which can be referred directly by the Regional
Administrator to DOJ.  All other cases oust continue Co be
reviewed by Headquarters OECM and will be referred by me to
DOJ.  Cases which contain counts which could be directly
referred and counts which require Headquarters concurrence
should be referred to EPA Headquarters.  If you are uncertain
whether a particular case may be directly referred, you
should contact the appropriate Associate Enforcement Counsel
for guidance.

-------
                            -2-

      Manv of the procedures for direct referral cases ere
 adequately explained  in  the September 29th agreement.
•However,  there are tame  point* I vant to emphasise.

      Referral packages should be addressed to Mr. F. Henry
.Habicht,  II,  Assistant Attorney General, Land end Natural
 Resources Division, U.S. Department of Justice, Uashi>oo,
 D.C.  20530, Attention: Stephen D. Ramsey.  The tine limitations
 set forth in  the agreement for review and initial disposition
 of the package vill commence upon receipt of the package in
 the Land  and  Natural  Resources Division, end not -*t the DOJ
 nailroom. Delivery of referral packages to the Land and
 Natural Resources Division will be expedited by use of
 express nail,  which is not commingled with regular Bail in
 DOJ's nailroom.

      The  contents of  a referral package (either direct to
 DOJ or to EPA Headquarters) should contain three primary
 divisions: (1)  a cover letter; (2) the litigation report;
 (3)  the documentary file supporting the litigation report.

      The  cover letter should contain a summary of the following
 elements:

    .  (a)  identification  of the proposed defendant(s); •
                                             9
      (b)  the  statutes and regulations which are the basis
          for  the proposed action against the defendant(s);

      (c)  a brief statement of the facts upon which the
          proposed action is based;

      (d)  proposed relief to be sought against the defendant(s);

      (e)  significant  or  precedential legal or factual issues;

      (f)  contacts with the defendant(s), including any
          previous administrative enforcement actions taken;

      (g)  lead Regional legal and technical personnel;

      (h)  any  other aspect of the case which is significant and
          should be highlighted, including any extraordinary
          resource demands which the case may require.

      A referral to DOJ or to Headquarters EPA is tantamount
 to a  certification by the Region that it believes the case
 is sufficiently developed for the filing of a complaint,
 and that  the  Region is ready, willing and able to provide
 such  legal and technical support ae might be reasonably
 required  to pursue the case through litigation.

-------
     As provided in the Septcnber 29, 1983,  agreement.
information copies of the referral package nay be provided
to the U.S. Attorney for the appropriate judicial district
in which the proposed case nay be filed.  These information
packages should be clearly labelled or stamped with the
following vords: "Advance Copy — No Action  Required At
This Tine".  Also, information copies should be simultaneously
provided to the appropriate OECH division at Headquarter*.
It is important that the directly referred cases be tracked
in our case docket ays tea and Headquarters oversight initiated,
Copies of the referral cover letter vill be  provided to
OZCM's Office of Management Operations for inclusion la the
automated case docket system when Headquarters informational
copy is received at OECM's Correspondence Control Unit.

Department of Justice Responsibilities

     DOJ shares our desire to handle these cases AS expedl-
tiously as possible.  To that end, DOJ has agreed that,
within thirty days of receipt of the package in the Land arad
Natural Resources Division at DOJ Headquarters, it vill
determine whether Headquarters DOJ or the U.S. Attorney
vill have the lead litigation responsibilities on • specific
case.  DOJ vill notify the Regional offices  directly of its
determination in this regard, with a copy to the appropriate
DECK division.  Although USA offices vill have lead respon-
sibilities in' nany cases, the Land and Natural Resources
Division vill continue to have oversight and management
responsibility for all cases.  All complaints and consent
decrees vill continue to require the approval of the
Assistant Attorney General tor the division  before the case
can be filed or settled.

     DOJ has reaffirmed the time frame of the Memorandum
of Understanding, dated June 15, 1977, for the filing of
cases vithin 60 days after receipt of the referral package,
vhere possible.  Where it is not possible, DOJ vill advise
the Region and Headquarters of any reasons for delays in
filing of the case.  However, when DOJ determines that
the USA should have the lead responsibilities in a case, DOJ
vill forward the case to the USA vithin thirty days of
referral to the extent feasible.

     DOJ can request additional information  from a Region
on a case or return a case to a Region for further develop-
ment.  In order to avoid these delays, referral packages
should be as complete as possible and the Regions should
vork closely with DOJ to develop referral packages.

-------
J
 '
      The Deputy Administrator has expressed concern in the
 past on  the number of cases returned to the Regions or
 declined by EPA or DOJ.  2 have Assured the Deputy Administrate
 that I vill closely track the number of cases declined by
 DOJ  or returned to the Regions and the reasons for the
 declination or return as indications of whether direct
 referrals are a feasible method of handling EPA'e judicial
 enforcement program.

 Headquarters OECM Responsibilities

      Although OECM vill not formally concur on cases directly
 referred to DOJ, OECM vill still review these packages and
nay  offer comments to the Regions and DOJ.  DOJ is free to
 request  EPA Headquarters assistance on cases, as DOJ
 believes necessary.  EPA Headquarters review vill help to
 point out potential issues and pinpoint areas where future
guidance should be developed.  OECM vill also be available
 as a consultant to both DOJ and the Regions on these cases.
OECM vill be available to address policy issues as they
 arise and, as resources permit, nay be able to assist in
 case development or negotiation of these cases.  Any request
 from a Regional office for Headquarters legal assistance
should be in vriting from the Regional Administrator to
ne,  setting forth the reasons for the request and the type
of assistance needed.

      OECM also na in tains an oversight responsibility for
these cases.  Therefore, Regional attorneys nust report
 the  status of these cases on a regular basis through use
of the automated case docket"!  All information for the case
 required by the case docket system nust appear in the
docket and be updated in accordance vith current guidance
 concerning the automated docket ays tea.

Settlements in Cases Subject to Direct Referral

      I vill continue to approve and execute all settlements
 in enforcement cases, including those in cases subject to'
 direct referral and amendments to consent decrees in these
 cases.   This is necessary to ensure that Agency policies and
 enforcement activities are being uniformly and consistently
applied  nationwide.  After the defendants have signed the
 settlement, the Regional Administrator should forward a
 copy of  the settlement to ne (or ny designee) vith a written
 analysis of the settlement and a request that the settlement
 be signed and referred for approval by the Assistant Attorney
 General  for the Land and Natural Resources Division and for
 entry.   The settlement will be reviewed by the appropriate
 OECM Enforcement Division for consistency vith law and
Agency policy.

-------
                            -5-

     Vithln twenty-one days from the date of  receipt of the
settles eat by the appropriate OECM division.  2 will either
sign the settlement and transmit it to DOJ With a request
that the settlement be entered,  or transmit a memorandum to
the Regional Office explaining factors which  justify post-
ponement of referral of the package to DOJ. or return the
package to the Region for changes necessary before the
agrees en t can be signed.

     Obviously, ve vant to avoid the necessity of
communicating changes in Agency settlement positions to
defendants, especially after they have signed a negotiated
agreement.  To avoid this, the Regional office should
coordinate with Headquarters OECM and DOJ in  development of
settlement proposals.  A copy of all draft settlement
agreements should be transmitted by the Regional Counsel to
the appropriate Associate Enforcement Counsel for review
before it is presented to the defendant.  The Associate
Enforcement Counsel will coordinate review of the settlement
with the Headquarters program office and respond to the
Regional office, generally, within ten days of receipt of
the draft.  The Regional office should remain in contact
with the Headquarters liaison staff attorney  as negotiations
progress.  Failure to coordinate settlement development
with appropriate Headquarters offices nay result in rejection
of a proposed settlement which has been approved by the
defendant(s) and the Regional office.

     I will also continue to concur in and forward to DOJ
all requests for withdrawal of cases after referral.  In
addition, I will review and concur in any delay  in the filing
or prosecution of a case after referral. . This is appropriate
because cases which are referred to DOJ should be expeditiously
litigated to conclusion, unless e settlement  or some other
extraordinary event justifies suspending court proceedings.
The review of reasons for withdrawal or delay of cases
after expenditure of Agency and DOJ resources is an  Important
function of OECM oversight.  Therefore, should the Regional
offices desire to request withdrawal or delay of a case
which has been referred to DOJ, a memorandum  setting forth
the reasons for such a request should be forwarded to the
appropriate OECM division, where it vill be reviewed end
appropriate action recommended to me.

III.  CASES NOT SUBJECT TO DIRECT REFERRAL

     Those cases not subject to direct referral will be
forwarded by the Regional Administrator to the Office
of Enforcement and Compliance Monitoring for  review prior
to referral to DOJ.  OECM has committed to a  twenty-one day
turn-around time for these cases.  The twenty-one day
review period starts when the referral is received by the
appropriate OECM division.-

-------
     Within  this twenty-one day period, DECM will decide
whether  to refer the  case to DOJ (OECM then has fourteen
additional days to formally ref.er the case), to return the
case to  the  Region for further development, or to request
additional info mat ion from the Region.

     Because of this  rfhort OECM review period, emphasis
should be placed on developing complete referral package*
so that  delay occassioned by requests for additional infor-
mation from  the Region will be rare.  OECM nay refer a case
to DOJ vhich lacks soae information only if the referral
can be supplemented vith a minimum of time and effort by
information  available to the Regional office vhich can
immediately  be gathered and transmitted to DOJ.  However,
this practice is discouraged.  In the few instances in
which a  case is referred to DOJ without all information
attached, the information should, at a minimum, be centrally
organized in the Regional office and the litigation report
should analyze the completeness and substantive content of
the information.

     A referral will  be returned to the Region, vith an
explanatory memorandum, if substantial information or
further development is needed to complete the package.
Therefore, the Regions should work closely with OECM
attorneys to be certain referral packages contain all
necessary information. '           .

IV.  MEASURING THE EFFICACY OF THE DIRECT REFERRAL AGREEMENT

     I will use EPA's case docket system, OECM'6 quarterly
Management Accountability reports and DOJ's responses to
the referral packages to review the success of the direct
referral agreement.  OECM will review the quality of the
litigation reports accompanying directly referred cases and
discuss the general quality of referrals from each Regional
office at case status meetings held periodically vith DOJ's
Environmental Enforcement Section.

     If you  have any questions concerning the procedures
set out  in this memorandum, please contact Richard Hays,
Senior Enforcement Counsel, at FTS 382-4137*
Attachment

-------
  *      UNITE* STATES EKVIRDMMEK7A1. FftDTECTiDK A3ŁkCY
if     .',               WlkSMIWBTOX.
Honorable T.  Henry Babiebt* XX    'J;
Acting Asfiistant Attorney General •"';
Land and Natural Jteaaurce* Diviaieo'
U.5. Department of Justice
Kashington, D.C.  20530

Dear Bankt

     Aa a result of our meeting en  Thursday* September •#' ltB€*   -c
and the subsequent discussions  of respective staffs* we sirs* in
agreement that, subject to the  conditions set  forth below* the
classes of cases listed herein  vill be  referred'directly frost
EPA's  Regional Offices to the Land  and  natural Resources Division
of the Department of Justice  in Washington, D.C«
•                                        .                          •
     The terms, conditions and  procedures to be followed in
implementing  this agreement arei
                                                •               .
2.  The Assistant Administrator for Enforcement and Compliance
     Monitoring will waive for  a period of one year the requirement
     of the Assistant Administrator's prior concurrence for referral
     to the Department of Justice for the following classes of
     judicial enforcement casess

     fa)  Cases under Section 1414(b) of the Safe Drinking Mater
           Act which involve violations  of the  National Interim
           Primary Drinking Water Regulations,  such as reporting 0r
           monitoring violations, or maximum contaminant violations*
                         •
     (b)  The following cases under the -Clean  Water Acts

           (i)    cases involving discharges without a permit
                  by industrial  discharger* s
                                  '"•*
           (ii)   all cases against  minor industrial disehargerat

           liii)  cases'involving failure to monitor or report by
                 'industrial dischargers;

-------
          (iv)   referral* to collect stipulated penalties f
                 industrials under consent decrees;

          
-------
           (ill)  903 shall, within 30 days from receipt ef the
                 referral package, determine II) whether  the Lands
                 Division of 1109 will have lead responsibility for
                 the cue; or 12) whether the USA will have *aaŁ
                 responsibility for the ease.
                          1 . «;;              »
                 While ft is Agreed that to the extent feasible*
                 cases in which the OSA will nave the lead will  **
                 transmitted to the DBA for filing and handling
 .  * .            within this 30-day period, if DOJ determines that
                 the case requires additional legal or factual
                 development «t DOJ prior to referring the vatfesr
                 to the OSA, the case Bay be returned to the
                 Regional Office, or Bay be retained at the Lands
                 Division of DO3 for further development* including
                 requesting additional information from the Regional
                 Office.  In any event. DOJ will notify the Regional
                 Office, DECK and the OSA of its determination of
                 the lead role within the above-mentioned 30-day
                 period.

           (iv)   Regardless of whether DOJ or the OSA is determined
                 to have lead responsibility for management of
                 the ease, the procedures and tine limitations «et
                 forth in the HOU and 26 CFR fO.65 et eeq., shall
                 remain in effect and shall run c.oncurrently with*
                 the management determinations made pursuant-to
                 this agreement*
                 >                                          «
3.   (a)  All other cases not specifically described in paragraph
           1, above, which the Regional Offices propose for judicial
          enforcement* shall first be forwarded to DECK and the
          appropriate Headquarters program office for review.
          A copy of the referral package shall be forwarded simul-
           taneously by the Regional Office to the Lands Division of
          DOJ and to the OSA for the appropriate judicial district*
          the OSA*a copy being marked "advance copy-no action required
          at this time.*   .
        *               ' .   *         •*
     (b)  OECM shall review the referral package within twenty-en*
           (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 ease
          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 ef case.

-------
      tc)  Any request for information, or return of the case
           to the Region shall be transmitted by appropriate letter
           or memorandum signed by the AA for OCCM  (or her designee}
           within the aforementioned twenty-one day period.  Should
           OŁCM concur in the proposed referral of  the case to &OJ»
           the actual referral shall be by letter from the AA for
           DECK (or her designee) signed  within fourteen days of
           the termination of the aforementioned twenty-one day
           review period.  Copies of the  letters referred to herein
           shall b* sent to the Assistant Attorney  General for the
           Lands Division of  DOS*           .
    •^i -    *•                 *.*'*•••..      *
      (d)  Upon receipt of the referral package by DOJ, the
.   .        procedures and time deadlines  set forth  in paragraph
           Mo. 8 of the MOU shall apply.

      Zn order to allow sufficient time prior to implementation of
this agreement to make the U.S. Attorneys, the Regional Offices
and our staffs aware of these provisions, it is agreed that this
agreement shall become effective December 1, 1963.  Courtney trie*
will distribute a memorandum within CPA  explaining this agreement
and how it will be implemented within the Agency.  (You will receivi
a copy.)       J ~

      Z  believe that this agreement will eliminate the necessity of
formally amending the Memorandum of Understanding between our
respective agencies, and will provide necessary experience to
ascertain whether these procedures will  result in significant
savings of time and resources.  In that  regard, Z have asked
Courtney to establish criteria for measuring the efficacy of this
agreement during the one year trial period, and Z ask that you
cooperate with her in providing such reasonable and necessary
information as she may request of you in  making that determination.
At the  end of the trial period—or at any time in the interval—
we may  propose such adjustments in the procedures set forth herein
as may  be appropriate based  on experience of all parties.

      Zt is further understood that it is  the mutual desire of the
Agency  and DOJ that cases be referred to the OSA for filing as
expeditiously as possible.'

      Z  appreciate your cooperation in arriving at this agreement.
Zf this meets with your approval, please sign the enclosed copy
in the  space  indicated belov and xeturn  the copy to m* for our
files.       •   .    ...        •  .-,.
                                    Sincerely yours.
                                    Alvin Z,. Aim
                                    Deputy Administrator

 Approve
 F.  Benry HaTbicht, Zl
 Acting Assistant Attorney General
 iand  and Natural Resources Division
 T.S.  DcD»rt»sBt of

-------
                         ENFORCEMENT CASE DATA FORM
    CASE NO.:  	-	-  E
    (Assigned by Docket  Control
                Date Entered:
 *  CASE  NAME:
 * TYPE  CASE:.	
 (See  Back  for Adm.)

 * HQ  DIVISION:
 *  LAW/SECTION:
 1.	/	
 2.	/	
 3.	/	
 4.	/	
 5.         /
 * TECHNICAL CONTACT:

 * .REGIONAL  ATTORNEY:

 * DEFENDANTS:
 COMPLAINT?
 (Y/N)
 1.	
 2.	
 3.	
 4.
* STATE:

VIOLATION TYPE:

  DATE OPENED:
* DATE INITIATED:
   (Civil)
  DATE ISSUED:
  (Adj. Ada.)
  DATE CONCLUDED:

DATE VIOLATION
DETERMINED:

PROPOSED PENALTY:
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
                         PHONE: FTS - _

                         PHONE: FTS - _

                              NAMED IN
           POLLUTANT:
        * REFERRAL INDICATOR  	 RH: Region  to  HQ
                              	 RD: Region  to  DOJ
                                  (Direct Referral)
       Direct Referral Lead: DOJ      USA
          DATE DOCUMENTS
          RECEIVED BY ORC:
* Required fields - must be  filled out for case entry

-------
                             FACILITY DATA FORM


 *PLEASE USE THE ADDRESS OF THE SITE OF VIOLATION (NOT THE COMPANY MAILING
 ADDRESS).


 *A  SEPARATE FORM MUST BE COMPLETED FOR EACH FACILITY CITED IN THE CASE.
  CASE NO.:
-E
 I  (Assigned by DOCKET analyst)
I  EPA ID I:
                   (Assigned by FINDS analyst)
 * FACILITY NAME:

 * STREET ADDRESS:
* CITY:
*TYPE OWNERSHIP:
           * STATE
               ZIP:
           P:   Private industry or individual,
           F:   Federal Government            :
           S:   State
           C:   County
           M:   Municipal
           D:   District
 A'C CODE(s) : 	
  (one required)
                                  OPTIONAL
PARENT COMPANY:

NPDES PERMIT NO.

SUPERFUND SITE:

LATITUDE:

LONGITUDE:
            (Y or N)

-------
RF.2

-------
RF.2-1

-------
        UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                      WASHINGTON, D.C. 20460
                       JAN
                                                    OFFICE OF ENFORCEMEV
                                                      \NDCOWPL; VNI E
                                                       MONITORING
MEMORANDUM

SUBJECT:


FROM:


TO:
Expansion of Direct Referral of Cases to thq
Department of Justice
Thomas L. Adams, Jr.
Assistant Administrator"

Regional Administrators, Regions I - X
Deputy Regional Administrators, Regions I
Regional Counsels, Regions I - X
Assistant Administrators
Associate Enforcement Counsels
OECM Office Directors
I.  BACKGROUND

     During the past year, my office has worked closely with
the Regions, the Headquarters program offices, and the Land
and Natural Resources Division of the U.S. Department of
Justice  (DOJ) to expand the use of direct referral of cases.
On January 5, 1988, EPA and DOJ entered into an agreement
which expanded the categories of civil judicial cases to be
referred directly to DOJ Headquarters from the EPA Regional
offices without my prior concurrence.  In entering into this
agreement, EPA has taken a major step towards streamlining
the enforcement process and more fully utilizing our Regional
enforcement capabilities.

     On January 13, 1988, the Administrator signed an interim
delegations package which will allow the Agency to immediately
implement expanded direct referrals to DOJ.  A final delega-
tions package is now being prepared for Green Border review.

-------
     This memorandum provides guidance to EPA Headquarters
and Regional personnel  regarding procedures to  follow in
implementing the expanded direct referral agreement.  Prior
guidance on direct referrals appears  in a November 28, 1983,
memorandum from Courtney Price entitled "Implementation of
Direct Referrals for Civil Cases Beginning December 1, 1983.
That guidance is superseded to the extent that  the current
guidance replaces or changes procedures set forth therein;
otherwise the 1983 document remains in effect.
II.  SUMMARY

     Effective immediately for non-CERCLA cases, and effec-
tive April 1, 1988, for CERCLA cases, the Regions will4
directly refer to the Department of Justice all civil cases
other than those listed in the attachment to this memorandum
entitled "Cases Which Will Continue to be Referred Through
Headquarters."  This attachment lists cases in new and
emerging programs and a few, highly-selected additional
categories of cases where continued referral through EPA
Headquarters has been determined to be appropriate.  EPA
Headquarters will have 35 days to review the case simul-
taneously with DOJ.  EPA Headquarters will focus its review
primarily on significant legal or policy issues.  If major
legal or policy issues are raised during this review, EPA
Headquarters will work with the Regi'on to expedite resolu-
tion.

     Attached is a copy of the agreement between EPA and DOJ,
which is incorporated into this guidance.  Many of the
procedures for direct referral of cases are adequately
explained in the agreement.  However, there are some points I
would like to emphasize.
III.  PROCEDURES

     A.  CASES SUBJECT TO DIRECT REFERRAL

     The attached agreement lists those categories of cases
which must continue to be referred through the Office of
Enforcement and Compliance Monitoring (OECM).  All other
cases should be referred directly by the Regional Office to
DOJ Headquarters, with the following two exceptions:

     (1)  cases which contain counts which could be directly
     referred and counts which require prior EPA Headquarters
     review should be referred through EPA Headquarters, and

-------
      (2)  any referral which transmits a consent decree
     should be referred through EPA Headquarters, except
     where existing delegations provide otherwise.

If you are uncertain whether a particular case may be
directly referred, you should contact the appropriate
Associate Enforcement Counsel for guidance.

     B.  PREPARATION AND DISTRIBUTION OF REFERRAL PACKAGES

     The contents of a referral package  (either direct to DOJ
or to EPA Headquarters) should contain three primary divi-
sions:  (1) a cover letter;  (2) the litigation report; %(3) the
documentary file supporting the litigation report.

     The cover letter should contain a summary of the
following elements:

      (a)  identification of the proposed defendant(s);

      (b)  the statutes and regulations which are the basis
          for the proposed action against the defendant(s);

      (c)  the essential facts upon which the proposed action
          is based, including identification of any signi-
          ficant factual issues;

      (d)  proposed relief to be sought against defendant(s);

      (e)  significant or precedential legal or policy issues;

      (f)  contacts with the defendant(s), including any
          previous administrative enforcement actions taken;

      (g)  lead Regional legal and technical personnel;

      (h)  any other aspect of the case which is significant
          and should be highlighted, including any extra-
          ordinary resource demands which the case may
          require.

     A direct referral to DOJ is tantamount to a certifi-
cation by the Region that it believes the case is suffi-
ciently developed for filing of a complaint, and that the
Region is ready, willing and able to provide such legal and
technical support as might be reasonably required to pursue
the case throucrh litigation.

     Referral packages should be addressed to the Assistant
Attorney General, Land and Natural Resources Division, U.S.
Department of Justice, Washington D.C. 20530.  Attention:

-------
 Chief,  Environmental  Enforcement  Section.   Copies of all
 referral packages  should also be  sent  to the Assistant
 Administrator  for  OECM and  the  appropriate  Headquarters
 program offioe.

     DOJ has reaffirmed the time  frame of the Memorandum of
 Understanding, dated  June 15, 1977,  for the filing of cases
 within  60 days after  receipt of the  referral package, where
 possible.  DOJ can request  additional  information from a
 Region  on a case or return  a case to a Region for further
 development.  In order to avoid these  delays, referral
 packages should 'be as complete  as possible  and the Regions
 should  work closely with DOJ to develop referral packages.

     C.  IDENTIFICATION AND RESOLUTION OF SIGNIFICANT%LEGAL
          AND POLICY  ISSUES

     A  major element  in assuring  the success of the expanded
direct  referral program is  an efficient process to identify
and resolve significant legal and policy issues.  This should
be done as early as possible to assure that unresolved issues
not delay a referral.   Early identification and resolution
will also help the Agency to avoid devoting significant
Regional resources to preparing a litigation report for a
case which will ultimately  be considered inappropriate for
referral.

     The procedures make  clear  that  the Regional office has
the initial responsibility  for  identification of significant
legal and policy issues.  Such  issues should be identified to
OECM and the appropriate  Headquarters program office as soon
as a decision is made to  proceed with litigation.  All
parties should then work  to address  the issues as quickly as
possible, preferably before the referral package is sent to
Headquarters.

     The agreement with DOJ also  outlines procedures for
Headquarters review of  referral packages to determine whether
any significant legal or  policy issues exist which would
impact  filing,  and the  process  for resolution of such issues.
If an issue surfaces during the 35-day Headquarters review
period, OECM will work  for  quick  resolution of the issue,
with escalation as necessary to top  Agency management.   This
should  serve primarily  as a "safety  valve"  for those few
issues  not previously  identified, rather than as the point at
which issues are first  raised.

     Finally, if DOJ  raises a significant legal or policy
issue during its review,  OECM will work with the Region and
the Headquarters program  office to expedite resolution of the
issue.  If DOJ makes  a  tentative  determination to return a

-------
referral, DOJ will consult with OECM and the Regional Office
in advance of returning the referral.

     D.  CASE QUALITY/STRATEGIC VALUE

     OECM will evaluate Regional performance as to the
quality and strategic value of cases on a generic basis.
While OECM will not request withdrawal of an individual
referral based on concerns about quality or strategic value,
it will consider these factors during the annual audits of
the Offices of Regional Counsel and the annual Regional
program office reviews.  Concerns relative to issues of
quality or strategic value will also be raised informally as
soon as they are identified.

     E.  WITHDRAWAL OF CASES PRIOR TO FILING

     Cases should be fully developed and ready for filing at
the time they are referred to DOJ Headquarters.  Thus, case
withdrawal should be necessary only under the most unusual
circumstances.  If, after consultation with OECM, withdrawal
is determined to be appropriate, the Regions may request that
DOJ withdraw any directly referred case prior to filing.
Copies of the Region's request should be sent to the Assis-
tant Administrator for OECM and the appropriate program
office.

     F.  MAINTENANCE OF AGENCY-WIDE CASE TRACKING SYSTEM

     In order to assure effective management of the Agency's
enforcement program, it is important to maintain an accurate,
up-to-date docket and case tracking system.  Regional
attorneys must continue to report the status of all cases.
including directly referred cases, on a regular basis through
use of the national Enforcement Docket System.  All infor-
mation for the case required by the case docket system must
appear in the docket and be updated in accordance with
current guidance concerning the automated docket system.


     If you have any questions concerning the procedures set
forth in this memorandum, please contact Jonathan Cannon,
Deputy Assistant Administrator for Civil Enforcement, at
FTS 382-4137.

Attachment

cc:  Hon. Roger J. Marzulla
     David Buente
     Nancy Firestone
     Assistant Section Chiefs

-------
     I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
     /                WASHINGTON. D.C. 20460

                              ... 24
                                                        OFFICE OF
                                                      ENFORCEMENT AND
                                                     COMPLIANCE MONITORING
Honorable Roger J. Marzulla
Acting Assistant Attorney General
Land and Natural Resources Division
Washington, D.C.  20530

Dear Roger:

     As you know! the Agency has been considering changes in
existing procedures to increase the effectiveness of its enforcement
program.  One change, which we discussed at our recent*meeting with
you, is a major expansion of the direct referral program for civil
judicial enforcement actions, whereby such cases are referred
directly from the Regional Administrators to your office.

     We believe the past successes of this program and the
increased maturity of Regional staff warrant adopting direct
referrals as the basic mode of operation.  Thus, with your
acceptance, we intend to utilize direct referrals to your office
for virtually all civil cases other than those relating to certain
new statutory authorities or emerging programs where judicial
enforcement experience is limited.  As such programs mature, we
will expand the scope of direct referrals to cover them.  In
addition, as new programs are implemented under new statutory or
regulatory requirements, we contemplate an initial period of
referrals through Headquarters for these cases prior to their
incorporation into the direct referral process.

     Based on discussions within the Agency and with your staff,
we would propose that direct referrals cover all civil cases but
those listed in Attachment A.  This list includes cases in new and
emerging programs and a few, highly-selected additional categories
of cases where continued referral through Headquarters has been
determined to be appropriate.  This would allow direct referral of
the vast majority of civil cases, including those which would still
require significant national coordination to assure a consistent
approach (such as auto coating VOC air cases).  For this reason,
the procedures applicable to this small subset of cases as outlined
in the memorandum entitled "Implementing Nationally Managed or
Coordinated Enforcement Actions:  Addendum to Policy Framework for
State/EPA Enforcement Agreements" dated January 4, 1985 will remain
in effect.

-------
                                -2-
     For all but CEPCLA cases, this expansion would be effective
on.January 1, 1988.  For CERCLA cases, direct referrals would take
effect on April 1, 1988.  We anticipate joint issuance by our
offices of the model CERCLA litigation report prior to that date.

     Also attached (Attachment B) is the outline of the direct
civil referral process as the Agency intends to implement it.
This outline refines current direct referral procedures by more
clearly focusing authority and accountability within the Agency.

     Under these modified procedures, the Regional Office has the
lead on direct referrals.  The Region will be solely responsible
for the quality of the referral.  In this context, quality
encompasses both the completeness and accuracy of the litigation
report and the strategic value of the case.  Any problems
involving case quality should be raised directly with the Region.

     OECM will evaluate Regional performance as to the "quality
and strategic value of cases on a generic basis.  While OECM will
not request withdrawal of an individual referral on the basis of
concerns about quality or strategic value, we are committed  to
working with the Regional Offices to assure that current standards
are maintained or even exceeded  in future referrals.  We welcome
your input on Agency performance to assist us in this regard.

     As the procedures detail, OECM (as well as the appropriate
Headquarters office) will continue to be actively involved in
identification and resolution of significant legal and policy
issues.  Such issues normally should be raised and resolved  prior
to the actual referral.  If such an issue surfaces during the
35-day Headquarters review period, we will work for quick resolution
of the issue, with escalation as necessary to top Agency management.
During the period required for resolution, DOJ will treat the
referral as "on hold".   In the unusual circumstance where an  issue
is still unresolved after 60 days from the date of referral,  we
would contemplate withdrawal of  the referral by the Agency pending
resolution unless a formal "hold" letter has been submitted  in
accordance with the procedures contained in the memorandum entitled
"Expanded Civil Judicial Referral Procedures" dated August 28,
1986.

     If a significant policy or  legal  issue is raised by DOJ  during
its review, OECM remains committed to work with the Regional  and
program offices to assure expedited resolution of the  issue.
Obviously, these procedures are  not intended to inhibit discussions
between our offices to  facilitate a resolution.  In addition, if
DOJ makes a tentative determination to return a referral, we
understand that you will consult with OECM and the Regional  Office
in advance of returning  the referral.

-------
                                -3-


     We believe this expansion in use of  direct  referrals  represent
a major advance in streamlining the Agency's  enforcement process
and- appreciate your support in its implementation.   This letter,
upon your acceptance, will supersede the  letters  of  September  29,
1983, October 28, 1985, and August 28,  1986 on  this  subject and
constitute an amendment to the June 15,  1977  Memorandum of
Understanding between our respective agencies.

     I appreciate your continuing cooperation and support  in our
mutual efforts to make our enforcement process more  effective.  I
hope this letter meets with your approval.  If  so, please  sign  in
the space provided below and return a copy of the letter to me  for
distribution throughout the Agency.

                             Sincerely,
                             Thomas L.  Adams,  Jr.
                             Assistant  Administrator
Attachments

Approved:
                        ,
JM05««8
Roger J. Marzulla"Date
Acting Assistant Attorney General
Land and Natural Resources Division
U.S. Department of Justice

-------
        RESPONSIBILITIES AND PROCEDURES FOR DIRECT REFERRALS
 OF CIVIL JUDICIAL ENFORCEMENT ACTIONS TO THE DEPARTMENT OF JUSTICE


     (1)  Regional Offices have the lead on direct referrals  to
the Assistant Attorney General, Land and Natural Resources Division,
Department of Justice (DOJ) ? Regions will be responsible for
the quality of referrals.

     (2)  Regions will identify any significant legal/policy  issues
as soon as the decision is made to proceed with litigation.  Such
issues will be raised in writing for consideration by OECM and the
appropriate Headquarters program office.  All parties will attempt
to resolve such rssues as early as possible, preferably before the
referral package is sent to Headquarters.  Regions will also  flag
such issues in the cover memo transmitting the referral*.

     (3)  At the same time the referral is sent to DOJ, it will be
sent to OECM and the appropriate Headquarters program office  for a
simultaneous and independent review to determine whether any  other
significant policy/legal issues exist which would impact filing.

     (4)  Headquarters offices will complete their reviews within
35 days of receipt of the referral.  Each Headquarters office will
notify the Region in writing of any significant issues identified
or that no such issues have been identified.  A copy of this
memorandum will be sent to DOJ.  The Headquarters offices will
coordinate their reviews and, to the extent possible, provide a
consolidated response.

     (5)  If significant issues are identified and not readily
resolved, Headquarters (the Assistant Administrator for OECM),
after consultation with the program office Assistant Administrator,
may request the Regional Administrator to withdraw the case.   If
the Regional Administrator and the Assistant Administrator for OECM
(and, as applicable, the program office Assistant Administrator)
are unable to agree on the appropriate resolution of the issue, the
issue would be escalated to the Deputy Administrator.

     (6)  If a significant  issue is not resolved within 60 days of
the date of referral, the case will normally be withdrawn pending
resolution unless an appropriate "hold" letter is sent to DOJ in
accordance with the procedures contained in the memorandum entitled
"Expanded Civil Judicial Referral Procedures" dated August 28, 1986
(document GM-50 in the General Enforcement Policy Compendium.)

     (7)  Headquarters will NOT request withdrawal of a referral
package for any of the following reasons:

          — overall quality of referral package
          — strategic value of case
          — adequacy of documentation

-------
                                -2-
     (8)  If DOJ makes a tentative decision to return a referral
to.EPA, it will consult with the Regional Office and OECM prior
to making a final decision to return the case.

     (9)  Headquarters will evaluate on a generic basis (e.g.,
trends or repeated concerns) the quality/strategic value of a
Region's referrals.  Concerns relative to issues of quality or
strategic value will be raised informally as soon as they are
identified.

     (10) Headquarters oversight will be accomplished primarily
through annual program and OGC/OECM reviews, or ad_ hoc reviews
as problems are identified in a given Region.

Note;   Where a re.ferral also transmits a signed consent decree
       for Headquarters approval, the procedures applicable to
       processing settlements shall apply in lieu of these
       procedures.

-------
  CASES WHICH WILL CONTINUE TO BE REFERRED THROUGH HEADQUARTERS
ALL MEDIA:
Parallel Proceedings — Federal  civil  enforcement
matters where a criminal investigation  of the same
violations is pending
RCRA/CERCLA;   UST enforcement

               Enforcement  of   RCRA
               technology regulations
                         land  ban  and  minimum
               Enforcement  of administrative  orders for  access
               and  penalty  cases  for  failure  to  comply  with
               requests for access (Section 104)

               Referrals  to  enforce  Title  III  of  SARA,   the
               Community Right-to-Know provisions
TSCA/FIFRA;
Referrals  to  compel compliance  with or  restrain
violations  of  suspension   orders   under  FIFRA
Section 6(c)

FIFRA  actions  for stop  sales,  use,   removal,  and
seizure under Section 13

Referrals  to  enforce  Title  III  of  SARA,   the
Community Right-to-Know provisions

Injunctive  actions  under   Section  7   of  TSCA
(actions  for  injunctive relief  to  enforce  the
regulations  promulgated  under  Section  17  or
Section 6 could be directly referred)
WATER;
Clean Water  Act  pretreatment  violations —failure
of  a   POTW  to  implement  an   approved  local
pretreatment program

Clean Water  Act  permit violations relating  to  or
determined  by biological  methods  or  techniques
measuring whole effluent toxicity

PWSS  cases  to  enforce   against  violations   of
administrative orders which were not  issued  using
an adjudicatory hearing process

-------
 WATER
 (contd.)        Cases  brought  under  the   Marine  Protection,
                Research  and Sanctuaries Act  (MPRSA)

                UIC cases1


 AIR:            Smelter cases
     1  The  ten  cases   referred   to  date  indicate  that  the
regulations  raise  interpretive issues of  continuing  national
significance.   There  also  appears  to be  a  need for  greater
experience at  gathering  the facts necessary to prove violations
and support appropriate relief.  For this reason, the first 3 UIC
cases  from  each Region  shall  be referred  through Headquarters.
Once the Associate  Enforcement Counsel for OECM determines that
the Region has completed three successful  referrals,  the Region
may proceed to refer these cases directly to DOJ.

-------
        UNITED STATES ENVIRONMENTAL P*um.TIUN
                     WABMIN6TOW. DC tMM                 ^ '  *
                       KV28B63
                                                 •HFOKCBMBMT I
MEMORANLOM

SUBJECT: Implementation of Direct Referrals for Civil Caa<
          Beginning December 1. 1983
FROM:    Courtney M. Pricev^.^^JJZ*-/'
         Assistant Administrator foe Enforcement
          and Compliance Monitoring

TO:      Regional Administrators, Regiona I - X
         Regional Counsels, Regions X • X
         Associate Enforcement Counsel*
         OECM Office Directors
I.
     On Septeaber 29. 1983, the Environmental Protection
Agency (EPA) and the Land and Natural Resources Division of
the Department of Justice (DOJ) entered into an agreement
which, beginning on December 1. 1983, allows certain
categories of cases to be referred directly to DOJ fro» EPA
Regional offices without ay prior concurrence.  A copy of
that agreement is attached to this memorandum.

     This aenorandua provides guidance to EPA Headquarter*
and Regional personnel regarding procedures to follow in
implementing this direct referral agreement.  Additional
guidance will be issued as required.

II. PROCEDURES TOR CASES SUBJECT TO DIRECT REFERRAL

     The attached agreement lists those categories of
cases which can be referred directly by the Regional
Administrator to DOJ.  All other cases Bust continue to be
reviewed by Headquarters OECM and will be referred by ae to
DOJ.  Cases which contain counts which could be directly
referred and counts which require Headquarters concurrence
should be referred to EPA Headquarters.  If you are uncertain
whether a particular case Bay be directly referred, yon
should contact the appropriate Associate Enforcement Counsel
for guidance.

-------
     Many of the procedures for direct referral cases are
adequately explained in the September 29th agreement*
However, there are some points' 2 want to emphasize.

     Referral packages should be addressed to Mr.  F.  Henry
Rabicht, II. Assistant Attorney General. Land and  Natural
Resources Division. U.S. Department of Justice, Washington.
D.C. 20530, Attention: Stephen D. Ramsey.  The tiae  linitations
set forth in the agreement for review and initial  disposition
of the package will commence upon receipt of the package in
the Land and natural Resources Division, and not -at  the DGJ
mail room.  Delivery of referral packages to the Land and
Natural Resources Division will be expedited by use  of
express mail, which is not commingled with regular mail la
DOJ's mailroom.

     The contents of • referral package (either direct to
DOJ or to EPA Headquarters) should contain three primary
divisions: (1) a cover letter; (2) the litigation  report;
(3) the documentary file supporting the litigation report.

     The cover letter should contain a summary of  the following
elements:

     (a) identification of the proposed defendant(s);

     (b) the statutes and regulations which are the  basis
         for the proposed action against the defendant(s);

     (c) a brief statement of the facts upon which tie
         proposed action is based;

     (d) proposed relief to be sought against the  defendant(s);

     <«) significant or precedential legal or factual issues;

     (f) contacts with the defendant(s), including any
         previous administrative enforcement actions taken;

     (g) lead Regional legal and technical personnel;

     (h) any other aspect of the case which is significant and
         should be highlighted, including any extraordinary
         resource demands which the case may require.

     A referral to DOJ or to Headquarters EPA is tantamount
to a certification by the Region that it believes  the case
is sufficiently developed for the filing of a complaint.
and that the Region is ready, willing and able to  provide
such legal and technical support as might be reasonably
required to pursue the case through litigation.

-------
     As provided In the September 29, 1983,  agreement,
information copies of the referral package nay be provided
to the U.S. Attorney for the appropriate judicial district
in which the propoaed case nay be filed.  These information
package* ahould be clearly labelled or stamped with the
following words: "Advance Copy — Mo Action  Required At
This Tine".  Also, information copies should be simultaneously
provided to the appropriate OECM division at Headquarters.
It ia important that the directly referred cases be tracked
in our case docket eystem and Headquarters oversight initiated.
Copies of the referral cover letter will be  provided to
OZCM's Office of Management Operations for Inclusion in the
automated case docket system when Headquarters informational
copy is received at OECM's Correspondence Control Unit.

Department of Justice Responsibilities
                                                     •
     DOJ shares our desire to handle these cases as expedi-
tiously as possible*  To that and, ZXX7 has agreed that,
within thirty days of receipt of the package in the Land mad
Natural Resources Division at DOJ Headquarters, it will
determine whether Headquarters DOJ or the D.S. Attorney
trill have the lead litigation responsibilities on a specific
case.  DOJ will notify the Regional offices  directly of Its
determination in this regard, with a copy to the appropriate
OECM division.  Although USA offices will have lead respon-
sibilities in many cases, the Land and Natural Resources
Division will continue to have oversight and management
responsibility for all cases.  All complaints and consent
decrees will continue to require the approval of die
Assistant Attorney General tor the division before the case
can be filed or settled.

     DOJ has reaffirmed the tine frame of the Memorandum
of Understanding, dated June 15, 1977, for the filing of
cases within 60 days after receipt of the referral package,
where possible.  Where it is not possible, DOJ will adviae
the Region and Headquarters of any reasons for delays in
filing of the case.  However, when DOJ determines that
the USA should have the lead responsibilities in a case, DOJ
will forward the case to the USA within thirty days of
referral to the extent feasible.

     DOJ can request additional information from a Region
on a case or return a case to a Region for further develop-
ment.  In order to avoid these delays, referral packages
should be as complete as possible and the Regions should
work closely with DOJ to develop referral packages.

-------
     The Deputy Administrator has expressed concern In the
past on  the number of cases returned to the Regions or
declined by EPA or DOJ.  I have assured the Deputy Adninistrator
that I vill closely track the nmber of cases declined by
DOJ or returned to the Regions and the reasons for the
declination or return as indications of whether direct
referrals are a feasible method of handling EPA's judicial
enforcement program,

Headquarters OECM Responsibilities

     Although OECM vill not formally concur on cases directly
referred to DOJ, OECM vill still review these packages and
aay offer conn en ts to the Regions and DOJ.  DOJ is free to
request  EPA Headquarters assistance on cases, as *DOJ
believes necessary.  EPA Headquarters review vill help to
point out potential issues and pinpoint areas where future
guidance should be developed.  OECM vill also be available
as a consultant to both DOJ and the Regions on these cases.
OECM vill be available to address policy issues as they
arise and, as resources permit, »ay be able to assist in
case development or negotiation of these cases.  Any request
from a Regional office for Headquarters legal assistance
should be in writing from the Regional Administrator to
me, setting forth the reasons for the request and the type
of assistance needed.

     OECM also maintains an oversight responsibility for
these cases.  Therefore. Regional attorneys aust report
the status of these cases on a regular basis through use .
of the automated case docket.  All information for the case
required by the case docket system must appear in the
docket and be updated in accordance vith currant guidance
concerning the autoaated docket system.

Settlements in Cases Subject to Direct Referral

     I vill continue to approve and execute all settlements
in enforcement cases, including those in cases subject to
direct referral and amendments to consent decrees in these
cases.   This is necessary to ensure that Agency policies and
enforcement activities are being uniformly and consistently
applied  nationwide.  After the defendants have signed the
settlement, the Regional Administrator should forward a
copy of  the settlement to ae (or ay designee) vith a written
analysis of the settlement and a request that the settlement
be signed and referred for approval by the Assistant Attorn<
General  for the Land and Natural Resources Division and for
entry.   The settlement vill be reviewed by the appropriate
OECM Enforcement Division for consistency vith lav and
Agency policy.

-------
                            -5-

     Vithln twenty-one days from the date of  receipt of the
settlement by the appropriate OECM division.  1 vill cither
• ign the settlement and transmit it to DOJ with a  request
that the settlement be entered, or tranrait a memorandum ro
the Regional Office explaining factors which  justify post*
poneoent of referral of the package to DOJ, or return the
package to the Region for changes necessary before the
agrees en t can be signed.

     Obviously, we want to avoid the necessity of
communicating changes in Agency settlement positions to
defendants, especially after they have signed a negotiated
agreement.  To avoid this, the Regional office should
coordinate with Headquarters OECM and DOJ in  development of
settlement proposals.  A copy of all draft settlement  •
agreements should be transmitted by the Regional Counsel to
the appropriate Associate Enforcement Counsel for  review
before it is presented to the defendant.  The Associate
Enforcement Counsel will coordinate review of the  settlement
with the Headquarters program office and respond to  the
Regional office, generally, within ten days of receipt of
the draft.  The Regional office should remain la contact
with the Headquarters liaison staff attorney  as negotiation*
progress.  Failure to coordinate settlement development
with appropriate Headquarters offices may result  in  rejection
of a proposed settlement which has been approved by  the
defendant(s) and the Regional office*

     I will also continue Ło concur in and forward to DOJ
all requests for withdrawal of cases after referral,  la
addition, I will review and concur in any delay  in the filing
or prosecution of a case after referral.  This  is  appropriate
because cases which are referred to DOJ should be  expeditiously
litigated to conclusion, unless a settlement  or some other
extraordinary event Justifies suspending court proceedings.
The review of reasons for withdrawal or delay of cases
after expenditure of Agency and DOJ resources is an  important
function of OECM oversight.  Therefore, should  the Regional
offices desire to request withdrawal or delay of a case
which has been referred to DOJ, a memorandum  setting forth
the reasons for such a request should be forwarded to the
appropriate OECM division, where It will be reviewed and
appropriate action recommended to Be.

III.  CASES HOT SUBJECT TO DIRECT REFERRAL

     Those cases not subject to direct referral will be
forwarded by the Regional Administrator to the Office
of Enforcement and Compliance Monitoring for  review prior
to referral to DOJ.  OECM has committed to a  twenty-one day
turn-around tine for these cases.  The twenty-one  day
review period starts when the referral is received by the
appropriate OECM division.

-------
     Within this twenty-one day period, OECM will decide
whether to refer the case to DOJ (OECM then has fourteen
additional days to formally refer the ease) , to return the
case to the Region for further developnent, or to request
additional information from the Region.

     Because of this rfhort OECM review period, enphasis
should be placed on developing complete referral package*
so that delay occasioned by requests for additional infor-
mation from the Region will be rare.  OECM Bay refer a case
to DOJ which lacks sane information only if the referral
can be supplemented with a minimum ot tine and effort by
information available to the Regional office which can
immediately be gathered and transmitted to DOJ.  However,
this practice is discouraged.  In the few instances in
which a case is referred to DOJ without all information.
attached, the information should, at a minimum, be centrally
organized in the Regional office and the litigation report
should analyze the completeness and substantive content of
the information.

     A referral will be returned to the Region, with an
explanatory memorandum, if substantial information or
further development is needed to complete the package.
Therefore, the Regions should work closely with OECM
attorneys to be -certain referral packages contain all
necessary information.

IV.  MEASURING THE EFFICACY OF THE DIRECT REFERRAL AGREEMENT

     I will use EPA's case docket system, OECM's quarterly
Management Accountability reports and DOJ'a responses to
the referral packages to review the success of the direct
referral agreement.  OECM will review the quality of the
litigation reports accompanying directly referred cases and
discuss the general quality of referrals from each Regional
office at case status meetings held periodically with DOJ'a
Environmental Enforcoaent Section.

     If you have any questions concerning the procedures
set out in this memorandum, please contact Richard Mays,
Senior Enforcement Counsel, at FTS 362-4137.


Attachment

-------
•  *rr •*>.-                       •.•-:•  8
  ' -^*. •_  •                      ••«

       f       UNITED STATES ENVIRONMENT Ai. FROTECT1OJ* A3EKCY
          "-  '     '       7 v    "' ^'V't  '  ?V?4*>
      Honorable F. Henry Babiebt, XX   J\    * *J^ .           «.7
      Acting Assistant Attorney General • '  - • V.^-^          " '%~
      Land and Natural Resources Diviaioa  •   ...  -•';         ^* *
      O.6. Department of Justice          .   '•''"'"•'•*         r
      Washington, D.C.  20530            -    ^-"."
                                   '••'•• "?>^---   •••j'r-.-;i-'         • • •
      Dear Banks                   .    '-?.J>.               ' t >..*:
           As a result of our meeting en Thursday* September •/
      and the subsequent discussions of respective staffs, we are in
      agreement that, aubject to the conditions set forth below, the
      elasses of eases listed herein will be referred'directly from
      ZPA's Regional Offices to the Land and Natural Resources Division
      of the Department of Justice in Washington, D.C*

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

      X*   The Assistant Administrator for Enforcement  and Compliance
           Monitoring will waive for a period of one year the requirement
           of the Assistant Administrator*s prior concurrence for referral
           to the Department of Justice for the following classes of
           judicial enforcement casess

           (a)  Cases under faction 1414(b) of the Safe Drinking Hater
                Act which involve violations of the National Interim
                Primary Drinking Water Regulations, auch as reporting or
                monitoring violations, or maximum contaminant violatioaai

           (b)  The following cases under the Clean Water Acts

                (i)    cases involving discharges without a permit
                       by industrial dischargersi
                            • *       .."•*..•                '
                lii)   all cases against ainor industrial dischargersi

                liii)  cases Involving failure to monitor or report by
                      * industrial dischargers!

-------
          fivl   referrals to collect stipulated penalties  f
                 industrials voder consent decrees;

                 .referrals to collect administrative spill  penalties
                 mder Section 311 (j) of the
     Ccl  All cases under the Clean Air Act except the following!

          (i)    cases involving the steel industry}

          (ii)   cases involving non-ferrous smeltersi

          (iii)  cases involving National Emissions Standards for
                 Bazardous Air Pollutantst  •••

          fiv)   cases involving the post-1982 enforcement policy.

2.   Csses described in Section 1* above* shall be referred
     directly from the Regional Administrator to the  Land  and
     natural Resources Division of DOJ ia the following Banner t

     (a)  The referral package shall be forwarded 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 D.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*)* and the  Assistant
          Administrator for Enforcement and Compliance Monitoring
          (OECM) at EPA Headquarters.  OECM shall have the following
          functions with regard to said referral packages

          (i)    OECM shall have ao responsibility for review of
                 such referral packages* and the referral  shall be
       :          effective as of the date of receipt  of the package
                 by DOJt however* OECM shall comment  to the Region
                 upon any apparent shortcomings or defects which
                 it My observe in the package.  DOJ  may,  of course*
                 continue to consult with OECM on such referrals.
                 Otherwise* OECM shall be responsible only for
                 routine oversight of the progress and management
                 of the case consistent with applicable present
                 «nd future guidance.  OECM shall* however* retain
                 final authority to approve settlements oo behalf
                 of EPA for these cases* as ia other  cases.
                                • '.<..
          iii)   The referral package shall be la the format and
                 contain information provided by guidance  memoranda
                 as may be promulgated from time to time by OECM  t
                 consultation with DOJ and Regional representstie\

-------
          fill}  DOJ shall, within 30 days from receipt of  the
                 referral package* determine (1) whether  the Lands
                 Division of DOJ will have lead responsibility for
                 the ease* or <2> whether the OŁA will have lead
                 responsibility for the case.
                          1 • » c              »
                 Hhile it is agreed that to the extent feasible,
                 cases in which the OSA wiJJ have the lead will  he
                 transmitted to the OSA for filing and handling
 .  * .   •         within this 30-day period* if DOJ determines  that
                 the case requires additional legal or factual
                 development mt DOJ prior to referring the matter
                 to the OSA, the case may be returned to the
                 Regional Office, or Bay be retained at the lands
                 Division of DOJ for further development, including
                 requesting additional information fron the Regional
                 Office.  In any event, DOJ will notify the Regional
                 Office, OECM and the USA of its determination oŁ
                 the lead role within the above-mentioned 30-day
                 period.

          (iv)   Regardless of whether DOJ or the OSA is determined
                 to have lead responsibility for management of
                 the case, the procedures and time limitations set
                 forth in the HOU and 28 CFR 10.65 et seq., shall
                 remain in effect and shall run concurrently with
                 the management determinations made pursuant to
                 this agreement.

3.   (a)  All other cases not specifically described in paragraph
          1, above, which the Regional Offices propose for judicial
          enforcement* shall first be forwarded to OECM and the
          appropriate Bead quarters program office for review.
          A copy of the referral package shall be forwarded simul-
          taneously by the Regional Office to the Lands Division of
          DOJ and to the OSA for the appropriate judicial district,
          the OSA*a copy being marked 'advance copy-no action  required
          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.

-------
      tc)  Any request for intonation, or return of the
           to the ftegion shall be transmitted by appropriate letter
           or Memorandum signed by the AA for OECH (or her designee)
           within the aforementioned twenty-one day period.  Should
           OŁCM concur In the proposed referral of the case to &OJ,
           the actual referral shall be by letter from the AX for
           OECH (or her designee) signed within fourteen days of
           the termination of the aforementioned twenty-one day
           review period.  Copies of the letters referred to herein
           shall  b* sent to the Assistant Attorney General for the
           Lands  Division of DOS*            .
   *»'.'   ••-..       :.        '  ••••"  •"'•     •""."
      
-------
RF.2-2

-------
IMPLEMENTATION OF DIRECT REFERRALS FOR CIVIL CASES
     EPA GENERAL ENFORCEMENT POLICY I GM  -  18
                         UNITED STATES ENVIRONMENTAL
                              PROTECTION AGENCY

                          EFFECTIVE DATE:     DEO 1   198?

-------
  \
   I     UNITED STATES ENVIRONMENTAL PROTECTION
     '                WASHINGTON. DC SM40
                       KDY  28 B63
HEMORANLUK

SUBJECT: Implementation of Direct Referral* for Civil Cue*
          Beginning Deember 1. 1963
FROM:    Courtney M. PriceV_ __
         Assistant Administrator for) Enforcement
          and Compliance Monitoring

TO:      Regional Administrators, Regions I - X.
         Regional Counsels, Regions I - Z
         Associate Enforcement Counsels
         OECM Office Directors
I.  BACKGROUND

     On September 29, 1983, the Environmental Protection'
Agency (EPA) and the Land and Natural Resources Division of
the Department of Justice (DOJ) entered into an agreement
which, beginning on December 1, 1983, allows certain
categories of cases to be referred directly to DOJ fron EPA
Regional offices without my prior concurrence.  A copy of
that agreement is attached to this memorandum.

     This memorandum provides guidance to EPA Headquarters
and Regional personnel regarding procedures to follow in
implementing this direct referral agreement.  Additional
guidance will be issued as required.

II. PROCEDURES FOR CASES SUBJECT TO DIRECT REFERRAL

     The attached agreement lists those categories of
cases which can be referred directly by the Regional
Administrator to DOJ.  All other cases must continue to be
reviewed by Headquarters OECM and will be referred by me to
DOJ.  Cases which contain counts which could be directly
referred and counts which require Headquarters concurrence
should be referred to EPA Headquarters.  If you are uncertain
•whether a particular case may be directly referred, you
should contact the appropriate Associate Enforcement Counsel
for guidance.

-------
                            -2-

      Many  of  the procedures for direct referral cases are
 adequately explained  in the September 29th agreement.
'However, there are some points* I vant to emphasize.

      Referral packages should be addressed to Mr* I*. Henry
 Habicht, II,  Assistant Attorney General, Land and Natural
 Resources  Division, B.S. Department of Justice, Washington.
 D.C.  20530, Attention: Stephen D. Ramsey.  The time limitations
 set  forth  in  the agreement for review and initial disposition
 of the package will commence upon receipt of the package in
 the  Land and  Natural Resources Division, and not -at the DOJ
 mailroom.   Delivery of referral packages to the Land and
 Natural Resources Division will be expedited by use of
 express nail, which is not commingled with regular nail in
 DOJ's mailroom.

     The contents of a referral package (either direct to
 DOJ or to  EPA Headquarters) should contain three primary
 divisions:  (1) a cover letter; (2) the litigation report;
 (3)  the documentary file supporting the litigation report.

     The cover letter should contain a summary of the following
 elements:

   .  (a) identification of the proposed defendant(s); •

      (b) the  statutes and regulations which are the basis
         for  the proposed action against the defendaat(s);

      (c) a brief statement of the facts upon which the
         proposed action is based;

      (d) proposed relief to be sought against the defendant(s);

     (e) significant or precedential legal or factual issues;

      (f) contacts with the defendant(s), including any
         previous administrative enforcement actions taken;

      (g) lead Regional legal and technical personnel;

      (h) any  other aspect of the case which is significant and
         should be highlighted, including any extraordinary
         resource demands which the case may require.

     A referral to DOJ or to Headquarters EPA is tantamount
 to a  certification by the Region that it believes the case
 is sufficiently developed for the filing of a complaint,
 and  that the  Region is ready, willing and able to provide
 such  legal and technical support ae might be reasonably
 required to pursue the case through litigation.

-------
     AB provided is the September 29,  1983,  agreement,
information copies of the referral package may be provided
to the U.S. Attorney for the appropriate judicial district
in which the proposed case nay be filed.  These information
packages should be clearly labelled or stamped vith the
following vords: "Advance Copy — Mo Action  Required At
This Time".  Also, information copies should be simultaneously
provided to the appropriate OECM division at Headquarters.
It is important that the directly referred cases be tracked
in our case docket Bye ten and Headquarters oversight in it la ted 4
Copies of the referral cover letter vill be  provided to
OECM's Office of Management Operations for inclusion In the
automated case docket system when Headquarters informational
copy is received at OECM's Correspondence Control Unit.

Department of Justice Responsibilities

     DOJ shares our desire to handle these cases as expedi-
tiously as possible.  To that end, DOJ has agreed that,
within thirty days of receipt of the package in the Land sad
Natural Resources Division at DOJ Headquarters, it vill
determine whether Headquarters DOJ or the U.S. Attorney
vill have the lead litigation responsibilities on a specific
case.  DOJ will notify the Regional offices  directly of its
determination in this regard, with a copy to the appropriate
OECM division.  Although USA offices will have lead respon-
sibilities in'many cases, the Land and Natural Resources
Division will continue to have oversight and management
responsibility for all cases.  All complaints and consent
decrees will continue to require the approval of the
Assistant Attorney General for the division  before the case
can be filed or settled.

     DOJ has reaffirmed the time frame of the Memorandum
of Understanding, dated June 15, 1977, for the filing of
cases within 60 days after receipt of the referral package,
where possible.  Where it is not possible, DOJ will advise
the Region and Headquarters of any reasons for delays in
filing of the case.  However, when DOJ determines that
the USA should have the lead responsibilities in a case, DOJ
will forward the case to the USA within thirty days of
referral to the extent feasible.

     DOJ can request additional information  from a Region
on a case or return a case to a Region for further develop-
ment.  In order to avoid these delays, referral packages
should be as complete as possible and the Regions should
work closely with DOJ to develop referral packages.

-------
     The Deputy Administrator has expressed concern in the
past on th« number of cases returned to the Regions or
declined by EPA or DOJ.  I have assured the Deputy Administrator
that I will closely track the number of cases declined by
DOJ or returned to the Regions and the reasons for the
declination or return as indications of whether direct
referrals are a feasible method of handling EPA's judicial
enforcement program.

Headquarters OECM Responsibilities

     Although DECK vill not formally concur on cases directly
referred to DOJ, OECM vill still review these packages and
nay offer comments to the Regions and DOJ.  DOJ is free to
request EPA Headquarters assistance on cases, as DOJ
believes necessary.  EPA Headquarters review vill help to
point out potential issues and pinpoint areas where future
guidance should be developed.  OECM vill also be available
as a consultant to both DOJ and the Regions on these cases.
OECM vill be available to address policy issues as they
arise and, as resources permit, nay be able to assist in
case development or negotiation of these cases.  Any request
from a Regional office for Headquarters legal assistance
should be in writing from the Regional Administrator to
me, setting forth the reasons for the request and the type
of assistance needed.

     OECM also maintains an oversight responsibility for
these cases.  Therefore, Regional attorneys nust report
the status of these cases on a regular basis through use
of the automated case docket.All information for the case
required by the case docket system nust appear in the
docket and be updated in accordance with current guidance
concerning the automated docket systen.

Settlements in Cases Subject to Direct Referral

     I vill continue to approve and execute all settlements
in enforcement cases, including those in cases subject to*
direct referral and amendments to consent decrees in these
cases.  This is necessary to ensure that Agency policies and
enforcement activities are being uniformly and consistently
applied nationwide.  After the defendants have signed the
settlement, the Regional Administrator should forward a
copy of the settlement to ne (or ny designee) vith a written
analysis of the settlement and a request that the settlement
be signed and referred for approval by the Assistant Attorney
General for the Land and Natural Resources Division and for
entry.  The settlement will be reviewed by the appropriate
OECM Enforcement Division for consistency vith law and
Agency policy.

-------
     Within twenty-one days from  the date of receipt of the
settlement by the appropriate OECM division. 2 vill either
sign the settlement and transmit  it to  DOJ Vith a request
that the settlenent be entered, or transmit a memorandum to
the Regional Office explaining factors  which Justify post-
poneaent of referral of the package to  DOJ, or return the
package to the Region for changes necessary before the
agrees en t can be signed.

     Obviously, ve vant to avoid  the necessity of
communicating changes in Agency settlement positions to
defendants, especially after they have  signed a negotiated
agreement.  To avoid this, the Regional office should
coordinate with Headquarters OECM and DOJ  in development of
settlement proposals.  A copy of  all draft settlement
agreements should be transmitted  by the Regional Counsel to
the appropriate Associate Enforcement Counsel for review
before it is presented to the defendant. The Associate
Enforcement Counsel will coordinate review of the settlement
with the Headquarters program office and respond to  the
Regional office, generally, within ten  days of receipt of
the draft.  The Regional office should  remain in contact
with the Headquarters liaison staff attorney as negotiations
progress.  Failure to coordinate  settlement development
with appropriate Headquarters offices nay result  in  rejection
of a proposed settlement which has been approved by  the
defendant(s) and the Regional office.

     I will also continue to concur in  and forward to DOJ
all requests for withdrawal of cases after referral.  In
addition, I will review and concur in any delay  in  the filing
or prosecution of a case after referral..  This  is appropriate
because cases which are referred  to DOJ should be expeditiously
litigated to conclusion, unless a settlement or some other
extraordinary event justifies suspending court proceedings.
The review of reasons for withdrawal or delay of cases
after expenditure of Agency and DOJ resources  is an  important
function of OECM oversight.  Therefore, should the Regional
offices desire to request withdrawal or delay of a  case
which has been referred to DOJ, a memorandum setting forth
the reasons for such a request should be forwarded  to the
appropriate OECM division, where  it vill be reviewed smd
appropriate action recommended to ne.

III.  CASES NOT SUBJECT TO DIRECT REFERRAL

     Those cases not subject to direct  referral will be
forwarded by the Regional Administrator to the Office
of Enforcement and Compliance Monitoring for  review  prior
to referral to DOJ.  OECM has committed to a twenty-one day
turn-around time for these cases.  The  twenty-one day
review period starts when the referral  is received by the
appropriate OECM division.

-------
                            -6-

     Vithin this twenty-one day period, DECM will decide
whether to refer the case to DOJ (OECM then has fourteen
additional days to formally refer the case) , to return the
case to the Region for further development, or to request
additional information from the Region.

     Because of this tfhort OECM review period, emphasis
should be placed on developing complete referral packages
so that delay occassioned by requests for additional infor-
mation from the Region will be rare.  OECM nay refer a case
to DOJ which lacks some information only if the referral
can be supplemented with a minimum of time and effort by
information available to the Regional office which can
immediately be gathered and transmitted to DOJ.  However,
this practice is discouraged.  In the few instances in
which a case is referred to DOJ without all information
attached, the information should, at a minimum, be centrally
organized in the Regional office and the litigation report
should analyze the completeness and substantive content of
the information.

     A referral will be returned to the Region, with an
explanatory memorandum, if substantial information or
further development is needed to complete the package.
Therefore, the Regions should work closely with OECM
attorneys to be certain referral packages contain all
necessary information. '           .                        -

IV.  MEASURING THE EFFICACY OF THE DIRECT REFERRAL AGREEMENT

     I will use EPA's case docket system, OECM16 quarterly
Management Accountability reports and DOJ's responses to
the referral packages to review the success of the direct
referral agreement.  OECM will review the quality of the
litigation reports accompanying directly referred cases and
discuss the general quality of referrals from each Regional
office at case status meetings held periodically with DOJ's
Environmental Enforcement Section.

     If you have any questions concerning the procedures
set out in this memorandum, please contact Richard Hays,
Senior Enforcement Counsel, at FTS 382-4137.
Attachment

-------
••I-
          UNITED STATES EU'tflRDMMEKTAl. FftDTECTlOJ*' ASCWTY
                                 X. i>r  aaccr
                                     T   .  fy
                            *^-\i.-..     ••   ••• '-sr ir
                            t~"f" •         • ..'•  .-T»_'
 Honorable T. Benry Babicbt, II    ^.; .  \*'*!•*>         c Vr  *
 Acting Assistant Attorney General •;   - ; V.^'-V         ^^r""  Ł-
 l^nd and natural Jtesourcec Divlsiaa  •  .-;. .';''v       t.* "   *""
 XJ.B. Departaent of Justice      •        v "'""•.'*       ~      ^
 Washington, D.C.  20530             .-    .«•-'"•".       -       ."
                              <•  '-"^-'  ••*•:-.-ar       '  • -    -
 Dear Banks                    .    ' .vf>                  s >..T  S
                             ••.-.. .<«•"'•>-• ••                '?•••.
                                  •'   •                     .    ««r-
      As a result of our meeting on  Thursday, September B, 19B5-»
 and the subsequent discussions  of respective staffs,  ve  are in
 agreement that, subject to the  conditions set  forth below,  the
 classes of cases listed herein  will be referred'directly fre*
 EPA's Regional Offices to the Land  and Natural Resources Division
 of the Department of Justice in Washington, D.C.

      The terns, conditions and  procedures to be followed in
 implementing this agreement ares
                                                 •                »
 1.   The Assistant Administrator for Enforcement and  Compliance
      Monitoring will waive for  a period of one year the  requirement
      of the Assistant Administrators  prior concurrence  for referral
      to the Department of Justice for  the following classes of
      judicial enforcement casess

      la)  Cases under Section 2414(b)  of the Sale Drinking  Water
           Act which involve violations of the  National Interim
           Primary Drinking Water Regulations,  such as reporting or
           jmonitoring violations, or suximum contaminant  violations;

      (b)  The following cases under the -Clean  Water Acti
                                                 •
           (i)    cases involving discharges without a permit
                  by industrial  dischargers*
                        **.*•••
           (ii)   all cases against  minor industrial dischargersi

           (ill)  cases Involving failure to monitor or report by
                  industrial dischargers;

-------
                                .Ł-
          fiv)   referrals to collect stipulated penalties Ł
                 industrials under consent decrees;

          CvJ    referrals to collect administrative spill penalties
                 under Section 311 (j) of the
                         ..                 .... ,
     (c)  All cases twder the Clean Air Act except the following*

    •      (i)    cases involving the steel industry;
                            . _             V
          (ii)   cases involving non-ferrous smelters;
   ~Ł....                   ..-    .  .        .                  •    ..
          (iii)  cases involving national Emissions Standards for
                 Hazardous Air Pollutants i  ••
                              •     *.
          fiv)   cases involving the post-1982  enforcement policy.

2.   Cases described in Section 1, above, shall be referred
     directly from the Regional Administrator to the  Land and
     natural Resources Division of DOJ in the following sunners
                 /
     (a)  The referral package shall be forwarded to  the Assistant
          Attorney General  for Land and Natural Resources, 0.6.
          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"), and  the  Assistant
          Administrator for Enforcement and Compliance Monitoring
          (DECK) at EPA Headquarters.  OECM shall have the following
          functions with regard to said referral  packages

          (i)    DECK shall have no responsibility for review of
                 such referral packages, and the  referral shall be
       :          effective  as of the date of receipt  of the package
                 by DOJ; however, OECM shall comment  to the Region
                 upon any apparent shortcomings or defects which
                 it a\ay observe in the package.  DOJ  day, of course,
                 continue to consult with OECM  on such referrals.
                 Otherwise, DECK 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 approve settlements on behalf
                 of EPA for these cases, as in  other  cases.

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

-------
          (ill)  DOJ shall, within 30 days iron receipt of the
                 referral package* determine (1) whether the Lands
                 Division of DD3 will have lead responsibility for
                 the ease; or (2) whether the USA will have lead
                 responsibility for the case.
                          l • * v •           •  »   •
                 While ft is agreed that to the extent feasible,
                 cases in which the DSA wilJ have the lead trill fee
                 transmitted to the DSA for filing and handling
                 within this 30-day period, if OOJ determines that
                 the case requires additional legal or factual
                 development «t DOJ prior to referring the -amtfttr
                 to the DSA, the case nay be returned to the
                 Regional Office, or may be retained at  the Lands
                 Division of DOJ for further development, including
                 requesting additional information from the Regional
                 Office.  In any event* DOJ will notify  the Regional
                 Office, DECK and the OSA of its determination of
                 the lead role within the above-mentioned 30-day
                 period.

          (iv)   Regardless of whether DOJ or the DSA is determined
                 to have lead responsibility for management of
                 the ease, the procedures and tine limitations »et
                 forth in the MOD and 2B CFR fO.65 et seq., ahall
                 remain in effect and shall run cpncurrently with*
                 the management determinations made pursuant-to
                 this agreement.

3.   (a)  All other cases not specifically described in  paragraph
          1, above, which the Regional Offices propose for  judicial
          enforcement shall first be forwarded to DECK and the
          appropriate Headquarters program office for review,
          A copy of the referral package shall be forwarded simul-
          taneously by the Regional Office to the Lands  Division  of
          DOJ and to the DSA for the appropriate judicial district*
          the OSA's copy being marked "advance copy-no action required!
          at this tim*.«   .
                           t          .*

     (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 aaay be required; or (e) 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 ease
           to the Region shall  be  transmitted by appropriate letter
           or memorandum signed by the AA for DECK (or her desiynee)
           within the aforementioned twenty-one day period.  Should
           OŁCM concur in the proposed referral of the case to 2>OJ,
           the actual referral  shall be by letter from the AA for
           OEQN (or her designee)  signed within fourteen days of
           the termination of the.  aforementioned twenty-one day
           review period.  Copies  of the letters referred to herein
           shall b* sent to the Assistant Attorney General for the
           Lands Division of  DO3.            .

      (d)  Upon receipt of the  referral package ty DOJ, the
.  •         procedures and time  deadlines set forth in paragraph
           Mo. 8 of the KOU shall  apply.

      In order to allow sufficient time prior to implementation of
this  agreement to make the U.S. Attorneys, the Regional Offices
and our staffs aware of these  provisions, it is agreed that this
agreement  shall become effective  December 1, 1963.  Courtney Price
will  distribute a memorandum within CPA explaining this agreement
and how it will be implemented within the Agency,  (you will receivi
s copy.)        ^  *"

      2  believe that  this agreement will eliminate the necessity of
formally amending the Memorandum  of Understanding between our
respective agencies,  and will  provide necessary experience to
ascertain  whether these procedures will result in significant
savings of time and  resources.  In that regard, 2 have asked
Courtney to  establish criteria for measuring the efficacy of this
agreement  during the  one year  trial period, and 2 ask that you
cooperate  with her in providing such reasonable and necessary
information  as she may request of you in making that determination.
At  the  end of the trial period—or at any time in the interval—
we  may  propose such  adjustments in the procedures set forth herein
as  may  be  appropriate based  on experience of all parties.

      It is further understood  that it is the mutual desire of the
Agency  and DOJ that  cases be referred to the DSA for filing as
expeditiously as possible.'

      I  appreciate  your cooperation in arriving at this agreement.
If  this meets with your approval, please sign the enclosed copy
in  the  space indicated be lev and return the copy to jae for our
files.
                                    Sincerely yours.
                                    Alvin I. Arm
                                    Deputy Administrator
 Approve^:
         '
 F.  Benry  H^bicht, II
 Acting Assistant Attorney General
 iajid  and  Natural Resources Division
 U.S.  Department jof Justice

-------
RF.3

-------
RF.3-1

-------

        UNITED STATES ENVIRONMENTAL PROTECTION AGENCY ^ p, V
                      WASHINGTON, D.C. 204(0
                                                     OFFICE OF FNFOROFMFM
                                                      ASDCOMPUfNCf

                                                        MONITORING
                    NOV I219ST
MEMORANDUM

SUBJECT:  DOJ Procedures for Returning Certain Unfiled Cases to
          EPA for Further Processing
                             I   a  t
FROM:     Jonathan Z. CannonWVYUJ>'/(JKW^
          Deputy Assistant Administrator for Civil Enforcement

TO:       Deputy Regional Administrators, Regions I - X
          Regional Counsels,/ Regions I - X

     The Department of Justice (DOJ), Environmental Enforcement
Section, is instituting new procedures to clear its enforcement
docket of EPA cases that remain unfiled at DOJ for more than
sixty days after referral (or beyond any additional period
covered by a hold letter) while the region is negotiating a
consent decree or compiling additional information to support
filing.  For record keeping purposes, rather than declining these
referrals, DOJ will return these cases to the region for "further
Agency processing" but will retain all files on these cases and
continue to work with EPA towards resolving them.

     The return of these cases will be made by a letter from the
Chief of the Environmental Enforcement Section or the Environ-
mental Defense Section, as warranted.  This letter will be
addressed to or copy the Deputy Assistant Administrator for Civil
Enforcement, the appropriate Associate Enforcement Counsel, and
the Regional Counsel.  Cases returned to the region for further
Agency processing will be identified in EPA's enforcement computer
docket ast "returned to region."  OECM Compliance and Evaluation
Branch Chief Ranelle Rae will insure appropriate treatment of
these cases under SPMS.

     Cases returned to the region under these circumstances would
be reactivated by Justice if the region (1) provides the requested
additional information necessary for filing; (2)  forwards a signed

-------
 consent decree for processing by OECM and DOJ1;  (3)  notifies OECfl
 and  DOJ that the progress of the negotiations no longer justifies
 further delay in the filing of the complaint and requests that a
 complaint be filed; or (4)  EPA resolves an internal  policy
 conflict affecting the filing.   The Agency would not have to
 prepare a new referral package or litigation report.2  In cases in
 which  a filing is requested because negotiations have been
 unproductive and there is no consent  decree,  concurrence by  OECM
 is not required to reactivate the case.   However, written notice
 of the region's request to reactivate should be  given to OECM to
 insure proper tracking.

 cc:  David Buente
     Margaret Strand
     Associate Enforcement  Counsels
     Headquarters Program Office Enforcement  Division Directors
     Renelle Raer  OCAPO
     1  The Region should keep the DOJ and OECM attorneys informed
of the progress of negotiations and obtain the approval of DOJ and
OECM before a written consent decree is transmitted to the
defendant.

     2  If new violations had occurred or were discovered durinq
the period of negotiations, the Region would need to provide OOJ
with adequate evidence of such violations.

-------
RF.3-2

-------
                                                        F.3-Z
             UNfTEO STATES ENVIRONMENTAL PROTECTION AGENCY
                        WASHINGTON, O.C. 20460
                          NOV I 6 1990
MEMORANDUM

SUBJECT:  "Hold Action" RequeaJt*?
FROM:     James M. Stfoc)
          Assistant Administrator                              ».
                                                                •

TO:       Regional Counsels


     At the Regional Counsels meeting in Seattle,  v« discussed
th« problem of cases whose filing was being delayed by informal
staff-level "hold action* requests.  To deal with  this problem,
and strengthen our management of this process, Ed  Reich sent to
you on August 27 a draft of the new procedures for such requests.
Based on your positive comments, and the support of the
Department of Justice  (see attached), I am adopting these
procedures effective immediately.

     Please assure that all Regional Counsel Staff are aware of,
and comply with, these procedures.

Attachment

cc:  Edward E. Reich
     Scott Fulton
     Associate Enforcement Counsels

-------
              Procedures for  "Hold  Action"  Recruests
1.   "Hold action" requests  (requests  to dtlay  filing of a
     complaint)  arc generally disfavored.  When EPA
     refers a case to the Department of Justice,  it  should
     be with the intent to get it  filed as quickly as
     possible, and the case  should be  fully prepared for
     filing.  The Department seeks to  file a complaint
     within 60 days of receipt of  a referral.

2.   Use of prereferral negotiation procedures  in cases
     where pro-filing negotiations are desired  should reduce
     the need for "hold action" requests.

3.   The following procedures are  adopted to better  manage
     the "hold action" request process.

     A.   Authority to request a hold on a referred
          civil  case for up to sixty days is hereby
          delegated to the Regional Counsels.  This
          authority is non-delegable, but may be
          exercised by an Acting Regional Counsel.
          This delegated authority is limited to
          circumstances in which additional time is
          needed either:  (1) to pursue pre-filing
          settlement negotiations  (where settlement
          is viable); (2)  to allow for the addition
          of other counts or defendants or (3)  where
          litigation practicalities,  recognized by
          both the Regions and DOJ, militate in
          favor of a brief filing delay.   The Regional
          Counsel can request more than one short hold
          if necessary but the cumulative time of all
          such holds for any case  is strictly limited
          to sixty days.

     B.   Any hold beyond 60 days, individually or
          cumulatively, can be requested only by the
          AA for Enforcement.  The Regional Counsel
          would initiate this request, where
          appropriate, by preparing a letter to the
          Assistant Attorney General, Environment and
          Natural Resources Division for the signature
          of the Assistant Administrator for
          Enforcement and sending  this letter and an
          appropriate transmittal  memorandum to the AA.

-------
PT.1

-------
PT.1-1

-------
                                  PT./-/
     POLICY ON CIVIL  PENALTIES
EPA GENERAL ENFORCEMENT POLICY #GM -  21
           UNITED STATES ENVIRONMENTAL
                PROTECTION AGENCY

           EFFECTIVE DATE:  FEB  I fi J98A

-------
                             -1-

Introduction
     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 outline of 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 appendix
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.
Applicability	

     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 of
different programs.  Accordingly, it cannot be used, by itself,
as a basis for determining an appropriate penalty in a specific

-------
                              -2-

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 Framework.

     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:

          0  For cases that are substantially settled,
             apply the old policy.

          0  For cases that will require further sub-
             stantial negotiation, 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:

          0  CERCLA §107.   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.

          0  Clean Water Act §311(f) and (g).   This also
             is cost recovery in nature.  As in CERCLA
             §107 actions,  the penalty assessment
             approach is inappropriate.

          0  Clean Air Act §120.  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 noncompliance.  It should be noted, how-
             ever, that this 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.  Further
guidance on the issue of seeking penalties against non-profit
entities will be forthcoming.

-------
                              -3-

Deterrence	

     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 violator 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-specific 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

-------
                              -4-

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 seriousness  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 economic benefit of
noncompliance.   This incentive would directly undermine the
goal of deterrence.
Fair and Equitable Treatment of the Regulated 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 consistency 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 penalties must have enough
flexibility to make adjustments to reflect legitimate differences
between similar violations.  Otherwise the policy might 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 benefit
and gravity components are generated systematically, they

-------
                              -5-

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:

          0  Degree of willfulness and/or negligence

          0  History of noncompliance.

          0  Ability to pay.

          0  Degree of cooperation/noncooperation.

          0  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-
gation.

     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
reassessed.
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.

-------
                              -6-

     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:

          0  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 cooperation/noncoopera-
             tion discussed above.

          0  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.

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 delaying 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
compliance.
I/  For the purposes of this document, litigation is deemed to
begin:
          0 for administrative actions - when the
            respondent files a response to an adminis-
            trative complaint or when the time to
            file expires or

          0 for judicial actions - when an Assistant
            United States Attorney files a com-
            plaint in court.

-------
                              -7-
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 solely for 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
them 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 matter of public interest, the Agency may
elect to release this information in some cases.
                                   Courtney M. Price
                              Assistant Administrator for
                         Enforcement and Compliance Monitoring
Attachment

-------
                              -8-

                          ATTACHMENT A
Outline of Civil Penalty Assessment
I.   Calculate Preliminary Deterrence Amount

     A.  Economic benefit component and

     B.  Gravity component

(This yields the preliminary deterrence amount.)


II.   Apply Adjustment 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 reexamine
         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.)

-------
PT.1-2

-------
                                      fT.J-2
A FRAMEWORK FOR STATUTE-SPECIFIC APPROACHES

          TO PENALTY ASSESSMENTS;

IMPLEMENTING EPA'S POLICY ON CIVIL PENALTIES
    EPA GENERAL ENFORCEMENT POLICY #GM - 22
                 UNITED STATES ENVIRONMENTAL
                      PROTECTION AGENCY
EFFECTIVE DATE:
                                       6 1984

-------
Contents	Page


    Introduction                                               1
    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 Adjusted Penalty Target Figure           16

         I.   Flexibility-Adjustment Factors                  17

              A.  Degree of willfulness and/or negligence     17
              B.  Degree of cooperation/noncooperation        19
              C.  History of noncompliance                    21
              D.  Ability to pay                              23
              E.  Other unique factors                        24

-------
                             11






Appendix (Con't)






     II.   Alternative Payments                           24



     III.  Promoting Consistency                          27






     Use of Penalty Figure in Settlement Negotiations     28

-------
                             -1-
Introduction
     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 deviations
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.

-------
                               -2-
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 portions of the
appendix should be consulted.


I.  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 development
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 request
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 must contain a section on
calculating the preliminary deterrence figure.  That section
should contain materials on each of the following areas:

          0  Benefit Component.  This section should
             explain:

             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 similar previous
                 violations.

-------
                              -3-

          0  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
             considered:

             a.  actual or possible harm,
             b.  importance to the regulatory
                 scheme and
             c.  availability of data from other
                 sources.

     In evaluating actual or possible harm, your scheme should
consider the following facts:

          0  amount of pollutant,
          0  toxicity of pollutant,
          0  sensitivity of the environment,
          0  length of time of a violation and
          0  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.


Ill.  Adjusting the Preliminary Deterrence Amount to Derive the
     Initial Penalty Target Figure (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 may 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:

          0  Degree of willfulness and/or negligence

          0  Cooperation/noncooperation through pre-
             settlement action.

          0  History of noncompliance.

-------
                              -4-

           0  Ability  to pay.

           0  Other unique  factors  (including  strength  of
             case, competing  public policy  considerations).

     The policy may 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 reas-
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
begun.

     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

-------
                              -5-

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
appropriate.


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
Attachment

-------
                            APPENDIX
Introduction
     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 of the penalty
which removes the economic benefit of noncompliance is referred to
as the "benefit component;" that part of the penalty which reflects
the seriousness of the violation is referred to as the "gravity
component."  When combined, these two components yield the "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 section 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 issues

-------
                              -7-

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:

          0  Failure to install equipment needed to meet
             discharge or emission control standards.

          0  Failure to effect process changes needed
             to eliminate pollutants from products or
             waste streams.

          0  Testing violations, where the testing still
             must be done to demonstrate achieved com-
             pliance.

          0  Improper disposal, where proper disposal is
             still required to achieve compliance.

          0  Improper storage where proper storage is still
             required to achieve compliance.

          0  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
             expensive).

     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

-------
                               -8-

 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  that  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  thumb"
 method generally should not be  used  in any of  the following cir-
 cumstances:

          0  A  hearing  is likely on  the amount of the
             penalty.

          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.

          0  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  economic
 benefit of delayed compliance should be computed using the Meth-
 odology for Computing the Economic Benefit of Noncompliance.
This document,  which is under development,  provides  a method
 for computing the economic benefit of noncompliance  based  on a
 detailed economic analysis.   The method will largely be a  refined
 version of the method used in the previous Civil Penalty Policy
 issued July 8,  1980, for the Clean Water Act and Title I of the
Clean Air Act.   It will also be consistent with the  regulations

-------
                              -9-

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, 1980,
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.

          0  Cost savings for operation and maintenance of
             equipment that the violator failed to install.

          0  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.

          0  Improper storage, where commercial storage is
             reasonably available.

          0  Improper disposal, where redisposal or cleanup
             is not possible.

          0  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 Noncom-
pliance.  Again, until the Metholology is issued, the method
contained in the July 8, 1980, Civil Penalty Policy should be
used as modified to reflect recent changesin the tax law.

-------
                             -10-

     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:

          0  Selling banned products.

          0  Selling products for banned uses.

          0  Selling products without required labelling
             or warnings.

          0  Removing or altering pollution control
             equipment for a fee, (e.g., tampering with
             automobile emission controls.)

          0  Selling products without required regula-
             tory clearance, (e.g.,  pesticide registra-
             tion or premanufacture notice under TSCA.)

     To adequately remove 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:

          0  The amount of the profit should be based on
             the best information available concerning
             the number of transactions resulting from
             noncompliance.

          0  Where available, information about the
             average profit per transaction may be used.
             In some cases,  this may be available from
             the rulemaking record of the provision
             violated.

          0  The benefit derived should be adjusted to
             reflect the present value of net profits
             derived in the past.

-------
                              -li-

     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
Noncompliance and with methods developed by 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
          benefit

     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 may 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:

        0  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.

        0  The size of the gravity component;  If the
           gravity component is relatively small, it
           may not provide a sufficient deterrent, by

-------
                              -12-

            itself, to achieve the goals of this policy.

         0  The certainty of the size of the benefit
            component;  If the economic benefitis 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 would 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 where
there are compelling public concerns that would not be served by
taking a case to trial.  In such instances, it may become necessary
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:

         0  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.

         0  Settlement will avoid or terminate an
            imminent risk to human health or the
            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.

         0  Removal of the economic benefit would
            result in plant closings, bankruptcy, or
            other extreme financial burden, and there
            is an important public interest in allow-
            ing the firm to continue in business.

-------
                              -13-

              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 program must develop a system for quantifying the
gravity of violations of the laws and regulations it administers.

-------
                             -14-

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) the 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  allow EPA  to consider
both factors in assessing penalties.

     Each system must also be  designed to minimize the possi-
bility that two persons applying the 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 categorization of the events relevant
to the penalty decision should be noted in the penalty develop-
ment portion of the case file.

     B.    Gravity Factors

     In quantifying the gravity of a violation, a program-specific
policy should rank different types of violations according to the
seriousness of the act.   The following is a  suggested approach to
ranking the seriousness of violations.   In this approach to rank-
ing,  the following factors should be considered:

          0  Actual or possible harm;   This  factor
             focuses on whether (and to what extent)
             the activity of the defendant actually
             resulted or was likely to result in an
             unpermitted discharge or exposure.

          0  Importance to the  regulatory scheme;  This
             factor focuses on  the importance of the
             requirement to achieving the goal of 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 result 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.

          0  Availability of data from other sources;
             The violation of any recordkeeping or
             reporting requirement is a very serious

-------
                               -15-

             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,  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.)

          0  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:

          0  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.

          0  Toxicity of the pollutant;  Violations
             involving highly toxic pollutants are more
             serious and should result in relatively
             larger penalties.

          0  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.

          0  The length of time a violation continues;
             In most circumstances,  the longer a
             violation continues  uncorrected, the
             greater is the risk  of harm.

-------
                             -16-

     Although each program-specific 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 approach would be to direct the
case development team to consider increasing the gravity component
within a certain range to achieve general deterrence.   These extra
assessments should be consistent with the other goals of this
policy.
Initial and Adjusted Penalty 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.

-------
                              -17-

     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.


I.  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
factors.

     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 0-20% adjustment of the
gravity component, is within the absolute discretion of the case
development team. V  The second, typically a 21-30% 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 scrutiny
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
_!/ 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
these determinations if they so desire.  Of course the authority
to exercise the Agency's concurrence in final settlements is
covered by the applicable delegations.

-------
                              -18-

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:

          0  How much control the violator had over the
             events constituting the violation.

          0  The forseeability of the events consti-
             tuting the violation.

          0  Whether the violator took reasonable
             precautions against the events con-
             stituting the violation.

          0  Whether the violator knew or should have
             known of the hazards associated with the
             conduct.

          0  The level of sophistication within the
             industry in dealing with compliance issues
             and/or the accessibility of appropriate
             control technology (if this information is
             readily available).  This should be balanced
             against the technology forcing nature of the
             statute, where applicable.

          0  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 absolute discretion to adjust the
penalty up or down by 20% of the gravity component.  Adjustments
in the + 21-30% range should only be made in unusual circumstances.

-------
                               -19-

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.Ł/  But since these incentives must be consistent
with deterrence, they must be used judiciously.
2/  For the purposes of this document, litigation is deemed to
begin:
          0 for administrative actions - when the
            respondent files a response to an adminis-
            trative complaint or when the time to
            file expires or

          0 for judicial actions - when an Assistant
            United States Attorney files a com-
            plaint in court.

-------
                                -20-

     The circumstances under which the penalty  is reduced depend
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 reduction
typically should be a substantial portion of the unadjusted gravity
component.

     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 the subject of close
scrutiny in auditing performance.

     In all instances, the facts and rationale justifying the
penalty reduction must be recorded in the case 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.

-------
                              -21-

     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:

          0  How similar the previous violation was.

          0  How recent the previous violation was.

          0  The number of previous violations.

          0  Violator's response to previous violation(s)
             in regard to correction of the previous
             problem.

     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:

          0  The same permit was violated.

          0  The same substance was involved.

          0  The same process points were the source
             of the violation.

          0  The same statutory or regulatory provision
             was violated.

-------
                             -22-

          0  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 in this section.  New ownership often
raises similar problems.  In 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  violator 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 relatively
large number of dissimilar violations, the gravity component can
be increased up to 70%.  If the pattern is one of "similar"
violations, the case development team has absolute discretion to
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 in extraordinary
circumstances, but such adjustments will  be subject to scrutiny
in any performance audit.

-------
                             -23-

     D.  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 the same 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 would reduce a penalty
where a facility refuses to correct a serious violation.  The same
could be said for a violator with a long history of previous 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 Regions 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:

          0  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.

          0  Consider non-monetary alternatives, such as
             public service activities;  For example, in
             the mobile source program, fleet operators
             who tampered with pollution control devices

-------
                             -24-

             on their vehicles agreed to display anti-
             tampering ads on their vehicles.  Similar
             solutions may be possible in other industries.

          0  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. Ł/

          °  Consider joinder of the violator's individual
             owners:  This is appropriate if joinder is
             legally possible and justified under the
             circumstances.

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.

     E.  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, each
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 reduction
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 the 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-
"frative or judicial final order, then the Agency must follow
the Federal Claims Collection Act procedures for obtaining the
penalty amount.

-------
                             -25-

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.  Most 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:^/

          0  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).

          0  The majority of the project's environmental
             benefit should accrue to the general public
             rather than to the source or any particular
             governmental unit.

          0  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.

-------
                             -26-
          0  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.Ł/

     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:

          0  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.

          0  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.

          0  The project should receive stronger
             consideration if undertaken at the
             facility where the violation took place.

          0  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 to public awareness activities
such as those employed for fuel switching and tampering violations
under the Clean Air Act.  The purpose of the limitation is to
preserve the deterrent value of the settlement.  But these viola-
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.

-------
                             -27-

     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 uniform
approaches for applying adjustment factors to arrive at an initial
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 adjustments.
Only through such complete documentation can enforcement attorneys,
program staff and their managers learn from each others' experience
and promote the fairness required by the Policy on Civil Penalties.

     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 for
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.

-------
                             -28-
Use of Penalty Figure in Settlement 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.

-------
PT.1-3

-------
USE.
UNITED STATES ENVIRONMENTAL PROTECTION AGcki<- Y
           WASHINGTON, O.C.  20460
   MEMORANDUM
   SUBJECT:   Documenting  Penalty  Calculations and Justifications in
              EPA  Enforcement  Ac
   FROM:     James  M.
             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 Decree*  (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
   released.

        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.  Tha  Region should than discuss  in detail the
   justification for any mitigation of either component.  In
   partiatilajr, reference should be  made to the factor or language in
   the pemMl$ty policy that is relied upon to justify the mitigation,
   and • daeussion Bust be  included detailing why  mitigation  is
   varranteoT in tha 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
   o^-der.  zt 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  •» nirt«
   communication which would have to be snared with defendants under
   40 C.P.R. Part 22.

-------
                               - 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  with 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
 reguired  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 b« 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 OB attorney  assigned to the case will  than determine  if
OE concurs with the-penalty proposed by the Region in reviewing
 the referral.  O« concurrence will be documented in writing,
placa*; ia the) Oft casa file and  provided to the  Region,  if OE
does afcr concur with  the  penalty proposed by the Region in the
 refenntK  tha assigned OB attorney will prepare a  memorandum to
 the Ration stating with specificity tha basis(es)  of tha
 nonconeurrence.

     onca tha enforcement action is initiated or pre-filing
 negotiations  begin, tha  litigation team should  document any
 agreed  upon changes to the bottom  line penalty  based upon new
 information or circumstancee which arise during the course of the
 enforcement action.   This documentation must, 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 mitigation, and the changed circumstances or new
information which  justify modification of the bottom line.  This
vi11 be especially 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 terns of the
penalty policy.  This is essential for reviews or audits of our
settlements.

Addressees:

     Regional Administrators
     Regions I-X

     Deputy Regional Administrators
     Regions I-X

     Regional Counsels
     Regions I-X

     E. Donald Elliott
     General Counsel

     Headquarters Compliance Program Division Directors

     Associate Enforcement Counsels

     Richard B. Stsvart
     Assistant Attorney General
     Environment and Natural Resources Division
     U.AV Department of Justice
       .•••*«

-------
PT.1-4

-------
<*•"' "fi
      \       UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
     /   /                 WASHINGTON, D.C. 20460
                            APR 151985
                                                         OFFICI OF
                                                           ASDCOMHIANCI
                                                             MOMTOMN&.
   MEMORANDUM


   SUBJECT:  Remittance of Fine* and Civil Pena^ies

   FROM:     Courtney M. Price\—I
     .       Assistant Administrator for Enforcement
               and Compliance Monitoring (LE-133)

   TO:       Associate Enforcement Counsels
             Director, Office of Compliance Analysis and
               Program Operations,
             Regional Counsels


        This is to inform you of a new Agency  remittance procedure
   instituted by the EPA Office of the Comptroller.  The procedure
   applies to payments on all debts owed EPA,  including civil
   penalties assessed by the Agency.

        All EPA orders requiring payment of fines or civil penal-
   ties—or letters transmitting those orders—will include  language
   consistent with 'the new procedure, which is described below.

        EPA has adopted the Department of Treasury's Nationwide
   Lockbox System for receipt of payments on debts owed to the
   Agency.  Under the Lockbox System, debtors  are directed to remit
   payments to the Post Office Box address used  by the designated
   EPA lockbox bank.  Payments received at that  "lockbox" are
   deposited immediately by the responsible bank, and the Agency
   receives a copy of the remittance and all accompanying documents
   within one working day.  Users of the system  have found that
   the lockbox has several benefits:  Improved cash management,
   increased physical security for the checks, stronger internal
   controls, and a reduced administrative burden.

        For your information, I have attached  a  listing that shows,
   for each region and for EPA Headquarters, the lockbox address
   to which payments of penalties owed the Agency will be sent.
   (Remittances for Superfund billings nationwide are sent to a
   single lockbox address.)

-------
                              -2-


     Chief Administrative Law Judge Edward Finch is directing
all Agency administrative law judges and hearing clerks to
implement this new procedure.

     The new procedure supersedes the requirement in the Consol-
idated Rules of Practice (CROP), 40 CFR $22.31(b), that payment
is to be forwarded directly to the regional hearing clerk.
This paragraph in the CROP will be formally revised in the
near future.  Because this revision is procedural only, it nay
be implemented prior to the completion of formal rulemaking.

     Under the new procedure, the servicing financial management
offices will contact the appropriate hearing clerk as soon as
they receive notification of a remittance, and will provide
the hearing clerk with a' copy of the check and accompanying
documents.  Accordingly, questions concerning the status of a
civil penalty may be directed to either of those offices.  In
addition, the headquarters Financial Reports and Analysis
Branch (FTS 382-5131) maintains a computerized record of civil
penalty receivables and collections nationwide.

     More detailed procedures for penalty collections are being
developed by EPA's Office of the Comptroller.  In the meantime,
any questions concerning the lockbox procedure should be directed
to your financial management office.

Attachment

cc:  General Counsel
     Edward B. Finch, Chief Administrative Law Judge
     Assistant Administrators
     Associate Administrators
     Regional Administrators
     C. Morgan Kinghorn, Comptroller

-------
                      LOCKBOX DEPOSITORIES
REGION
LOCKBOX BANK
   ADDRESS FOR
 REMITTING PAYMENT
Region 1
 Boston
Region 2 -
 flew York
Region 3 -
 Philadelphia
Region 4 -
 Atlanta
Region 5
 Chicago
Region 6
 Dallas
Region 7 -
 Kansas City
Region 8 -
 Denver
Mellon Bank
Mellon Bank
Mellon Bank
The Citizens and
Southern National
Bank
The First National
Bank of Chicago
Mellon Bank
Mellon Bank
Mellon Bank
EPA - Region 1
(Regional Hearing Clerk)
P.O. Box 360197M
Pittsburgh, PA 15251

EPA - Region 2
(Regional Hearing Clerk)
P.O. Box 36018RM
Pittsburgh, PA 15251

EPA - Region 3
(Regional Hearing Clerk)
P.O. Box 360515M
Pittsburgh, PA 15251

EPA - Region 4
(Regional Hearing Clerk)
P.O. Box 100142
Atlanta, GA  30384

EPA - Region 5
(Regional Hearing Clerk)
P.O. Box 70753
Chicago, IL 60673

EPA - Region 6
(Regional Hearing Clerk)
P.O. Box 360582M
Pittsburgh, PA 15251

EPA - Region 7
(Regional Hearing Clerk)
P.O. Box 360748M
Pittsburgh, PA 15251

EPA - Region 8
(Regional Hearing Clerk)
P.O. Box 360859M
Pittsburgh, PA 15251

-------
Region 9 -
 San Francisco
Region 10 -
  Seattle
Mellon Bank
Mellon Bank
Headquarters -      Mellon Bank
 Washington, D.C.
All Superfund
 Billi ngs
Mellon Bank
EPA - Region 9
(Regional Hearing Clerk)
P.O. Box 360863M
Pittsburgh, PA 15251

EPA - Region 10
(Regional Hearing Clerk)
P.O. Box 360903M
Pittsburgh, PA 15251

EPA - Washington
(Hearing Clerk)
P.O. Box 360277M
Pittsburgh, PA 15251

EPA - Superfund
P.O. Box 371003M
Pittsburgh, PA 15251

-------
PT.1-5

-------
         UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                       WASHINGTON, D.C. 20460
                           KV   51984
                                                     omci or »sK»ciMtvr
                                                       ANDCOMPLJAKQ
                                                        MONITORING
MEMORANDUM
SUBJECT:  Guidance for Calculating uhs Econoaic Benefit of
          Noncocnpliance for a. Civil Penalty Assessment
                            i  ^         0\
FROM:     Courtney M. Price \^_J2^JL^
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Regional Administrators
          Associate Enforcement Counsels
          OECM Office Directors
I.   PURPOSE

     This guidance amplifies the material  in the Appendix of
GM-22, "Framework for Statute-Specific Approaches  to Penalty
Assessment."  The Appendix presents a description  of how to
calculate the economic benefit of nonconpiiance as part of
developing e civil penalty.  A new computer model, BEN, is a
refinement of the methodology for calculating the  econecic
benefit of noncompliance. •

     By refining the aethodc by which we calculate the economic
benefit cf noncompliance, wo will:

     1.  Respond to ths probieas that er.fcrcesent  and progi'es
officer, identified concerning methods for  -ulculitir.g ths
econoaic benefit coopcnent of a civil penalty;

     2.  Ensure among ihe m^dia prograas appropriate consistency
in calculating the economic benefit component cf 2 civil penalty;

     3.  Ensure that the occnonic benefit  cf noncoapli&nce Con-
tinues to be a fairly valued, reasonable component of a ;ivil
penalty; end

     4.  Ensure that the assumptions and data used in BEN to
calculate the economic benefit component can be de*?nded at
cither an administrative hearing or a judicial proceeding.

-------
                               -2-
 II.   SCOPE
     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 the
 econonic 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 BEN  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 for these types of
 violations.

     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
 expenditures.


 III. NEW CIVIL PENALTY POLICY APPROACH

     Regional personnel nay 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 estimate calculated
with BEN.  For example, the longer the period of noncompliance,
 the more the  rule of thumb underestimates the economic benefit
 of noncompliance.

     If EPA proposes and a violator accepts the rule of thunb
calculation,  Regional personnel can develop the civil penalty
without further analysis of economic benefits.  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.

-------
                              -3-

     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*
IV.  USING BEN TO CALCULATE ECONOMIC BENEFIT OF NONCOMPLIANCE

     EPA personnel should use the revised computer model BEN
whenever:

          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
              calculation.

     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 I.)

     BEN also has the capability for EPA personnel to enter
for those 8 variables the actual financial data of e violator.
In appropriate cases, EPA should notify a violator of the
opportunity to submit actual financial data to use in SEN
instead of the 8 standard values.  If a violator agrees to
supply financial data, the violator must supply data fcr all
the standard values.
V.   ADVANTAGES OF BEN OVER OTHER CALCULATION METHODS

     The computer nodel 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 effect the penalty
calculation.
I/ Although the general penalty policy cut off point is $10,000,
each program office nay establish a cut off point for the
progress's mecium-specific policy.

-------
                              -4-

     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 nonccapliance.  Regional personnel
have a consistent method for developing a civil penalty under
several statutes for multiple violations that involve delayed
capital costs end 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  .
                            BEN
A.  Accessed via terminal to EPA's IBM computer in Durban/ N.C.
B.  Can be run in either of two nodes:
    1.  Standard node:
        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 fcr private
                companies
           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 node:
        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 nodel
    2.  Written documentation will be available by December
        1984
D.  Is based on modern financial principle:.'

-------
PT.1-6

-------
          UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                        WASHINGTON, D.C. 20460
                            OCT30B85
                                                      OFFICE OF ENFORCEMtNT
                                                        AND COMPLIANCE
                                                         MONTTOMNC
MEMORANDUM
SUBJECT:  Division of Penalties with  State  and  Local Governments
PROM:     Courtney M. Price   C_
          Assistant Administrate!:"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. v Jones t Laughlin
(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
         enforcement.

-------
                               -2-

 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 court-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)  The 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 is 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.

-------
                              -3-

     4)  For contempt actions, the state or local governnent
         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.}/

     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 Babicht IX, Assistant Attorney General
     Land and Natural Resources Division
I/ it the consent decree contains stipulated penalties and
specifies how they are to be divided, the government will
abide by those terms.

-------
PT.2

-------
PT.2-1

-------
      | UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                       WASHINGTON. D.C. 20460
DEC I 6 !986
                                                   1,
 MEMORANDUM

 SUBJECT:   Guidance on Determining  a Violator's
           Ability to Pay  a  Civil Penalty

 FROM:      Thomas L.  Adams,  Jr.   AX. >3sP"««.^, \-
           Assistant Adminstrator for             ^
             Enforcement and Compliance Monitoring

 TO:        Assistant Administrators
           Regional Administrators
 I.    PURPOSE

      This guidance amplifies  the  discussion  in  the  Uniform
 Civil Penalty Policy on  how to  adjust  a penalty target  figure
 when  a violator  claims paying a civil  penalty would cause
 extreme financial  hardship.   This  guidance was  developed to
 meet  the commitment  made in the Uniform Civil Penalty Policy
 issued February  16,  1984, and in  response to Regional Office
 requests for  amplification  of the  "Framework for Statute-
 Specific Approaches  to Penalty  Assessments"  (GM-22).
II.  APPLICABILITY

     This guidance applies to the calculation of civil
penalties under medium-specific policies issued in accordance
with the Uniform Civil Penalty Policy that EPA imposes on:

     1.  Por-profit publicly or closely held entities; and

     2.  Por-profit entities owned by not-for-profit entities.

     This guidance does not apply to:

     1.  The calculation of civil penalties that EPA imposes
on municipalities and other not-for-profit entities; or

     2.  A violator who files for bankruptcy or is in bankruptcy
proceedings after EPA initiates the enforcement action.

-------
                              -2-

 III. SCOPE

      This guidance only gives a general evaluation of the
 financial health of a violator and the possible effects of
 paying a civil penalty for the purpose of settlement
 negotiations.  It describes when to apply the  ability to pay
 factor and provides a methodology for applying the factor
 using a computer program,  ABEL.

      The guidance does not prescribe the amount by which EPA
 may reduce a civil penalty if the ability to pay factor is
 applied.  The methodology in this guidance will not calculate
 a specific dollar amount that a violator can afford in civil
 penalties nor does it provide a way to predict whether paying
 a  certain amount for  a civil penalty will cause an already
 financially troubled  firm to go out of business.

      For an ability to pay analysis,  EPA needs specific financial
 information from a violator (see section V).   EPA includes the
 financial data in a litigation report only when the data are
 requested by the Department of Justice or offered by  the violator,
                                                            »

 IV.   THE ABILITY TO PAY FACTOR

      Under  the Uniform Civil Penalty Policy, EPA may  consider
 using the ability to  pay  factor  to  adjust a civil penalty
 when  the  assessment of a civil penalty may result in  extreme
 financial hardship.   Financial hardship cannot be expressed
 in absolute  terms.  Any  limitation  on  a violator's  ability
 to pay depends  on how  soon  the payments must be made  and
what  the  violator has  to give  up  to make the payments.  A
violator has  several  options  for  paying a  civil penalty:

      1.   Use  cash on  hand;

      2.   Sell  assets;

      3.   Increase debt by  commercial  borrowing;

      4.   Increase equity by  selling stock;

      5.  Apply toward  a  civil  penalty for a period of time
what  wo-id otherwise  be distributed as profit;  or

      6.   Use  internally-generated future cash  flows by deferring
or eliminating  some planned  future  investments.

      Each of  these  options  will  affect a for-profit violator's
operations to  some  degree.   EPA  must  decide whether to adjust

-------
                              -3-

 a proposed penalty amount and by how much,  taking  into account
 the gravity of the violation and other criteria  in medium-
 specific guidance.


 V.   INFORMATION TO DETERMINE ABILITY TO PAY

      If ability to pay is at issue,  EPA may request from  a
 violator any financial information the Agency needs to evaluate
 the violator's claim of extreme financial hardship.   A violator
 who raises the issue has the burden of providing information
 to demonstrate extreme financial hardship.

      Financial information to request from  for-profit entities
 may include the most recent three to five years  of:

      1.  Tax returns;

      2.  Balance sheets;

      3.  Income statements;

      4.  Statements of changes in financial position;

      5.  Statements of operations;

      6.  Retained earnings statements;

      7.  Loan  applications, financing agreements,
 security agreements;

      8.  Annual reports; or

      9.   Business services, such as  Compustat, Oun and
 Bradstreet,  or Value  Line.
                                                      t '
      Tax returns are  the most complete and  in the  most consis-
 tent  form for  analysis.   Tax returns also provide  financial
 information in a format  for direct input into ABEL.   Annual
 reports ar« the most  difficult to analyze and may  require
 the assistance of a financial analyst.

     When reque:  < ng  information informally or through
 interrogatories  or discovery,  ETA should ask for three to
 five years  of  tax returns  along with all other financial
 information  that  a violator regularly maintains  as business
 records.  If a  violator  refuses  to give  EPA the  information
 to evaluate  the violator's  ability to pay,  EPA should seek
 the full calculated penalty amount under the assumption that
the violator can  pay.

-------
                              -4-

 VI.  CONFIDENTIALITY OF FINANCIAL INFORMATION

      A violator can claim confidentiality for financial
 information tubmitted to EPA.  In accordance with  the  regu-
 lations on confidential business information,  40 CFR 2.203,
 EPA must give notice to a violator that the  violator may
 assert a business confidentiality claim.   EPA's notice must
 contain the information required in 40 CFR 2.203.  The notice
 must include a statement that if the violator submits  financial
 information without a confidentiality claim,  EPA may release
 the information without further notice to the violator.

      The violator can make a claim of confidentiality  for
 financial information in a cover letter accompanying the
 information.   Information in published annual reports  would
 not be  entitled to confidential treatment.
 VII.  APPLYING  THE  ABILITY  TO  PAY  FACTOR

      Under  the terms  of  a  consent decree,  a  violator pays a
 civil penalty  in addition  to  making  any  capital  investment
 necessary to come  into compliance.   EPA  considers  the costs
 of attaining compliance  when  applying  the  ability  to pay factor
 to a  civil  penalty calculation.

      EPA determines whether to apply the ability to pay
 factor using a four-step process:

      1.  Determine, if'possible,  whether a violator plans to
 claim extreme  financial  hardship;

      2.  Determine whether criteria  in the Uniform Civil
 Penalty Policy and medium-specific guidance  require consideration
 of ability  to  pay;

      3.  Evaluate  the overall financial  health of  a violator's
 operations  by  analyzing  financial information provided by a
 violator or from other sources, such as  business services; and

      4.  Project the probabilities of a  violator having future
 internally-generated cash  flows to evaluate  how  paying a proposed
 civil penalty  nay  affect * violator's  financial  decisions.


 VIII. FINANCIAL COMPUTER PROGRAM

      EPA's  computer program,  ABEL, assists in evaluating the
 financial health of for-profit entities, based on  the estimated
 strength of internally-generated  cash  flows.  ABEL uses financial
 information on a violator  to  evaluate  the  overall  financial
health of a violator  (step 3  above).  The  program  uses standard

-------
                              -5-

 financial ratios to evaluate  a  violator's ability to borrow
 money and pay current and long-term operating expenses.

      ABEL al»o projects  the probable availability of
 future internally-generated cash  flows  to evaluate some of a
 violator's options  for paying a civil penalty (step 4 above).
 EPA is developing a user's manual to provide self instruction
 in the use of ABEL  in addition  to the documentation and help
 aids in the computer program.

      Exhibit 1 is a hypothetical  use of ABEL to evaluate a
 violator's financial health.  If  the ABEL analysis indicates
 that a violator may not  be able to finance  a civil penalty
 with internally-generated cash  flows, EPA should check all
 available financial information for other possible sources
 of cash flows for paying a civil  penalty.

      For example, in corporate  tax returns, item 26 of
 Schedule A (cost of goods sold) sets forth  deductions for
 entertaining,  advertising, and  professional dues.  Schedule E
 shows  the compensation of officers.   In Schedule L  (balance
 sheets),  item 8 sets forth investments  that may include
 certificates  of deposit  or money  market funds.  These types
 of assets and expenses do not directly  affect operations and
 may vary considerably  from year to year without adversely
 affecting the  violator's operations.  Because a civil penalty
 should  be viewed as  a  one-time  expense, these kinds of assets
 and  expenses  could  be  sources of  cash for a civil penalty.

     Using  the  sources of financial  information from the example
 above,  liquid  assets  such as  certificates of deposit and
 money market  funds  could be used  to  pay a penalty.  Expenses
 for  advertising,  entertaining,  or professional dues could be
 reduced  for a  short  period to pay a  civil penalty.  A corporate
officer  might  even  be  willing to  take less  compensation for
a short period.  A  combination  of  options like these may
produce  enough  cash  flow to pay a civil penalty without
causing  the violator extreme  financial  hardship in meeting
operating expenses.
Attachment

-------
                           EXHIBIT 1

 Assumption that Violator is  Financially  Healthy

      Assume that EPA has calculated  an economic benefit for
 Company X oŁ $140,000 and  a  gravity  component of $110,000 for
 a total proposed penalty of  $250,000.  EPA presents the
 proposed penalty after several negotiation sessions, and the
 CEO for Company X then claims that the company cannot afford
 to pay that much.   In support of  the claim, the CEO produces
 accounting statements showing that the firm paid no income
 taxes  for the previous three years and had less than $100,000
 in net income for those years.

     EPA requests  tax returns and other  financial information
 for  the  most recent  three  years of Company X.  EPA enters the
 tax  return information in  ABEL and receives the output in
 Attachment A.   The  Phase  1 analysis  from ABEL is not dispositive
 of the issue, so EPA performs a Phase 2 analysis.

     The Phase  2 analysis  indicates  that Company X can finance
 a  civil  penalty of  $250,000  from  internally-generated cash flows,
 even after planning  for  $400,000  in pollution control investments
 and  $50,000 for annual  O&M expenses.  The table in Phase 2
 shows  a  99 percent probability that  Company X will have future
 cash flows with a net  present value  of $370,061 available to
 pay a  civil penalty.

 Assumption that  Violator  Is Not Financially Healthy

     Assume again that  EPA has calculated a total penalty amount
 of $250,000.  Company  Z  claims extreme financial hardship.  If
 the ABEL analysis indicates that  Company Z would have little
 probability of  generating  $250,000 in cash flows during the
 next five  years, EPA would go back to the financial data
 supplied by the  violator and look for items that may indicate
 a  source of cash, including loans outstanding to corporate
 officers,  entertainment  expense deductions, company cars or
 airplanes,  amount of  compensation for corporate officers,
 compensation for relatives of corporate officers who .do not
have clearly defined  duties.

     If  the ABEL Phase  1 analysis indicates that Company Z
may have additional  debt capacity (debt/equity ratio), EPA
would  look in the tax  returns for the amount of long term
debt the violator is  carrying and analyze any loan applications
 the violator submitted  \n  response to I "'Vs request  for
 financial  information,   frequently,  firms can borrow additional
 money  for  operations  and  free up  cash  flow to pay civil
 penalties.

     Even  a  firm on  the  verge of  bankruptcy may choose  to
 settle an  enforcement  action with a  civil penalty provision  in
 the consent decree.   EPA should always seek  some  civil  penalty.
 ABEL and other  financial  analysis provide a  range of penalty
 amounts  for  the purpose of settlement  negotiations.

-------
                                               ATTACHMENT A
                   -  : ••
            DATA- FOR ABEL EXAMPLE

            ANALYSIS DATE:   NOVEMBER 24,  1986

            DEBT EQUITY RATIOS

        1985    0.58   A RATIO LESS THAN 1.3 INDICATES THE FIRM
                       MAY HAVE ADDITIONAL DEBT CAPACITY  •

        1984    2.91   A RATIO GREATER THAN 1.3 INDICATES  •
                       THE FIRM MAY HAVE DIFFICULTY BORROWING

        1983  ..1.59   A RATIO GREATER THAN 1.5 INDICATES
                •       THE FIRM MAY HAVE DIFFICULTY BORROWING  .

         PLEASE ENTER A. CARRIAGE RETURN TO CONTINUE
            CURRENT" RATIOS                          '               |

        1983    1.10   A RATIO LESS THAN 2.0 MAY  INDICATE          |
                       LIQUIDITY PROBLEMS-  '                       :
                                                                   »
        1TC4    1.20   A RATIO LESS THAN 2.0 MAY  INDICATE    •      j
                       LIQUIDITY PROBLEMS         .                 \
                                                                   4
        19S3    1.03   A RATIO LESS THAN 2.0 MAY  INDICATE
                       LIQUIDITY .PROBLEMS

         PLEASE ENTEP A CARRIAGE RETURN TO CONTINUE
            LEAVER'S  RATIOS
c                                                                  <
         19B3     0.22  A  RATIO GREATER THAN 0.20 INDICATES        «
                        HEALTHY SOLVENCY                           j

         1964     0.20  A  RATIO. BETWEEN' 0. 10 AND 0.20 IS.           j
                        INDETERMINATE                  '            |
P                                                                  !
         1933     0.30  A  RATIO GREATER THAN 0.20 INDICATES        j
                        HEALTHY SOLVENCY                           | '
P                                                                  I
          PLEASE ENTER A CARRIAGE RETURN TO CONTINUE               '
                                                                   I
C                                     "                              '
             TIMES  INTEREST EARNED

         19Q3      1.02  A RATIO LESS THAN 2.0 MAY INDICATE         |
                        SOLVENCY PROBLEMS          •                 »

         17S4      1.64  A RATIO LESS THAN 2.0 MAY INDICATE
                        SOLVENCY PROBLEMS                           •

         1963      1.30  A RAT 1C LESS THAN 2.0 MAY INDICATE         ;
                        SOLVSr:CY F.--02LIM3
                                                                    >
          PLEASE ENTER A CAFRI^SE RETURN TO  CONTITJUE

-------
       ABEL INTERPRETS THE OVERALL RESULTS  Of THE FINANCIAL
       RATIOS AS FOLLOWS:                     . -          <

       ALTHOUGH THE FIRM MAY FACE CURRENT CASH IOR LIQUIDITY*'
       CONSTRAINTS, ITS LONG-TERM, PROSPECTS ARE GOOD AND IT SHOULD
       BE ABLE TO FINANCE PENALTIES AND  INVESTMENTS.  A PHASE
       TWO ANALYSIS IS RECOMMENDED.

       ABEL NOTES THAT THE FIRM'S MOST RECENT DEBT-EQUITY
       RATIO IS SUBSTANTIALLY-BETTER .THAN  ITS HISTORIC AVERAGE.

       AE'EL NOTES THAT THE FIRM'S MOST RECENT TIMES INTEREST
       EARNED IS SUBSTANTIALLY POORER THAN  ITS HISTORIC AVERAGE.
                                        *•» *' "
       DO YOU WISH TO CONTINUE WITH T! IE  PHASE TWO ANALYSIS
       (Y OR N).?4   t:'_, .  ..^.;. .. . ..  . ,,-   >....  -  ;..  ,      -, '. .    ...  .


       DO YOU WISH TO ANALYZE A  CIVIL PENALTY (P> OR  A  NEW
       INVESTMENT  ?                 •
       PLŁA3E INPUT THE INITIAL  PROPOSED SETTLEMENT PENALTY
       AMOUNT IN CURRENT DCLLARS 'E.G.,  300O) ; IF THERE  IS NO  TA^CE'ED
       PENALTY,  ENTER 0.
250000
       ElIF'InE PROCEEDING WITH  THE  CIVIL PENALTY ANALYSIS,
       •-E-EL WILL REQUIRE C2RTAIN ADDITIONAL INFOr ENTER- t.'

200000
       PLEASE ENTER WHAT YEAR  DOLLARS THIS 15 Ł
-------
      ŁNfER ANY NON-uEPfrEC. I- T'-Ł, BUT TAX
      LEuuCTIGLS COSTS ASSOCIATED WITH THE NEW INVESTMENT.
      IF THERE 13 NO COST THAT MEETS THIS REQUIREMENT
      PLEASE ENTER 0.
100000

      PLEASE ENTER WHAT YEAR DOLLARS THIS' IS EXPRESSED  IN
      (E.G. , 1784)
1985                                   -.-r       •
                             ' •      »  •                   '     •
      ENTER THE ANNUAL OiM  COST OF  THE NEW  INVESTMENT*.
      IF THERE IS NO QJfcM COST, ENTER O
50000

      PI-EASE ENTER .WHAT YEAR DOLLARS  THIS IS EXPRESSED IN  •
      (E.G., 1984)
1985                                       '     •••"*••

      THE FOLLOWING STANDARD VALUES ARE  USED  IN  THIS SECTION OF
      1.  REINVESTMENT  RATE  »  O.O
      2.  NOMINAL  DISCOUNT 3ATE -13.69V.
      3.  INFLATION  RATE  - 4.41V.
      4.  MARGINAL INCOME TAX  RATE -5Q.OOV.
      5.  INVESTMENT TAX  CREDIT =10.00'X

      DO YOU WISH  TO HAVE THESE ITEMS EXPLAINED ('( OR "H ^
N

      DO YOU WISH  TO CHANGE  ANY OF THESE INPUTS (V OR N)?
      ftBKL  IS  READY" TO PROVIDE "ODTPUT ~  YOU HAVE "THE CHOICE
      OF THREE OUTPUT OPTIONS:

      1.  PRINT ONLY THE POSSIBILITY OF THE PRESENT VALUE
          OF THE FIRM'S FIVE YEAR PROJECTED CASH FLOW  EXCEED I r.'ij
          EITHER AN INITIAL PROPOSED SETTLEMENT PSNALTV OP. A PECUIRED
          .INVESTMENT.

      2.  PRINT A TABLE SHOWING THE NET AVAILABLE CASH FLOW
          WITH AN ANALYSIS OF THE TABLE.

      3.  PRINT A DETAILED TABLE SHOWING THE COMPONENTS' OF THE
          FIRM'S CASH TLCWS.  THIS OPTION MAY  BE HELPFUL TO' FINANCIAL
            ANALYSTS BUT 15 NOT RECOMMENDED FOR MOST USERS.
      PLEASE ENTER YOUR CHOICE  Cl,2 OR 3).

-------
   THERE IS A  99.9 % CHANCE THAT THE FIRM
   CAN FINANCE THE PROPOSED SETTLEMENT PENALTY QF
   * •  250000.OOBASED-ON THE STRENGTH OF INTERNALLY
   GENERATED CASH FLOWS FOR THE NEXT FIVE YEARS   THE
   ANALYSIS AT THIS POINT DOES NOT DEMONSTRATE '
   CONCLUSIVELY THE FIRM'S ABILITY TO PAY THE PROPOSED
   PENALTY.  TO MAKE A DETERMINATION, ONE MUST LOOK AT
   THE FIRM'S OTHER OPTIONS, INCLUDING INCREASING EQUITY
   SELLING ASSETS, OR LEVERAGING UNLEVERED ASSETS.       '

   ABEL IS READY TO BEGIN OUTPUT.  IF YOU WI3H  PLEASE
   POSITION YOUR PRINTER TO THE START OF A NEW PAGE.  PLEASE
   ENTER A CARRIAGE RETURN TO CONTINUE
   DATA FOR ABEL EXAMPLE

   ANALYSIS DATE:  NOVEMBER 24, 1986

                     NET PRESENT VALUE       EQUIVALENT
   PROBABILITY           AVAILABLE          ANNUAL CHARGE
                                                            f
      50.0                 716944.31               280891.31

      60.0                 679230.23               266115.37

      70.0            ,     6»33832.69              . 25023Q.OO

      30.0                 591423.31               231713.62

      90.0                 525833.30               206013.06

      73.0                 471726.Si,               134317.56

      99.0                 370061.81               144986.37

 THE HBCVE CATA Af?

-------
PT.2-2

-------
             UNfTEO STATES ENVIRONMENTAL PROTECTION AGENCY
                        WASHINGTON, D.C. 20460
                           FEE I 2 1991
                                                   OFFCS OF ENWRCŁM6Vr
MEMORANDUM
          Policy on the Use of Supplemental Environmental
          Projects in EPA Setttoaants
SUBJECT
FROM:     James M. strocl
          Assistant AjJ»*Alstrator

TO:       Regional Administrators
          Deputy Regional Administrators
          Regional Counsels
          Regional Program Division Directors
          Assistant Administrators
          General Counsel
          Program Compliance Directors
          Associate Enforcement Counsels
                            V
     This memorandum transmits the new Agency policy on  the use
of "supplemental environmental projects"  in Agency consent orders
and decrees.  It amends GM-22, "A Framework for statute-specific.
Approaches to Penalty Assessments; Implementing- EPA's Policy on
Civil Penalties (issued February 16,  1984), by  replacing and
superseding the section on "Alternative Payments"  on pages 24-27
of that documejg0,_jjŁeja0*..note that this  policy amends only
the section on -"alternative payments" and that  all other sections
of GM-22 remain in affect.

     In the past, the Agency has used several terms to describe
substantive settlement conditions  (usually projects or
activities)/ other than those required aa injunetive relief to
cqrrect the underlying violation. which the defendant/respondent
may undertaXe in exchange for a reduction in the amount  of the
assessed civil penalty.  In GM-22, these  conditions are  called
"alternative) payments."  They also have periodically been
referred to as "mitigation projects"  or "environmentally
beneficial expenditures."  The Agency's past experience  with
these projects has sometimes been problematic,  in  part because
GM-22 did not fully describe the kinda of projects that  are
appropriate for penalty reduction, the situations  under  which
they should be considered, and the amount by which the penalty
demand can be reduced.
                                                         Printed on Re
                                                                   I Paper

-------
      The Agency believes that these projects, if carefully
 crafted and executed, provide useful environmental benefits
 beyond what can be secured solely through injunctive relief. We
 particularly believe they can be a useful vehicle in promoting
 pollution prevention.  Last year, the Office of Enforcement
 explored with the Environmental Management Counsel major issues
 relating to the use of "alternative payments," and since then has
 worked  closely  with the Environment and Natural Resources
 Division  of  the Department of Justice to develop this new policy
 on the  systematic use of these projects.  This policy applies to
 both administrative and judicial settlements.

     In order to provide a common term of reference, this policy
 replaces  the term "alternative payment" with the general term
 "supplemental environmental project."  The policy describes five
 specific  categories of projects which the Agency will consider as
 supplemental environmental projects in a settlement: pollution
 prevention; pollution reduction; environmental restoration;
 environmental auditing.? and py*?*,Id awareness.  It also provides a
 number  of specific examples of supplemental projects.

     I  am confident that this new policy on "supplemental
 environmental projects" will enable the Agency to secure
 additional protection of human health and the environment
while avoiding  the difficulties which occasionally characterized
 their past use.  This policy takes effect immediately, and media-
specific policies will be modified to conform to this policy as
quickly as possible.  Any questions you have regarding its
 implementation  should be addressed to Ed Reich, the Deputy
Assistant Administrator for Enforcement or to Scott Fulton,
Senior  Enforcement Counsel.

Attachment

cc: Deputy Administrator
    Associate Deputy Administrator

-------
       EPA POLICY ON THE USE OF SUPPLEMENTAL
ENVIRONMENTAL PROJECTS IN ENFORCEMENT SETTLEMENTS
                                      February 12, 1991

-------
                                1

               Supplemental Envl'ron»e,ntal Project^

A.   Introduction

     In settlement of environmental enforcement cases, the United
States will insist upon terms which require defendants to achieve
and maintain compliance with Federal environmental laws and
regulations.  In certain instances, additional relief in the form
of projects remediating the adverse public health or environment-
al consequences of the violations at issue may be included in the
settlement to offset the effects of the particular violation
which prompted the suit.  As part of the settlement, the size of
the final assessed penalty may reflect  the commitment of the
defendant/respondent to undertake environmentally beneficial
expenditures ("Supplemental Environmental Projects").

     Even when such conditions serve as a basis for considering a
Supplemental Environmental Project, the Agency's penalty policies
will still require the assessment of a substantial monetary
penalty according to criteria described in A Framework for
Statute-Specific Approaches to Penalty Assessments; Implementing
EPA's Policy on civil Penalties (GM-22), generally at a level
which captures the defendant/respondent's economic benefit of
noncompliance plus some appreciable portion of the gravity
component of the penalty.  Each administrative settlement in-
which a "horizontal" Supplemental Environmental Project or
substitute performance is proposed (see below) must be approved
by the Assistant Administrator for Enforcement, and, where
required by the Agency's delegations policy, the media Assistant
Administrator.  Judicial settlements, including any of the
projects described herein, will continue to require the approval
of the Assistant Administrator for Enforcement and also be
approved by the Assistant Attorney General for the Environment
and Natural Resources Division.

     EPA will expand its approach to Supplemental Environmental
Projects while also maintaining a nexus (relationship) between
the original violation and the supplemental project.  EPA may
approve a supplemental project so long as that project furthers
the Agency's statutory mandates to clean up the environment and
deter violations of the lav.1  Accordingly,  supplemental  projects
     1   A supplemental project cannot be used to resolve
violations at a facility other than the facility or facilities
which are the subject of the enforcement action.  This would run
counter to deterrence objectives, since it would effectively give
a company a penalty "break" for violations at -one facility  for
undertaking what amounts to legally required compliance efforts
at another facility.  Such a scenario would operate to reward
recalcitrance, poor-management practices, and non-compliance.

-------
 may be  considered  if:  (1) violations are corrected through
 actions to  ensure  future compliance; (2) deterrence objectives
 are served  by payment  of a substantial monetary penalty as
 discussed above; and (3) there is an appropriate "nexus" or
 relationship between the nature of the violation and the
 environmental benefits to be derived from the supplemental
 project.

     All supplemental projects must improve the injured
 environment or reduce the total risk burden posed to public
 health  or the environment by the identified violations.  The five
 categories of permissible supplemental activities are pollution
 prevention, pollution reduction, environmental restoration,
 environmental auditing projects, and public awareness projects
 which are directly related to addressing compliance problems
 within  the industry within which the violation took place.  EPA
 negotiators should make it clear to a defendant/respondent
 interested in proposing a supplemental project that the Agency is
 looking only for these types of projects (cf. section F, below).

     Under no circumstances will a defendant/respondent be given
 additional time to correct the violation and return to compliance
 in exchange for the conduct of a supplemental project.


B.   Categories of Supplemental Environmental Projects

     Five categories of projects will be considered as potential
Supplemental Environmental Projects, subject to meeting the
additional criteria described in succeeding sections.

     1.    Pollution Prevention Projects

     Consistent with the Agency's forthcoming Pollution
Prevention Policy Statement and Pollution Prevention Strategyr a
pollution prevention project substantially reduces or prevents
the generation or creation of pollutants through use reduction
 (i.e.,  by changing industrial processes, or by substituting
different fuels or materials) or through application of closed-
loop processes.  A project which substantially reduces the
discharge of generated pollutants through innovative recycling
technologies may be considered a pollution prevention project if
the pollutants are kept out of the environment in perpetuity.

     2.    Pollution Reduction Projects

     A pollution reduction project is defined as a project which
goes substantially beyond compliance with discharge limitations
 to further reduce the amount of pollution that would otherwise be
 discharged into the environment.  Examples include a project that
 reduces the discharge of pollutants through more effective end-
 of-pipe or stack removal technologies; through improved operation

-------
and maintenance; or recycling of residuals at the end of the
pipe.2

     Sometimes an acceptable pollution reduction project may
encompass an "accelerated compliance project".  For instance,
assuming there is a statutory or regulatory schedule for
pollution phaseout or reduction (or is likely to be proposed in
the foreseeable future, e.g., an upcoming rulemaking), if a
defendant/respondent proposes to complete a phaseout or reduction
at least 24 months ahead of time, and such proposal for
accelerated compliance can be demonstrated to result in
significant pollution reduction (i.e., one can objectively
quantify a substantial amount of pollution reduction due to the
accelerated compliance) then such a proposal may proceed to be
evaluated according to the rest of the appropriateness criteria
below.  In addition, if the defendant/respondent substitutes
another substance for the one being phased out, he has the burden
to demonstrate that the substance is non-polluting, otherwise no
supplemental environmental project will be allowed and, indeed,
additional liability may accrue.

     3.   Projects Remediating Adverse Public Health or
          Environmental Consequences (Environmental Restoration
          Projects)
                            *
     An environmental restoration project is defined as a project
that not only repairs the damage done to the environment because
of the violation, but which goes beyond repair to enhance the
environment in the vicinity of the violating facility.

     4.   Environmental Auditing Projects

     Environmental Auditing that represents general good business
practices are not acceptable supplemental projects under this
policy (cf. Section E).'  However,  such a project may be
considered by the Agency if the defendant/respondent undertakes
additional auditing practices designed to seek corrections to
     1   where the obligation to reduce the pollution is already
effective, or is subject to-an  "as soon as practicable1*
or comparable standard, a proposal to further reduce
pollution would not fulfill the definition of a pollution
reduction project, and would not be appropriate.

                                    ^           \
     3   It should be  noted that the Agency has the authority to
require an environmental audit  as an element of injunctive
relief when it deems it appropriate given the fact pattern
surrounding the violation subject to the usual limits  on the
scope of injunctive relief..

-------
existing management and/or environmental practices whose
deficiencies appear to be contributing to recurring or potential
violations.  These other potential violations may encompass not
only the violating facility, but other facilities owned and
operated by the defendant/respondent, in order to identify, and
correct as necessary, management or environmental practices that
could lead to recurring or future violations of the type which
are the basis for the enforcement action.'

     Audit projects which fall within the scope of this policy
can be justified as furthering the Agency's legitimate goal of
encouraging compliance with and avoiding, as well as detecting,
violation of federal environmental laws and regulations.  Such
audits will not, however, be approved as a supplemental project
in order to deal with similar, obvious violations at other
facilities.

     5.   Enforcement-Related Environmental Public Awareness
          Projects

     These projects are defined as publications, broadcasts,
or seminars which underscore for the regulated community the
importance of complying with environmental laws or disseminate
technical information about the means of complying with
environmental laws.  Permissible public awareness projects may
included sponsoring industry-wide seminars directly related to
correcting widespread or prevalent violations within an industry,
e.g., a media campaign funded by the violator to discourage fuel
switching and tampering with automobile pollution control equip-
ment or one which calls for the defendant/respondent to organize
a conference or sponsor a series of public service announcements
describing how violations were corrected at a facility through
the use of innovative technology and how similar facilities could
also implement these production changes.

     Public Awareness Projects directly serve Agency deterrence
objectives and contribute indirectly to Agency enforcement
efforts. Though they are not subject to the nexus requirement
applicable to other supplemental environmental projects, they
must be related to the type of violations which are/were the
subject of the underlying lawsuit.  Defendants/respondents who
fund or implement a public awareness project must also agree to
publicly state in a prominent manner that the project was
undertaken as part of the settlement of a lawsuit brought by the
Agency or a State.  These projects will be closely scrutinized  to
ensure that they fulfill the legitimate objectives of this policy
in all respects.
     4   Of course, this requirement is subjject to the
qualifications of  footnote 1.

-------
     6.   Pro-iects pot Allowed as Supplement?! Projects

     Several types of projects, which have been proposed in the
past, would no longer be approveable Supplemental Environmental
Projects.  Examples of projects that would not be eligible
include:

          1.   general educational or environmental awareness-
               raising projects (e.g., sponsoring public seminars
               about, or inviting local schools to tour, the
               environmental controls at a facility; promoting
               recycling in a community);

          2.   contribution to research at a college or
               university concerning the environmental area of
               noncorapliance or concerning any other area of
               environmental study;

          3.   a project unrelated to the enforcement action, but
               otherwise beneficial to the community e.g.,
               contribute to local charity).


C.   "Nexus" (Relationship1 of Supplemental Environmental Project
     to the Violation
                             9
     The categories of Supplemental Environmental Projects
described above (except for Public Awareness Projects) may be
considered if there is an appropriate "nexus" or relationship
between the nature of the violation and the environmental
benefits to be derived from the type of supplemental project.
For example, the "nexus" between the violation and an
environmental restoration project exists when it remediates
injury caused by the same pollutant at the same facility giving
rise to the violation.  Such projects must further the Agency's
mission as defined by appropriate statutory mandates,  including
the purpose sections of the various statutes under which EPA
operates. The Agency will evaluate whether the required "nexus"
between the pollutant discharge violation and the project  exists.

     1.   Requirements for Remediation Projects

Examples of circumstances presenting an appropriate nexus
include:                                      ;

     a.   A project requiring  the purchase of wetlands which  then
          act to purge pollutants unlawfully discharged in
          receiving waters. In this example, EPA will  evaluate
          whether the required "nexus" between the pollutant
          discharge violations and the wetlands to be  purchased
          can be established.  EPA will evaluate the nexus
          between the project  and the violation in terms  of  both

-------
          geography and the pollution treatment benefits of the
          wetlands.

     b.   A project which calls for the acquisition and
          preservation of wetlands in the immediate vicinity of
          wetlands injured by unlawful discharges, in order to
          replace the environmental services lost by reason of
          such injury.

      c.  A "restoration" project, such as a stream sediment
          characterization or remediation program to determine
          the extent and nature of pollution caused by the
          violation and to formulate and implement a plan for
          remediating sediment near the facility.  Such a stream
          sediment characterization or restoration project, if
          obtainable as injunctive relief pursuant to the
          statutory provisions of the Clean Water Act in the
          particular case, would not be approveable as a
          supplemental project.

     2.   Nexus for Pollution Prevention/Pollution Reduction/
          Environmental Restoration/Environmental Auditing
          Projects           •                            ;

     The "nexus" for pollution prevention, pollution reduction,
environmental restoration and environmental auditing projects may
either be vertical or horizontal. as described below.

     a.   Vertical "Nexus"

     A "vertical" nexus exists when the supplemental project
operates to reduce pollutant loadings to a given environmental
medium to offset earlier excess loadings of the same pollutant in
the same medium which were created by the violation in question.
Even if the violations are corrected by reducing pollutant
loadings to the levels required by law, further reductions may be
warranted in order to alleviate the risk to the environment or
public health caused by past excess loadings.  Typically, such
projects follow a violation back into the manufacturing process
to address the root causa, of the pollution. Such reductions may
be obtained from the source responsible for the violation or,  in
appropriate cases, nay be obtained from another source, either
upstream, up gradient or upwind of the responsible source.

     For example, if pollutants were discharged in violation of
the Clean Water Act from a facility at a certain point along a
river, an acceptable pollution reduction project would be  to
reduce discharges of that same pollutant at an upstream  facility
on the same river.  Another classic example of a1"vertical"
pollution prevention activity is the alteration of a  production
process at a facility which handles a portion of the
manufacturing process antecedent to that which caused the

-------
violation of the regulatory requirement in a way that yields
reductions or total elimination of the residual pollutant
discharges to the environmental media assaulted by the violation.
Both of these examples present the necessary nexus between the
violation and the supplemental project.


     b. Horizontal "Nexus"

     A "horizontal" nexus exists when the supplemental project
involves either (a) relief for different media at a given
facility or b) relief for the same medium at different
facilities.  The nexus between supplemental projects in this
category and the violation must be carefully scrutinized.  The
nexus will be met only if the supplemental project would reduce
the overall public health or environmental risk posed by the
facility responsible for the violation or enhances the prospects
for reducing or eliminating the likelihood of future violations
substantially similar to those which are the basis for the
enforcement action.  Approval of such projects is appropriate
only where the terms of the settlement insure that the
defendant/respondent will be subject to required injunctive
relief prescribed by the compliance and deterrence policies
stated in the various Acts and their implementing regulations.
In those circumstances, the Agency believes the required nexus to
the statutory goals has been'met.

     Following are examples of approveable projects demonstrating
a "horizontal" nexus to the violation:

l.   violations of the Resource Conservation and Recovery Act
     (RCRA) or the Clean Water Act may have exposed the
     neighboring community to increased health risks because of
     drinking water contamination.  In addition to correcting
     these violations, it may be appropriate to reduce toxic air
     emissions from the same facility in order to compensate for
     the excess health risk to the community which resulted from
     the RCRA or CWA violations.

2.   A supplemental project is proposed which reduces pollutant
     discharges at a defendant/respondent's other facilities
     within the same air quality basin or water shed as  at  the
     facility which violated legal requirements applicable  to
     releases of. the same pollutant.  In this case, the  overall
     supplemental project would be designed to reduce the overall
     health or environmental risk posed by related operations to
     the environment or to the health of residents in the same
     geographic vicinity by reducing pollutant discharges to the
     air basin or watershed and to compensate for past excess
     discharges.

-------
 3.   A supplemental project is proposed which reduces pollutant
     discharges at a defendant/respondent's other (non-
     violating) facility(ies).  Such a project would be
     approveable where the violating and non-violating facilities
     are engaged in the same production activities and use the
     same production processes, where appreciable risks of
     violations and legal requirements applicable to releases
     of that same pollutant substantially similar to those at
     the violating facility are posed by the non-violating
     facility(ies), and where the defendant/respondent can
     establish that significant economies of scale would be
     achieved by incorporating pollution prevention process
     changes at both the violating and non-violating facilities.
     Alternatively, the settlement could call for the defendant/
     respondent to substitute input chemicals across all such
     facilities (e.g., replace higher toxic solvents with lower
     toxic solvents at all paint manufacturing plants) or to
     reduce the emissions loadings of particular emissions at all
     such facilities as part of a NESHAPS settlement.  Such
     projects would, therefore, reduce the overall health or
     environmental risk posed by such operations to the
     environment or to the health of residents in the same
     geographic vicinity.

4.   In settlement of a Toxic Substances Control Act (TSCA)
     PMN (premanufacture notification) violation for
     manufacturing a polymer without providing formal advance
     notice at a facility, the defendant/respondent could
     establish a closed loop recycling system to reduce the
     amount of that facility's product manufacturing waste which
     must be sent to a RCRA Subtitle C landfill.  Operating the
     facility in violation of TSCA created a risk of unwarranted
     health or environmental injury.  If TSCA penalty and
     injunction requirements have been met, then the supplemental
     project could be justified on the grounds that it would
     compensate for this unwarranted risk by reducing the -overall
     health or environmental risk presented by the facility*

     After the project category and "nexus" criteria have been
     met, a potential supplemental project must also meet the
     criteria described in the following sections, below» Most of
     the conditions below applied in the past, but some are new.
     All of these conditions must be met before a supplemental
     project may be accepted.


D.   status of the Enforcement Action/Compliance History of
     Defendant/Respondent
                                                V
     Any defendant/respondent against whom the Agency has taken
an enforcement action may propose to undertake a supplemental
project at any time prior.to resolution of the action, although

-------
 the  Agency  should consider both the status of the litigation/
 administrative action and the resources that have been committed
 to it before deciding whether to accept it.  In addition, the
 respondent's enforcement history and capability to successfully
 complete the project must be examined during evaluation of a
 supplemental project proposal.

     The Agency negotiators must also consider whether the
 defendant/respondent has the technical and economic resources
 needed to successfully implement the supplemental project.  In
 addition/ a respondent who is a repeat offender may be a less
 appropriate respondent from which to receive and evaluate a
 supplemental project proposal than a first time violator.


 E.   Main Beneficiary of a Supplemental Environmental Project

     The Federal Government's sole interest in considering
 supplemental projects is to ameliorate the adverse public health.
 and/or environmental impacts of violations.  Projects are not
 intended to reward  the defendant/respondent for undertaking
 activities  which are obviously in his economic self-interest
 (e.g., update or modernize a plant to become more competitive).
 Therefore,  as a general rule, these projects will usually not be
 approved when they  represent' a "sound business practice1*  , i.e.,
 capital expenditures or management improvements for which the
 Federal negotiators may reasonably conclude that the regulated
 entity, rather than the public, is likely to receive the substan-
 tial share  of the benefits which accrue from it.

     The only exception to the prohibition against acceptance of
 a supplemental project which represents a "sound business
 practice" is for a  pollution prevention project.  Although a
 pollution prevention project can be viewed as a "sound business
 practice" since  (by definition) it is designed both to make
 production  more efficient and reduce the  likelihood of
 noncompliance, it also has the advantage  of potentially  providing
significant long-tern environmental and health benefits  to the
 public.  Therefore, the "sound business practice"  limitation will
 be waived only for  pollution prevention projects  if the  Federal
 negotiators .decide, after due consideration and upon  a clear
 demonstration by the defendant/respondent as to what  the public
 health and/or environmental benefits would be, that those
 benefits are so substantial that the public interest  would be
 best served by providing additional incentives to undertake the
 project.


 F.   Extent to Whicfr the Final Assessed Penalty-can Reflect a
     Supplemental Environmental Project

     Although supplemental projects may directly  fulfill EPA's

-------
                                10

goal of protecting and restoring the environment, there is an
important countervailing enforcement goal that penalties
should have the strongest possible deterrent effect upon the
regulated community.  Moreover, the Agency's penalty policies
require the assessment of a substantial monetary penalty
according to criteria described in "Implementing EPA's Policy on
Civil Penalties" (GM-22), generally at a level which captures the
defendant/respondent's economic benefit*  of  noncompliance  plus
some appreciable portion of the gravity component of the
penalty.4

     In addition, 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.  EPA should calculate the net
present after tax value of the supplemental project at the time
that the assessed penalty is being calculated.  If a supplemental
project is approved, a portion of the gravity component of the
penalty may be mitigated by an amount up to the net present
after-tax cost of the supplemental project,  depending on the
level of environmental benefits to the public.


G.   Supplemental Environmental Projects for Studies

     Supplemental Environmental Projects for studies will not be
allowed without an accompanying commitment to implement the
results.  First, little or no environmental benefit may result in
the absence of implementation.  Second, it is also quite possible
that this type of project is one which the violator could
reasonably be expected to .do as a "sound business practice".

     Pollution prevention,  pollution reduction and environmental
restoration studies, as well as environmental audits, are defined
narrowly for purposes of meeting Supplemental Environmental
Project policy guidelines.   They will only be eligible as
supplemental projects if they are a part of an Agency-approved
set of actions to reduce, prevent, or ameliorate the effects of
pollution at the respondent's facility (e.g., a comprehensive
     *   Where  a  violation  is  found which did not confer a
significant economic benefit, e.g. a failure to notify, the
settlement must still include payment of a penalty which at least
captures a portion of the proposed gravity component.


     '   If  a  defendant/respondent can establish through use of
documents and affidavits sworn under penalty of perjury that  it
cannot afford to pay the civil penalty derived from use of the
appropriate civil penalty policy, the Agency will consider
entering into an "ability to pay settlement" for less than the
economic benefit of non-compliance.

-------
                               11

waste minimization or emissions reduction program).   The  amount
attributable to a supplemental project may include  the costs  of
necessary studies.  Nonetheless,  a respondent's offer to  conduct
a study, without an accompanying commitment to implement  the
results, will not be eligible for penalty reduction.  In
considering the applicability of a proposed study,  the1 Agency
negotiators will consider the likelihood of success, i.e.,
substantial pollution reduction or prevention, in making  a
determination.

     While studies are not by themselves eligible supplemental
environmental projects, to encourage pollution prevention,  EPA
will make a limited exception to this general approach for
pollution prevention studies.  Such studies will be eligible  for
a penalty offset when they are part of an Agency-approved set of
pollution prevention activities at a facility and are designed to
correct the violation (e.g., a recycling feasibility study, waste
minimization opportunity assessment, or waste reduction audit).

     The size of the penalty offset may include the costs of  the
studies.  The commitment to conduct the study also must be
tangible (e.g., the project completed on schedule,  etc.).  The
U.S. must have the authority to review the completed study to
decide whether it is technologically and/or economically feasible
to implement the results.  Should the U.S. decide that the
results can be implemented but the defendant/ respondent is
unwilling to do so, the "offset" for the pollution prevention
study will be rescinded and the final assessed penalty must be
paid in full (cf. Section J. on payment assurance).


H.   Substitute Performance of Supplemental Environmental
     Projects

     A supplemental environmental project which meets the other
criteria of this policy may consist in part or whole of
substitute performance by an entity or entities other than the
violator.  Such a substitute must bear a reasonable geographical
or media-specific relationship to the underlying violation.  This
substitute performance must be assured through agreements which
are enforceable by EPA, and may consist of agreements for
emissions limits, process design or input changes, natural
resource preservation or conservation easements/ or other means
of achieving compliance with the terms of the proposed
supplemental environmental project.  In the event a violator
proposes acceptable substitute performance, EPA will credit the
violator with an amount up to the net after tax cost of  the
project as if it were being performed by the violator.   The
violator, will, however, remain responsible for the performance
of the project or the payment of the penalty offset if substitute
performance is not completed.

-------
                                12

 I.    Level  of  Concurrence

      There  may be practical problems in administering cross-
 media and/or cross-regional projects.  Staff allocations for
 oversight requirements will necessarily increase, as will the
 level of resources needed for tracking purposes since tracking a
 supplemental project is more complex than tracking whether a
 payment is  made.  In addition, the likelihood of new issues
 emerging due to noncompliance with the conditions of the project
 is significant.

      The extent of coordination/concurrence for a supplemental
 project which  involved more than one Region will vary according
 to the nature  and complexity of the proposal.  All affected
 Regions must be notified about a supplemental project which would
 have  only a modest impact on facilities in those Regions (e.g., a
 commitment to  undertake an environmental audit at all of the
 defendant/respondent's facilities across the country).  However,
 all affected Regions would have to concur in a proposed
 supplemental project which would involve significant oversight
 resources or activities (e.g., a pollution prevention activity
 which required major construction or process changes).  Also, all
 affected EPA parties must be consulted on their respective
 oversight responsibilities.  As stated previously, judicial
 settlements, including any of the projects described herein, will
 continue to require the approval of the Assistant Administrator
 for Enforcement and also be approved by the Assistant Attorney
 General for the Environment and Natural Resources Division.

      Each proposed administrative settlement which has a
 "horizontal" nexus to the violation or which involves substitute
 performance also must be approved by the Assistant Administrator
 for Enforcement and, where required by the Agency's delegations
 policy,  the media Assistant Administrator.


J.    Overs iqht/Tracking

     Supplemental Environmental Projects may require third-party
 oversight.  In such cases, these oversight costs should be borne
 by the respondent, and it must agree as a part of the settlement
 to pay  for an independent, third-party auditor to monitor the
 status of the  supplemental project.  The auditor will be required
 by the settlement to submit specific periodic reports, including
 a final report evaluating the success or failure of the
 supplemental project, and the degree to which the project
 satisfied these guidelines.  All reports must be submitted to
 EPA.  Upon request, EPA may provide copies of the reports, or
 copies of portions of the reports, to the respondent.  The timing
 and amount of  reports released to the defendant/respondent shall
 be at EPA's sole discretion.

-------
                               13

     Obviously, a certain amount of government oversight will be
required to monitor compliance with the terns of an agreement
that contains a supplemental project.  "Horizontal" pollution
prevention or pollution reduction supplemental projects which
involve more than one Region (e.g., production changes at more
than one facility) may require additional oversight, and the
estimated amount of time and resources required for effective
oversight is another criteria which the negotiators should use to
determine whether to include the project in the settlement
agreement.

     The consent order or decree shall specify overall timeliness
and milestones to be met in implementing the supplemental
project. If the defendant/respondent does not comply
satisfactorily with the terms of the supplemental project, he
shall be liable for the amount by which the assessed penalty was
reduced (with applicable interest).  The consent order or decree
should contain a mechanism for assuring prompt payment, e.g.,
through stipulated penalties consistent with the other sections
of this policy or, if appropriate, the posting of a bond (in the
amount by which the assessed penalty was reduced) to be forfeited
if the supplemental project is not fully implemented.

                            •
K.   Documentin
-------
PT.2-3

-------
                                                   PT. 1-3
      | UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
     4?                 WASHINGTON. D.C. 20460
                            OCT 2 8 1986
                                                          OFFICE Of
                                                        ENFORCCMF.NT AND
                                                      COMPLIANCE MONITOHINQ
MEMORANDUM
SUBJECT:  Guidance on Calculating After Tax Net Present Value
          of Alternative Payments
FROM:     Thomas L. Adams, Jr.
          Assistant Administrator for
             Enforcement and Compliance Monitoring

TO:       Assistant Administrators
          Regional Administrators
PURPOSE

     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.

BACKGROUND

     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

-------
                              -2-

of an alternative payment project.  The Agency also can choose
to accept less than that amount. Ł/

     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.Ł/ 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.Ł/

     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.^/ Therefore, the Agency
also must reduce the after-tax value of the cash flows invested
in an alternative payment project to its net present value at
the date of settlement.
lyProposed 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 specifiying 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 tax benefits, a firm also can generate
positive, image-enhancing publicity from the project developed
for the alternative payment; however, the penalty policy requires
that any publicity a violator generates about 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.

-------
                              -3-

     The BEN computer model can calculate the atter tax net
present value of a violator's proposed alternative payment.
Appendix A of tne BEN User's Manual provides the procedure tor
calculating after tax net present value of capital investmentr
operation and maintenance costs, and one-time costs.

USING BEN TO CALCULATE THE AFTER TAX NET PRESENT VALUE OF
ALTERNATIVE PAYMENTS

     To use BEN to calculate after tax net present value of an
alternate payment project, respond to the BEN questions as
follows:

     1.  Enter the case name (variable 1);

     2.  For variables 2 through 4, enter the incremental
         costs for the alternative payment project of:

             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;jy

     6.  Select output option 2.
5/ Decreasing the tax rate used in BEN increases the amount of a
civil penalty and also increases the after-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.

-------
                         -4-

     Calculation C in output option 2 expresses the after tax
net present value ot tne alternative payment on tne date of
settlement, which is the date substituted for the first month
ot noncompliance (variable 5).  THIS tigure is the 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 showing the after tax net present value of the
investment.

     If you have any questions about calculating the after tax
net present value ot a proposed alternative payment, call Susan
Gary Watkins of my staff (FTS 475-8786).

Attachment

cc:  Regional Counsels
     Associate Enforcement Counsels
     Compliance Office Directors

-------
                          ATTACHMENT A

                  ALTERNATIVE PAYMENT EXAMPLE

     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 wouDd 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
_!/ 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
project.

-------
                              EXHIBIT 2

                           OUTPUT OPTIOB 2
    ALTERNATIVE PAYMENT EXAMPLE
                                             .-v r i" •» T : . . .
                                                         .  1986
                                                         *
                                                2 Ł!»f = «Ł.:•'..
A.  PRESENT VALUE COST "OF PURCH AS INS'" THE'INITIAL '
                           I IbH I
                                  ^^^^^XTn^^^^^^i^^^
    OPERATING IT THROUGHOUT  ITS USEFUL LIFE
                                                             303688
B.  PRESENT VALUE COST OF ON-TIME PURCHASE AND
    OPERATION OF INITIAL POLLUTION CONTROL	
    EQUIPMENT PLUS ALL FUTURE REPLACEMENTS
    PRESENT VALUE COST OF DELAYED PURCHASE AND
    OPERATION OP POLLUTION CONTROL EQUIPMENT	
                                                             379682
    PLUS ALL FUTURE REPLACEMENTS
    ———«••—
D.  ECONOMIC BENEFIT OF A    1 MONTH  DELAY
    AS OF INITIAL DATE OF NONCOMPLIANCE
    (EQUALS B MINUS C)
                                                             376304
                                 1  MONTH  DCLAV
    THE ECONOMIC BENEFIT OP ft
    AS OF THE PENALTY PAYMENT DATE,    1  MONTHS
    ftFTER THC IMlTIftL DATE Or NDHCOMPLIAHCC	

                THE ECONOMIC SAVINGS  CALCULATION ABOVE
                U5CP TME POLLOM1NB  VAMA6LE9;	T
        USER SPECIFIED VALUES
     1. CASE NAME'
                     ALTERNATIVE PAYMENT EXAMPLE
3.
5.
• *•* *
7.
INITIAL CBPITftL IIMV 'STMCKT • 	 9 	
ONE 'I ME NONDEPRECIABLE EXPENDITURE -
FIRST MONTH OF NONCOMPLIANCE-
PENALTY PAYMENT- DATE-
*
11.
12,
O
1987
1987
        STANDARD VALUES
     o.  uocruL Lire or POLLUTION  CONTROL EQUIPMENT
     9.  INVESTMENT TAX CREDIT  RATE -    -.-  -
    10.  MARGINAL INGOMC TAX RATE  •    	>	-
                                                                10.00
    11.  ANNUAL INFLATION RATE*
    12.  DIOCOUNT RATE
                                                                6.00
                                                                10.00
    13.  AMOUNT OF LOW INTEREST.FINANCING

-------
                                 EXHIBIT 1

                              uuxrur OPTION 2
     ALTERNATIVE PAYMENT EXAMPLE
                                                 APRIL 16, C19B6
 A.   PRESENT VALUE COST OF PURCHASING THE INITIAL
	PHI I I IT TON mMTK-nt  FntlTPMFMT DM TTMP ANP
     OPERATING IT THROUGHOUT ITS USEFUL LIFE
B.
    PRESENT  VALUE COST OF ON-TIME PURCHASE AND
               OF INTTTAL POLLUTION CDNTRDL
    EQUIPMENT  PLUS ALL FUTURE KEPLACEMENTS
    PRESENT  VALUE COST OF DELAYED PURCHASE AND
    OPERATION  OF  POLLUTION CONTROL EQUIPMENT
    PLUS ALL  FUTURE REPLACEMENTS
    ECONOMIC DENEFIT OF A  20 MUNIH •.•»-. L
    AS OF  INITIAL DATE OF NONCOMPLIAtiCE
    (EQUALS B  MINUS  C)
                                                              5B62C
     i\\~
                     FIT DF A   20  MONTH DELAY
    MŁ CT  l'!L   t-.'JALTY  PAYMENT DATE,  20 MONTHS
    AFTER  THE  INITIAL  DATE OF NONCOMPLIANCE
                                                              77252
    _>«>_>_>_>   THE ECONOMIC SAVINGS CALCULATION ABOVE  '<-<-<-<-<-<•
    	MggP TUP POLL OWING VARIABLES!	,	
        USER SPECIFIED VALUES-
     1. CASE NAME-   ALTERNATIVE PAYMENT EXAMPLE
     2  INITIAI_ CAPITAL INVESTMENT »         »
                                                    5OOOOO
DOLLAR:-
     3. ONE  'IME NONDEPRECIABLE EXPENDITURE -
     4. ANNUAL OfcM EXPENSE-	;	*.
                                                      7OOO  1986 DOLLAR;
     5.  FIRST MONTH OF NONCOMPLIANCE'
     6.  COMPLIANCE DATE-	
     7.  PENALTY PAYMENT DATE-   l.r
                                                          4,  1986
                                                         12.  1987
                                                             1987
        STANDARD  VALUES..
8.
9.
10.
11.
12.
13.
USEFUL -tlFE OF POLLUTION CONTROL
INVESTMENT TAX CREDIT RATE. -
MARGINAL INCOME TAX RATE--
ANNUAL INFLATION RATE- •. . X.-.
DISCOUNT RATE » 	 x* ' ' • ' '• •
AMOUNT OF LOW INTEREST FINANCING
* . • ' ">i ' '" *
'• »• 1
EQUIPMENT -
. ' * •" * •
* ' * •
. • '
• *
.rui^i < . . 	
15
10.
50.
6.
IB.
0
YŁ,
0-
uo
00



V.


-------
PT.3

-------
PT.3-1

-------
                                                        GM-7S"
                                           .(. 1IO.N A(,'K.NCY

                         WA>.HIM.IO.N. !).C. :0
                             JAN 2 4 1990
                                                       OKHl'F Oh ! vrORCt'Mf.Nr

                                                         \Sp ' .A(P| |.\ VF

                                                          M- )S i 11 >W lS(i
MEMORANDUM

SUBJECT:  Use of Stipulated Penalties in EPA Settlement
          Agreements
FROM:     James M. StrocJ     _
          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
penalties.

     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
     I.   Types of Requirements to Which Stipulated Penalties
          Should Apply

     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

-------
                                -2-
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

-------
                               -3-
additional penalty.  Sources may make this argument even if
the. government has reserved all rights to pursue various
enforcement responses for consent agreement violations.1

     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.

-------
                                -4-


financially crippling  to  one  source,  while  merely a  routine
business expense  for another.   However,  the burden is  always
on the-idef endant  to raise such  issues during negotiations-and
to justify lower,  stipulated, penaltieazthan.'.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
violators.

     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"
scheme.

     Another criterion which should be considered in setting
stipulated penalty amounts is the  gravity of the violation,
i.e.. 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 necessary 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.

-------
                               -5-
     III. Method of Collection

     Settlement agreements should"state the method by which
stipulated penalties will be coilectedc_5Va 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.  See 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 time 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 agreed 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 problea.
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

-------
                                -6-


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 injunctive 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.
No 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, the equities of a case may indicate that the govern-
ment may compromise the amount  it agrees to collect.   For
penalties payable on demand, the government may also  exercise
prosecutorial discretion by declining to proffer a demand for
stipulated penalties for minor violations of a consent agree-
ment.

     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.

-------
                               -7-
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 official"
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.
Addressees:

     Regional Administrators
     Regions I-X

     Deputy Regional Administrators
     Regions I-X

     Regional Counsels
     Regions I-X

-------
                          -8-
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

-------
PT.3-2

-------
           I SITED STATES F.NV IRONMENT Xl. PROTECTION

                         \V \>H|N'.1OV I) (
                                             PT. V
                         January 11,  1988    '  '
MEMORANDUM

SUBJECT:  Procedures for Assessing Stipulated Penalties

FROM:     Thomas L. Adams,  Jr. ^—-^W-****/ V*. *>s^«—*>  >^~
          Assistant Administrator for Enforcement      i \
            and Compliance Monitoring                  \\

TO:       Regional Administrators
          Regional Enforcement Contacts
          Regional Counsels
          Regional Program Division Directors
          Program Office Enforcement Directors


     The purpose of this memorandum is to clarify procedures for
assessing stipulated penalties for consent decree violations.

     As discussed  in my August 23, 1986 memo on Expanded Civil
Judicial Referral  Procedures, the direct referral process will
be followed to enforce the terms of a judicial decree  for payment
of penalties agreed to as part of the settlement on the original
violation.  Stipulated penalties  (i.e. penalties due and owing
because of a violation of the consent decree terms) are not
covered under the  above direct referral procedures.  -The procedure
described below will be used  for enforcing the payment of
stipulated penalties.

     Unless the consent decree specifies otherwise, letters  to
defendants demanding payment  of stipulated penalties should  be
sent by DOJ.  The  following  procedures apply for enlisting DOJ's
assistance:

     o  The Region sends a letter to DOJ  (copy to OECM) requesting
        DOJ to issue a demand letter.  The letter to DOJ should
        contain summary information  sufficient to apprise DOJ of
        relevant  facts, issues and proposed  solutions.

     o  DOJ copies the Region and OECM with  any response  to  the
        demand letter.

-------
                              - 2 -
     o  If the response is unsatisfactory, the Region will send
        a direct referral package to DOJ  (copy to OECM).  The
        referral package should request that DOJ enforce against
        the unresolved consent decree violations, include any
        relevant new information arising since the demand letter
        request, and specify the extent of the relief which EPA
        wishes to pursue.

     o  DOJ takes appropriate action to enforce the original
        consent decree with full participation by the Region.

     o  When the defendant pays stipulated penalties to the
        Federal government without receiving a demand letter
        (e.g. if the consent decree establishes stipulated
        penalties which are automatically due when certain events
        happen and the defendant pays such sums to EPA or the
        U.S. Attorneys Office), the Region should notify the
        appropriate Associate Enforcement Counsel of that fact
        in writing or by telephone.  OECM is currently developing
        procedures for' tracking and collecting civil penalties
        which may change the notification requirement in the
        future.
SPMS CONSENT DECREE TRACKING MEASURE

     Under the SPMS consent decree measure, a demand letter is not
considered a "formal enforcement response."  A penalty payment
must be received or a direct referral package sent to DOJ (copy
to OECM) before the violation is considered addressed.  Where a
demand letter has been sent, the Region should report the decree
in the "in violation with action planned" category.  When a
direct referral is sent to DOJ to address the non-payment of a
stipulated penalty, the Region should report the decree in the
"in violation with action commenced" category.

     If you have any questions regarding these procedures, please
contact Lisa Oyler, Compliance Evaluation Branch, OECM, at 475-6113
cc:  Roger J. Marzulla, DOJ
     David Buente, DOJ
     Gerald A. Bryan, OCAPO
     ^.    ._ -»_^^_ 	L. ^ _  k.1 ^ T ^
\JC L Q X U n • Dbjaiif vw*-»ts-f
Thomas Gallagher, NEIC
Deputy Assistant Administrators, OECM
Associate Enforcement Counsels, OECM

-------
PT.4

-------
PT.4-1

-------
                                                          PT. M-
              ENFORCEMENT SENSITIVE AND CONFIDENTIAL
                         August 1, 1993
MEMORANDUM

Subject:  Economic Benefit from Non-Compliance:  An Analysis of
          Judicial and Administrative Interpretation

From:     Craig Spencer, Student Intern*
          Program Development and Training Branch

          Matthew Azrael, Student Intern
          Program Development and Training Branch

To:       Jonathan Libber, BEN & ABEL Coordinator
          Program Development and Training Branch


  Government personnel may contact Jonathan Libber for a copy of
       this document.   He may be reached at (202)  564-6011.
     *Jason Grinnell,  another law student,  played a key role in
updating this memorandum.

-------
PT.4-2

-------
              ENFORCEMENT SENSITIVE  AND CONFIDENTIAL
                         August 1, 1993
MEMORANDUM

Subject:  Ability to Pay — For-Profit Entities: An Analysis of
          Judicial and Administrative Interpretation

From:     Craig Spencer, Student Intern*
          Program Development and Training Branch

          Matthew Azrael, Student Intern
          Program Development and Training Branch

To:       Jonathan Libber, BEN & ABEL Coordinator
          Program Development and Training Branch


  Government personnel may contact Jonathan Libber for a copy of
       this document.   He may be reached at (202)  564-6011.
     *Jason Grinnell,  another law student,  played a key role in
updating this memorandum.

-------
CL.1

-------
CL.1-1

-------
                   U.S. Environmental Protection Agency
                Contractor Listing Procedures and Guidance
                           Office of Enforcement
                        Contractor Listing Program
                                 May 1993
051193 rev.

-------
                             TABLE OF CONTENTS
I.     INTRODUCTION	

II.    BACKGROUND AND LEGAL AUTHORITY
in.   LISTING PROCEDURES  ..................................  3
            A.    Computation of Time .............................  3
            B.
1.
2.
3.
4.
5.
6.
Mfiiptsin Fil* of Pendine Criminal Cases
Obtain Notice of Convictions
Review tf\$ ConviCtionS
Notify Facilitv and Public of Listing
EPA Guidance On Implementation of Mandatory
Listing
Plea Agreements
(4)
(4)
(4)
(4)

(5)
(7)
            C.    Discretionary Listing .............................   7
                  1.    LO Receives Recommendation To List           (8)
                  2.    Review Recommendation                      (9)
                  3.    LO Briefs AA On Listing Recommendation       (9)
                  4.    AA Declines To List                         (10)
                  5.    AA Decides To Proceed With Proposed Listing. LO Notifies
                        Facility and Prepares Draft Determination        (10)
                  6.    Final Agency Action Taken  On The Recommends tifln to List
                                                                   (11)
                  7.    Withdrawal Of A Recommendation To List       (15)
                  8.    Stavs Of A Discretionary Listing Action         (16)
                  9.    EPA Guidance On Implementing Discretionary
                        Listing                                     (17)
                  10.   Big Apple Wrecking Corporation Case           (18)
            D.    Defining The Violating Facility  ......................  18
                  1.    Introduction                                 (18)
                  2.    Role of Regional Counsel. Regional
                        Program Staff, and CID                       (21)
                  3.    Guidance Document:   Defining the  "Violating Facility" for
                        Purposes of Listing  Asbestos Demolition  and  Renovation
                        Companies Pursuant to Section 306 of the Clean Air Act, March
                        11, 1988.                                   (19)
                  4.    Contractors                                 (20)
                  5.    Independent Facilities                         (21)

-------
APPENDIX

TABLE ONE:
TABLE TWO:
Attachment A:
Attachment B:

Attachment C:
Attachment D:

Attachment E:
Attachment F:

Attachment G:
Attachment H:
Attachment I:

Attachment J:

Attachment K:

Attachment L:
Attachment M:
Attachment N:
IV.   PROCEDURES FOR REMOVAL FROM THE LIST  	
            A.     Automatic Removal  	"	
                   1.     Mandatory Listing
                   2.     Discretionary Listing
            B.     Requests For Removal	
                   45-DAY PERIOD.
                   1.     Removal Of Underlying Court Order.
                   2.     Expiration Of One Year
                         (Discretionary Listing Only)
                   3.     Plan  For Compliance
                         (Discretionary Listing Only)
                   4.     The Condition Giving Rise To Listing Has
                         Been Corrected
                   5.     Removal Hearing (Administrative Appeals
                         To Case Examiner and  the Administrator)
                                                 (22)
                                                 (22)
                                                            21
                                                            22
                                                            23
                                                 (23)
                                                 (24)

                                                 (24)

                                                 (24)

                                                 (27)

                                                 (31)
Listing Official's Discretionary Listing Checklist.
Listing Official's Removal Checklist
Model Confirmation Letter to a Facility Listed Under Mandatory Listing.
Request For Removal From the List of Violating Facilities (Mandatory
Listing) [Enclosure with Attachment A]
Model  Letter Notifying GSA of Addition to Lists .of Parties Excluded
From Federal Procurement or Nonprocurement Programs (Mandatory
Listing).
Model  Memorandum providing information for press office preparation
of press release on listing action.
Model Memorandum Requesting Comments on Recommendation to List.
Model  Request for Additional Information From Recommending Person
(Discretionary Listing).
Contractor Listing Program Legal Authority.
Contractor Listing Regulations, 40 CFR Pan 15, September 5, 1985.
Memorandum, Implementation of Mandatory Contractor Listing. August
8, 1984.
Memorandum, Guidance on Implementing the Discretionary Contractor
Listing Program. November 26, 1986.
Memorandum, Listing Asbestos Demolition and Renovation  Companies
Pursuant to Section 306 of the Clean Air Act. March 11, 1988.
Memorandum, Asbestos Contractor Listing. June 30, 1988.
Memorandum, EPA  Policy Regarding the Role of  Corporate Attitude.
Policies. Practices, and Procedures In Determining Whether To Remove
A Facility  From The  EPA  List of Violating Facilities Following  A
Criminal Conviction. October 31, 1991.
Contractor Listing Guidance List, November 1991.

-------
Attachment 0:



Attachment P:



Attachment Q:

Attachment R:
Attachment S:

Attachment T:

Attachment U:


Attachment V:

Attachment W:


Attachment X:

Attachment XX:


Attachment YY:

Attachment Z:
Sample Regional Administrator's Recommendation  to Remove Facility
From the  EPA  List of Violating  Facilities, Exxon Bavway Refinery,
Bayonne  Terminal  and Inter-Refinerv Pipeline. November 6,  1991.
[DELIBERATIVE  PROCESS DOCUMENT!  DO NOT RELEASE!
Sample Regional Administrator's Recommendation Not to Remove Facility
From the EPA List of Violating Facilities,   *      lul" Communit
Service Treatment Plant. March 11, 1993. FDELIBERATTVE PROCESS
DOCUMENT; DO NOT RELEASE!
Assistant Administrator's Decision, Valmont Industries. Inc.. January 12,
1990.
Case Examiner's Decision, Valmont Industries. Inc.. June 5, 1990.
General Counsel's Decision, Big Apple Wrecking Corporation. August 15,
1991.
Assistant Administrator's Decision, The Bill L. Walters Companies. May
li. 1991.
Assistant  Administrator's  Determination   Regarding   Petition  For
Determination of  Independent Facilities, Exxon Corporation  rExxon
Bavwav). September 30, 1991.
Assistant Administrator's  Determination,  Fflitt  HftTIP1"1" Community
Service Treatment  Plant. April 19, 1993.
"EPA's Contractor Listing Program:  A List You Do Not Want To
Make,"  Jonathan  S. Cole, Federal  Facilities Environmental Journal.
Summer 1991.
"Contractor Listing: EPA's Hidden Enforcement Program,", Jonathan S.
Cole, Journal of Environmental Permitting. Winter 1992/93.
"Independent Verification That Requirements For Removal Have Been
Met in Mandatory  Listing   Cases,"  from  EPA Contractor  Listing
Protocols.
"Definition, for Purposes of Removal, of the 'Condition' That Gives Rise
to Mandatory Listing,"  from EPA Contractor Listing Protocols.
Discretionary Listing Caselaw:
a.    United States v. Interlake. Inc.. 432 F. Supp. 987 (N.D. HI.
       1977);
      United States v. U.S.  Steel Com.. 10 E.R.C.  1751  (N.D. 111.
       1977);
      United States v. Del  Monte de Puerto  Rico.  9 E.R.C.  1495
      (D.P.R. 1976).
                   5.
                   C.

-------
                            LIST OF ABBREVIATIONS
      The following abbreviations are used in the Contractor Listing Procedures.

AA         Assistant Administrator for Enforcement •
CAA        Clean Air Act
CE         Case Examiner
CFR        Code of Federal Regulations
CID        Criminal Investigation Division, Ofc. of Criminal Enforcement
CLP        Contractor Listing Program
CWA       Clean Water Act
DCE        Director of Civil Enforcement
DOCE      Director, Office of Criminal Enforcement
EC(s)       Enforcement Counsel for Air or Water, or Both
ECS-DOJ    Environmental Crimes Section, Department of Justice
EPA        Environmental Protection Agency
GSA        General Services Administration
List        The EPA List of Violating Facilities
LO         Listing Official
OCAPO     Office of Compliance Analysis and Program Operations
OCE        Office of Criminal Enforcement
OGC        Office of General Counsel
OPA        Office of Public Affairs
ORC        Office of Regional Counsel
RA         Regional Administrator

-------
                       Contractor Listing Procedures and Guidancq

I.     INTRODUCTION

       This document sets forth the procedures that the Contractor Listing Program (CLP) and
the Listing Official (LO), or his or her designee, use in administering the contractor listing legal
authority. (Clean Air Act § 306, 42 U.S.C. § 7606; Clean Water Act § 508, 33 U.S.C. § 1368;
Executive Order 11738; and 40 CFR Part 15).  It addresses both listing and removal procedures
and identifies the nature of the assistance that will be required from all EPA offices supporting
the listing program.

       This document  includes a summary of the legal  authority  for the contractor listing
program,  including the statutory  and regulatory authorities governing the contractor listing
program.  It contains a  detailed description of the procedures followed by the LO in processing
mandatory listing actions and discretionary recommendations to list  It also provides a detailed
description of the procedures the LO follows when processing automatic removals and requests
for removal from the EPA List of Violating Facilities (the List).  It describes the essential roles
of EPA staff in the Region and at Headquarters in carrying oui the listing program.  It also
describes the procedures for publishing, confirmations of listing and removal from the List in the
GSA "Lists of Parties Excluded From Federal Procurement and Nonprocurement Programs."

       In addition to describing in detail the procedures to  be followed when processing listing
and removal actions, this document contains numerous documents which can be used as guidance
when drafting the documents called for under the CLP's  procedures.  The attachments also
include the federal regulations governing the listing program and copies of policy documents and
case decisions pertaining to the listing program.

       Although this document provides detailed procedures for processing listing and removal
actions, it does not attempt to prescribe the circumstances  under which listing should be  used
as an enforcement tool.

       For questions or further information on any aspect of the contractor listing  program,
please  call the CLP at (202) 260-8781.

H.     BACKGROUND AND LEGAL AUTHORITY

       The Clean Air Act (CAA), Section 306, and  the Clean Water Act (CWA), Section 508,
as implemented by Executive Order 11738  [38 FR 25161, September 12,1973] and 40  CFR Part
15, automatically prohibit facilities from being used in the performance of any Federal contract,
grant or loan (including subcontracts, subgrants,  and  sub loans), where a person who owned,


*      The policies and procedures set forth in this document are intended solely as guidance for 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. EPA  reserves the right to act at variance with
these policies and procedure, and to amend them at any time without publk notice.

-------
leased, or supervised the facility at the time of the violation has been convicted under CWA
§ 309(c) or CAA § 113(c).  The 1990 CAA amendments added a sentence to CAA § 306. This
sentence  provided explicit authority for the Administrator  to  list additional facilities of a
convicted company. This amendment is a formal legislative statement of authority which already
existed  under EPA  policy and  EPA's  inherent  contract administration authority.   This
amendment is discussed in more detail below.  The legal authorities  also permit EPA to list
facilities on the basis of certain civil violations of the CWA or CAA, under its  discretionary
listing authority.

       Two executive orders were  signed subsequent to passage of the CWA and CAA. Both
are substantially the same and reiterate the language of statutes, as well as stating the policy
behind the contractor listing provisions, delegating authority to the Administrator, requiring
cooperation from each Federal Agency, and stating the duty of the Administrator to circulate the
List of Violating Facilities and to issue rules that are, to the maximum extent feasible, uniform
with respect to the listing of CAA  and CWA violators.

       Pursuant to Executive Order 11738, EPA promulgated 40 CFR Part 15 (40 Fed. Reg.
17124)  to  provide procedures for ensuring that  Executive  branch  agencies conduct their
procurement  and assistance programs in accordance  with  the  President's responsibility  for
ensuring compliance with CAA and CWA standards.  On February 5,  1979, EPA appended to
these regulation a procedural  statement explaining the decisionmaking  process within EPA
relating to placement of facilities on the list.  Revision and amendments to the contractor listing
regulations were promulgated on September 5,  1985 (50 FR 36188).   Draft amendments and
revisions  have been  prepared pursuant  to the  1990 Clean  Air  Act Amendments,  and
promulgation of these is scheduled for mid-1993.

       Several sections of the legislative history of the CWA and CAA have specific references
to contractor listing.  Some of the more significant language in the  legislative history is  as
follows:

              1.   "This  section  [CWA § 508] would be limited,  whenever  feasible and
reasonable to contracts affecting  only the facility not in compliance, rather than an entire
corporate entity or operations division. There might be cases where a plant could not participate
in a Federal contract due to a violation but another plant owned by the same company might bid
and transfer other work to the first plant. This type of action would circumvent the intent of this
provision.  In this case, the company's second facility should also be barred from bidding until
the first plant returns to compliance..." Legislative history of Federal  Water Pollution Control
Act, 1972, Senate Report, p.3749.

              2. "It [the amendment] also addresses situations where determining the definition
of the facility is problematic - such as asbestos demolition and renovation companies who move
their operations from building to building. This amendment clarifies that in such situations EPA
can define the facility to be the office of the convicted company ... Discretionary rather than
mandatory listing  of  additional facilities provides the flexibility necessary  for  the  EPA  to
consider variations in the structure of violating industries."  CAA Amendments, Report  on
Environment and Public Works, United States Senate,  December 20,  1989. pp. 371-372.

-------
       Facilities prohibited from  receiving federal contracts or assistance under this authority
are placed on the Environmental Protection Agency's (EPA) List of Violating Facilities. The
statutes, their legislative histories,  the Executive Order and the regulations identify two purposes
for the listing program: (1) to protect the government's proprietary interest; and (2) to ensure
compliance with the CAA and CWA.

       Facilities owned, leased, or operated  (at the  time of the violation) by persons2  found
guilty of certain criminal  convictions are subject to  automatic (i.e., mandatory) listing upon
conviction.  Facilities are  subject  to discretionary listing, after following procedures contained
in the regulations, as a result of certain civil and criminal violations of the CAA or CWA, or
state or local criminal convictions for violating clean air or clean water standards.  Although
CAA and CWA violations  which have been the subject of criminal or civil enforcement activities
are the basis  for listing a facility,  listing is an administrative function which is independent of
the underlying enforcement action.  Listing provides EPA with an effective administrative tool
to obtain  compliance with the CAA and CWA where an administrative or judicial action
identified in 40 CFR § 15.11(a)(l) - (6) has already been initiated against a facility, or where
its owner,  operator, or supervisor has been convicted of an offense under CAA § 113(c) or
CWA § 309(c).

ffl.    LISTING PROCEDURES

       A.     Computation of Time. Unless otherwise stated, in computing any period of time
              prescribed or allowed in the protocols,  the day of the event from which  the
              designated period begins to run shall not  be included.  Saturdays, Sundays, and
              Federal legal holidays  shall be included.  When a stated time expires  on a
              Saturday, Sunday, or a legal holiday, the  stated time period shall be extended to
              include the  next business day.  Failure to take action in a timely fashion may
              result in the loss of rights,  termination of a listing  or removal action, or a
              decision to proceed  with the listing or removal action without the participation of
              the nonresponding party.

       B.      Mandatory Listing.  The facility that is the source of the CAA or CWA violations
              is automatically placed on the List if it is owned, leased, or supervised (at the
              time of the violation) by a person convicted under CAA § 113(c) or CWA §
              309(c), for  those violations.  § 15.103 Even though a facility is automatically
              listed if it is the source of a CAA or CWA violation that leads to the conviction
              of the owner, operator, or supervisor  of the facility,  the LO follows the steps
              listed below to process the  mandatory listing action.
    2  Throughout this document, references .to ^persons * are understood to include all entities defined as a
•person'in 40CFR §  15.4.

    3  Throughout this document, references to the regulations are to 40 CFR Part  IS, unless otherwise
indicated.  Thus, 40 CFR § IS. 10 is cited as § IS. 10.

-------
1.     Maintain File  of Pending  Criminal Cases.   The  Contractor  Listing
       Program (CLP), with assistance from the Office of Criminal Enforcement,
       Criminal Investigation  Division  (CID),  develops  and  maintains  a
       compilation  of  the  indictments,  informations,  and  other  charging
       documents that evidence potential criminal  charges that may lead to
       mandatory listing of a facility.

2.     Obtain Notice of Convictions. It is the responsibility of CID to notify the
       LO of criminal convictions, see § 15.13(a), and to supply copies of the
       informations, indictments, or other charging documents, and judgments of
       conviction, to the LO. Notice of the conviction should be sent to the LO
       prior to  sentencing,  even though the judgment of conviction may not be
       filed  until some time later.  The CLP may also request case documents
       directly, e.g., from the court or from the U.S. Attorney's Office.

3.     Review the Convictions.  The LO determines whether listing is warranted
       under the regulations  by reviewing the documents associated with the
       conviction to ensure that:   (a) the  conviction  occurred under CAA  §
       113(c) or CWA § 309(c), § 15.10.; and (b) that the facility to be listed
       was owned,  leased or supervised, at the time of the violation giving rise
       to the conviction, by the person convicted under CAA § 113(c) of CWA
       §309(c), §  15.10.

             These determinations may require the LO to review the following
       documentation, obtained with the assistance of CID:  (1) documentation
       of the charges filed against the defendant, as evidenced by the signed and
       dated indictment, information, or other charging document(s) (original and
       as  finally amended);  (2) documentation  of the circumstances of the
       conviction, as evidenced  by court-filed documents, such as the signed and
       dated final  plea agreement(s), dismissal(s) of  counts, and sentencing
       report(s) and memoranda; (3) documentation that the final conviction or
       guilty plea  has been entered by the court; (4) documentation that the
       sentence has been imposed, as evidenced by court documents, such as the
       signed and dated final Judgment and Commitment/Probation Order; and
       (5) documentation evidencing the underlying technical data, evidence of
       violation or corrective action, or other relevant information.

4.     Notify Facility and  Public of Listing.  Once the LO determines that a
       facility  meets  the criteria for mandatory listing  (see  § III.D.  below
       ("Defining The Violating Facility")), the LO:

a.     Places the facility on the List as of the date of conviction (i.e., the date
       of the judgment order of conviction);

-------
              b.      Assigns a docket number to the facility and places the case on the listing
                     docket;

              c.      Notifies the Assistant Administrator for Enforcement (AA); the Director,
                     OCAPO; the Director of Civil Enforcement (DCE); ine Director, Office
                     of Criminal Enforcement (DOCE); the owner, operator, or supervisor of
                     the facility; the Enforcement Counsel (EC) for Air, or Water, or both; the
                     Regional  Administrator, Office or  Regional Counsel,  and  regional
                     program office;  the Chief  Counsel, Environmental  Crimes  Section,
                     Department of Justice (ECS-DOJ); the Director,  Criminal Investigation
                     Division, Office of Criminal Enforcement (CID); and the Assistant United
                     States Attorney (AUSA) in the criminal action. § 15.16(a);

              d.      Notifies the General Services Administration (GSA) that the facility is to
                     be added to the "Lists of Parties Excluded From Federal Procurement or
                     Nonprocurement Programs."

              e.      Provides the EPA Office of Public Affairs (OPA) with the information
                     necessary  to prepare  a  press  release  or  press  advisory,4  where
                     appropriate.

              5.      EPA  Guidance On Implementation of Mandatory Listing

              a.      Summary of Memorandum

                     On August 8, 1984, the Assistant Administrator for Enforcement issued
              a memorandum setting forth policy and procedures for Mandatory Listing. The
              main points of this memorandum are:

                     1.     Facilities owned, operated or supervised by convicted violators of
                           the  CWA or CAA will be  automatically  placed on  the List of
                           Violating Facilities.
    4  Use of Press Releases .  The LO works with the regional press office tod EPA Office of Public Affairs
to see that press releases concerning listing actions are issued, as appropriate, to the national press, local media
in the area where the  violations occurred, and the trade press of the affected industry. (Saa. Guidance on
Implementing the Discretionary Contractor Listing Program (November 26,1986, GM-53).

-------
                    2.     Only  criminal convictions in Federal court will result in listing.
                           State  court convictions dq not result in mandatory listing3.

                    3.     Verification of conviction (entry of guilty verdict or guilty plea) by
                           the Associate Enforcement Counsel for  Criminal Enforcement
                           (now  the  Director of Criminal Enforcement)  triggers  listing.
                           (NOTE: This policy has been superseded;  signing of the judgment
                           order triggers listing, and the date of entry of judgment is the date
                           upon  which the automatic statutory ineligibility  of the violating
                           facility is effective.)

                    4.     Removal procedures

              b.     Discussion

                    As noted above, OE's  policy is to confirm a mandatory listing  when a
              judgment order of conviction has been signed in a criminal case.  This policy was
              instituted because a guilty plea  or verdict can be  modified prior to sentencing and
              entry of judgment, affecting the consequent listing. The current  practice ensures
              that listing decisions, including determining what is the "condition giving rise to
              the conviction," are  made with reference to the appropriate final judicial order in
              the criminal case.

                    The procedures outlined in the 1984 memorandum  have been, for all
              practical  purposes,  superseded  by  the contractor listing • protocols (adopted
              October 1987, revised  1991), although the concepts, except as noted above,
              remain valid.  Other features of the CLP as set forth in  this  memorandum have
              also been changed: confirmations of listing and removal  are no longer published
              in the Federal Register.  The GSA list is used instead. The CLP receives notices
              of convictions from the CID upon receipt by the CID.

                    EPA recognizes the potential for confusion within the Federal government
              contracting community if issuance of a Confirmation of Listing is delayed, for
              example, because the  CLP did not receive timely notification of a criminal
              conviction  in  a  case that results  in mandatory listing.   Consequently,  it is
              important for the CLP to be notified of pending cases as soon as possible, prior
              to conviction,  so that it can  be prepared to issue prompt confirmation of listing
              after the conviction. The CLP has recently established procedures by which other
    s   However, state court convictions may be the basis for discretionary listing, or for debannent or suspension
by EPA's Office of Grants and Debannent, Debannent and Suspension Division, pursuant to the Federal Acquisition
Regulation, 48 CFR Part 9, or EPA's Nonprocuretnent Debannent and Suspension Regulation, 40 CFR Part 32.
For information on these authorities contact the EPA Debannent and Suspension Division (OARM, Office of Grants
and DebannentXMail Code PM-216F) at (202) 260-8025.

-------
       Federal investigative agencies, e.g., the Federal Bureau of Investigation and the
       Naval Investigative Service, will provide to the CLP information about CAA and
       CWA criminal cases in which EPA is not involved.

              It is EPA's intention that the A A  will make necessary listing decisions
       (e.g., in certain cases, what is the violating facility), within 10 days of the CLP's
       receipt of a Judgment Order of conviction.  In some cases, however, it will be
       necessary, due to the complexity of the case,  to obtain  additional information
       concerning  the violation that  led to the criminal conviction and  consequent
       mandatory listing.  In such cases, it is  EPA's intention that the AA will make
       necessary listing decisions  within 10 days after  the CLP has the information
       necessary to make such determinations.

       6.      Plea Agreements.

              The  statutory ineligibility that results  from a criminal conviction  under
       CAA § 306 or CWA  § 508 is  automatic  and is self-executing.   It is a
       Congressionally mandated restriction on using appropriated Federal funds for
       contracts, grants or loans which are to be  performed using a facility which was
       owned, operated or supervised at the time of the violation, by a convicted CAA
       or CWA violator.

              Neither EPA nor other Federal  authorities (e.g.,  U.S. Attorneys) may
       agree not to apply the mandatory prohibition of CAA  § 306 and CWA § 508.
       Defendants in criminal cases may attempt to seek such assurances from the U.S.
       Attorney's Office, or from EPA. It is EPA's position that such assurances should
       not be given, nor should EPA agree to substitute a charge which will not  result
       in mandatory listing for a CAA or CWA  criminal charge (if justified by the facts)
       which would result  in mandatory listing  (for example, if a  Clean  Water Act
       criminal charge is readily provable, then it is inappropriate to agree to substitute
       a Rivers and Harbors Act (Refuse Act) count in place of the CWA charge,  to
       avoid mandatory listing.)  Plea agreements also should not contain assurances  as
       to either the timing or the result of a request for  removal from the List  of
       Violating Facilities in cases involving mandatory listing.

             The  CLP is  available for  consultation  in cases involving attempts by
       defendants to negotiate mandatory listing issues.  The CLP has drafted model plea
       agreement language  which may be used  in such cases.

C.     Discretionary Listing. The discretionary listing process begins with the filing of
       a recommendation  to list  a facility.   A facility  will be listed  under the
       discretionary listing  process if EPA determines that the facility has a record of
       continuing or recurring noncompliance with clean air or clean water standards,
       and has been the subject of one of the enforcement  activities  described in §

-------
                             8

15.11(a)(l)-(6).  See Guidance on  Implementing the Discretionary Contractor
Listing Program. § III (November 26, 1986)(GM-53), for guidance on selecting
discretionary listing cases.

       A recommendation to list may be submitted by a "recommending person",
defined in § 15.4 as the "Regional Administrator,  the Associate Enforcement
Counsel  for Air or  the  Associate Enforcement Counsel for Water  or their
successors, the Assistant  Administrator for Air and Radiation or the Assistant
Administrator  for Water  or their successors,  a Governor, or a member of the
public. The Regions will have primary responsibility for selecting cases for EPA-
initiated listing actions. The Enforcement Counsels (ECs) for Air and Water and
the Assistant  Administrators for Air and  Water  will  rarely initiate  listing
recommendations.

       Each recommendation to list will be processed by representatives from the
Office of Regional Counsel, the regional program office, the EC for Air or
Water, or both, and the LO. The regional representatives will act as advocates
for the Region's position  on the recommendation to list. The representatives of
the ECs  will act as counsel to both the Region and the LO.  The adjudicative
function  will be conducted by the LO assigned to the case.  Each representative
will be responsible for ensuring that his or her office completes its responsibilities
under the Protocols in a timely fashion, and that all necessary  reviews by policy
level officials  within  his or her office are obtained.

       Under  the regulations,   a  recommending  person  may  withdraw  a
recommendation to  list  at any time  before the conclusion of the  listing
proceeding.     A  recommending   person   is   obligated  to  withdraw  the
recommendation to list if he or she determines that the conditions which gave rise
to the recommendation to list have been corrected, or the facility is on an EPA-
approved plan for compliance which will ensure that the conditions that gave rise
to the recommendation to list will be corrected, § 15.11(d). Ł& also, paragraph
ffl.C.7., pp. 16-17).  Thus, as a practical matter, if the facility corrects fully the
condition which is the basis for the listing action, and the recommending person
withdraws the recommendation to list, the listing process is terminated.  The steps
for processing a discretionary listing action are set forth below.

1.     LQ Receives Recommendation To List. The discretionary listing process
       begins  when the LO receives a recommendation to list, § 15.11(b).  It is
       anticipated  that most recommendations will be prepared by the Regions
       and that they will have  lead responsibility  for preparing  EPA-initiated
       recommendations.   The Guidance on Implementing  the  Discretionary
       Contractor  Listing  Program (November 26,  1986)(GM-53), includes
       model  discretionary listing recommendations based on both administrative
       and judicial enforcement actions.  The  Regions  will also  act  as the

-------
       Agency's primary contact for processing State or citizen initiated listing
       recommendations.

2.     Review  Recommendation.   As soon as a recommendation  to  list is
       received, the LO transmits a copy to the appropriate ECs, and, if the
       Region did not submit the recommendation to list, the LO transmits the
       recommendation to list to the Regional Administrator (RA),  Office of
       Regional Counsel (ORC), and  regional program office, to review and
       submit comments on the recommendation to the LO within 10  days.

             During the same period, the LO reviews the recommendation to
       list, § 15.11(c), to ensure that  it contains:  (a) the name, address, and
       telephone number of the person filing the recommendation, § 15. 1 l(b)(l);
       (b) a  description of the  facility,  including its name and address, §
       15.11(b)(2); (c) a  description  of the alleged continuing  or  recurring
       noncompliance, and supporting data, § 15.11(b)(3); and (d) a description
       of  the criminal, civil, or administrative action or conviction  which is
       pertinent to the facility and the alleged continuing or recurring violations,
       § 15.11(b)(4).   .,.

             If, after reviewing  the recommendation to list and the comments
       on  the recommendation, the LO  determines that additional documentation
       is needed,  the  LO returns the recommendation to the recommending
       person,  identifying  in  writing  the  specific  information   required.
       Resubmitted recommendations  must  be  processed according  to the
       procedures for processing an original recommendation, as set forth  in
       paragraph III.C. (p. 8 et seq.).

3.     LO Briefs AA On Listing Recommendation.  When the LO is satisfied
       that the recommendation to list meets the requirements of the regulations,
       the LO does the following:
      a.     The LO DflcKctft The CaK  The LO assigns a docket number to
             the facility and places the case on the listing docket.

      b.     The LO Prepares A Briefing Memorandum. The LO prepares a
             briefing memorandum  and  transmits it  and a copy  of  the
             recommendation to  list to the AA.  The briefing memorandum
             should: (i) summarize the status of the listing recommendation; (ii)
             review for the AA the pros and cons of proceeding with the listing
             action at this point, based upon the comments received from the
             Region and the EC(s); and (iii) offer the AA  the opportunity to
             have an oral briefing on the listing recommendation.  If an oral
             briefing is requested, the LO schedules the briefing and arranges

-------
                             10

             for representatives of the EC(s), OCE and OCAPO to be present,
             and  offers the  RA,  ORC,, and  regional  program offices  an
             opportunity to be present,  in person or by telephone.   At the
             briefing,  staff  will  advise  the  AA  of  the  basis  for  the
             recommendation to list.  •

4.     AA  Declines  To  List.     If,  after  being  briefed  ont  he  listing
       recommendation, the AA decides to decline the recommendation to list,
       the LO does the following:

       a.     The LO Prepares A Statement Of Reasons.   The LO prepares a
             brief statement  for the AA's  signature,  explaining the AA's
             reasons for the decision not to proceed with the listing action.
             This statement will be included in the record of the listing action
             and will be provided to the recommending person and the owner,
             operator, or supervisor of the facility. Consequently, the statement
             should exclude all  information which the Agency would seek to
             withhold under the Enforcement Document Release Guidelines,
             GM-43 (September  15, 1985).

       b.     The LQ Submits The  Statement For Headquarters Review.  The
             LO submits the draft  statement for review by (1) the EC(s) for
             Air, Water, or both; (2) the DCE;  and, to prevent conflict with
             potential criminal actions, (4) the DOCE.   •

       c.     The LQ Transmits The Statement To The AA To Sign.  At the
             conclusion of the review by appropriate Headquarters staff, the LO
             transmits the statement to the AA for his signature.

       d.     The LO Notifies Owner.  Once the A A has approved and signed
             the statement of reasons, the LO notifies the owner, operator, or
             supervisor of the facility that a recommendation to list the facility
             has been filed, and encloses a copy of the recommendation to list
             and  the  statement of  reasons  for  not proceeding  with  the
             recommendation with  the notice letter.  The LO also sends a copy
             of the  notice letter and enclosures to the recommending person.

5.     AA Decides To Proceed With Proposed Listing. LQ Notifies Facility and
       Prepares Draft Determination.  After the LO has briefed the AA on the
       recommendation  to list and  the AA  has decided  to proceed  with  the
       recommendation to list, the LO does the following:

       a.     The LO Notifies Owner. The LO notifies the owner, operator, or
             supervisor of the facility that a recommendation to list the facility

-------
                             11

             has been filed and encloses a copy of the recommendation to list
             with the notice letter.   The notice will also advise the  owner,
             operator,  or  supervisor that  he or she may request a listing
             proceeding before  a  Case  Examiner  (CE) to  determine  the
             propriety  of the proposed listing, §  15.12(a).   A  copy  of this
             notice  is sent to the listing case staff representatives and to the
             recommending person.

       b.     The LO Transmits The Recommendation To The Region. The LO
             prepares a transmittal memorandum,  and  transmits to ORC the
             recommendation to list and any comments received from the A A,
             EC(s), RA, and regional program  office,  requesting  that ORC
             prepare and return to the LO within 15 days, a detailed summary
             of the  documentation regarding  the recommendation to list, and
             copies  of any documents necessary for the LO to prepare  a draft
             determination.   Unless  the Regional Administrator or  Deputy
             Regional   Administrator   have   previously   reviewed  the
             recommendation to list, one of these officials must acknowledge in
             writing that he or she has reviewed the recommendation to list and
             has attached any comments to the recommendation.

       c.     The LQ Drafts The Determination.  Upon receipt from the Region
             of the  recommendation  to list and summary of  documentation
             regarding  the recommendation, and after the 30-day period for
             requesting a listing  proceeding has expired,  the LO drafts a
             determination for the AA's signature, and revises the summary of
             documentation to include any materials available at Headquarters.

       d.     The  LQ Submits The  Draft Determination  For  Headquarters
             Review and Comment.   Once the draft determination to list has
             been prepared, the LO acknowledges that he or she has reviewed
             it.  The draft determination is then transmitted  for review and
             comment, along with the summary of documentation, to:  (1) the
             EC(s) for Air, Water, or both; (2) the Director, OCAPO; and (3)
             the DCE and the DOCE.

6.     Final Agency  Action Taken On The Recommendation to List. After the
       LO has notified the facility  that a recommendation to list has been filed
       and  transmitted to the AA for decision,  final Agency action  on  the
       recommendation will occur  as a result of one of the following processes:

       a.     AA Decides (Listing Proceeding Not Held). At any point before
             a listing proceeding is held, the AA may, in his or her discretion,
             decline to list the facility, § 15.11(c). If a facility does not request

-------
                      12

      a listing proceeding within  30 days of receiving notice  that a
      recommendation to list has been filed, the AA must decide whether
      to list the facility.  In such a case, the AA's determination  on the
      recommendation to list is final Agency action, § 15.12(d).

             After  all of the EPA  personnel identified in paragraph
      Ill.C.S.d. have reviewed the draft determination and commented
      on it, the LO prepares a transmittal memorandum, and sends to the
      AA a draft determination, any comments from the EC(s)  or the
      Region, the summary of supporting documentation, and a briefing
      memorandum that summarizes:  (i) the history of the case;  (ii) the
      status  of the  case;  (iii)  the reasons for  the  recommended
      determination; (iv) whether the RA, ORC, and regional program
      office  have expressed comments  in agreement with the draft
    .  determination; and (v) any special problems or considerations.

             If an  oral  briefing  is  requested,  the LO schedules  the
      briefing and arranges for representatives of the EC(s), OCE  and
      OCAPO to  be present,  and offers the RA, DRA,  ORC, and
      regional program offices an opportunity to be present,  in person or
      by telephone.

             Based upon the AA's decision on the recommendation to
      list,  the LO does the following:

             (1)   AA  Decides To List.  If the AA decides to list, his
                   or her decision is  final Agency action  on  the
                   recommendation to list,  and the LO  follows  the
                   steps set forth in the Listing Official's Discretionary
                   Listing Checklist found in Table One.

             (2)   AA  Declines To List. If the A A decides not to list,
                   the LO notifies the owner, operator, or supervisor
                   of the facility, the EC(s), OCE, and the RA, ORC,
                   and  program office, that the recommendation to list
                   has been declined. The AA's decision not to list is
                   final Agency action on the listing recommendation.

b.    Listing Proceeding  Requested.    If  the  owner, operator, or
      supervisor of the facility requests a listing proceeding within 30
      days of receiving  notice that a recommendation to list has been
      filed, the LO does the following:

-------
                13

(1)    AA Designates A Case Examiner   The A A designates a
       Case Examiner for the listing proceeding, § 15.12(a).  The
       Case Examiner should be an EPA attorney who has subject
       matter expertise,  who  is not involved in the  underlying
       enforcement  action  or listing  action,  and who is not
       supervised  or  employed by  the person recommending
       listing  (i.e.,  the  CE should be  from  a different  EPA
       region).  The LO will consult with the  EC(s) to identify
       appropriate persons to act  as Case Examiners in  listing
       proceedings.

(2)    Case Examiner Schedules Listing Proceeding.  The CE
       schedules   the  listing  proceeding  and  notifies  the
       recommending person, the owner, operator, or supervisor
       of the facility, the LO, and  the listing case representatives
       (see paragraph III.C. above) of the date, time, and place of
       the listing proceeding, § 15.12(b).  That notice letter also
       informs all parties of their obligation to provide to all other
       parties at least 7 days prior to the listing proceeding, any
       papers  which  they intend  to submit  at  the  listing
       proceeding.

              It  is the responsibility of the CE and the LO to
       attempt to arrange the  timing and location of the listing
       proceeding so that it is convenient for all parties to attend.
    •  The CE determines  whether the listing proceeding should
       be adjourned  for  good  cause  shown,   as provided in
       paragraph III.C.8.a. (page 17).

(3)    CE Obtains Court Reporter. The CE retains the services
       of a court reporter, § 15.13(b)(2), paid for by EPA.

(4)    Listing Proceeding Held.   The  listing proceeding is
       conducted in  accordance with § 15.13(b).  Regardless of
       who  files  the recommendation to list, EPA  will  be
       represented at the listing proceeding by the EPA regional
       or headquarters attorney responsible  for the  underlying
       enforcement action, unless that attorney  is unavailable, in
       which case  ORC will select an attorney to represent EPA.

(5)    LO Obtains Decision of CE. The Case Examiner issues his
       or her  written decision on whether  to list the facility and
       files it with the LO within 30 davs of the conclusion of the

-------
                      14

             listing proceeding,  and  any supplementation of  record
             allowed by the Case Examiner, § 15.13(c).

c.     LO Sends Notice of CE's Decision And Opportunity For OGC
      Review.  After the CE files his or her decision with the LO, the
      LO is responsible for notifying the appropriate parties of the CE's
      decision, as follows:

      (1)    CE Decides To List. The LO notifies the owner, operator,
             or supervisor of the facility, the recommending person, the
             EC(s), the DCE and DOCK, the RA, ORC, the regional
             program  office, and the  Director,  OCAPO, of the CE's
             decision to list the facility and of the facility's opportunity
             to have  OGC  review that  decision  if  such review is
             requested within 30 davs.  §  15.13(d).

      (2)    CE  Decides Not To List.  The LO notifies the owner,
             operator, or supervisor of the facility, the recommending
             person, the EC(s), the DCE and DOCE, the RA, ORC, the
             regional program office, and the Director,  OCAPO, of the
             CE's decision denying the  recommendation to  list the
             facility.   The Case Examiner's decision not  to list is final
             Agency action on the recommendation to list, § 15.14(d).

d.    OGC Review Not Requested. If the CE decides to list the facility,
      the facility may request that OGC review the CE's decision.  The
      request for review  must be made in writing and must be received
      by the LO within 30 days of the date on which notice of the CE's
      decision  was received by the facility.

             If the LO  does not receive a timely request for OGC
      review, then the  CE's decision granting the recommendation to list
      stands as final Agency action,  §  15.14(d), and the LO follows the
      steps set forth  in  the Listing  Official's Discretionary  Listing
      Checklist, found in Table One.

e.    OGC Review Requested.  If the facility files a timely request with
      the LO for OGC review, the LO does the  following:

      (1)    The  LO  Transmits The  Request For OGC Review To
             QRC. The LO transmits to ORC a copy of the request for
             OGC review. ORC is responsible for obtaining comments
             from the  EC(s)  and  recommending   person  (if the
             recommendation to list was not filed by EPA). ORC must

-------
                             15

                    then  prepare and return to  the  LO, within  14 days of
                    receiving the request for OGC review, a reply brief stating
                    the Agency's response to the facility's claims in the request
                    for OGC review.  Generally, the attorrey who represented
                    EPA  at the listing  proceeding should prepare  the reply
                    brief.

             (2)     LO Transmits Request To QGC.  When the LO receives
                    the reply brief responding to the request for OGC review,
                    the LO transmits to OGC:  (i) the CE's decision; (ii) the
                    request for review; (iii) the reply brief; (iv) the comments
                    of the EC(s) and the  recommending person;  and (v) the
                    entire record of the listing  action.

             (3)     QGC Reviews CE's Decision.   OGC reviews  the CE's
                    decision based on the record of the listing proceeding,
                    considered as a whole, and issues a final decision within 30
                    days or as soon as practicable, §  15.14(c).

      f.     The LQ Obtains QGC's Decision.  When OGC files  its decision
             with   the  LO,  it  becomes  final  Agency   action   on  the
             recommendation  to  list, §  15.14(c).   The. LO then  does  the
             following:

             (1)     QGC Affirms The Case Examiner.  If OGC  affirms the
                    CE's  decision to list, listing is effective  when  OGC's
                    decision is filed with the LO. The LO follows the steps in
                    the Listing Official's Discretionary Listing Checklist, found
                    in Table One.

             (2)     QGC Reverses The Case Examiner.  If OGC reverses the
                    CE, the LO notifies the owner, operator, or supervisor of
                    the facility,  the recommending person, the AA, the DCE
                    and DOCE, the  Director,  OCAPO,  the  EC(s),  the RA,
                    ORC,   and   regional   program    office,   that   the
                    recommendation  to  list has been denied on the basis of
                    OGC's decision on review.

7;    Withdrawal Of A Recommendation To List. The recommending person
      may withdraw his or her recommendation to  list  under the  following
      circumstances:

      a.     Prior To The Conclusion Of The Listing Proceeding.  At any time
             before the CE issues his or her written decision concluding the

-------
                             16

             listing  proceeding, the recommending person may  withdraw the
             recommendation to list fpr any reason.  However, a request to
             withdraw the recommendation must be made in writing and must
             state the reason  for withdrawing the  request.  A recommending
             person  must withdraw a  recommendation  to  list  if he or  she
             determines that the facility has corrected the condition which gave
             rise to the recommendation to list, §  15.11(d).

      b.     After the Conclusion of the Listing Proceeding.
             After the CE has issued his or her decision at the conclusion of the
             listing  proceeding, a recommendation to list may be withdrawn
             only if the recommending person determines that the facility has
             corrected the condition which gave rise to the recommendation to
             list, §  15.11(d).  The request to withdraw the recommendation to
             list must  be made in writing and  must  state  the  reason for
             withdrawing the recommendation.  A recommending person must
             withdraw a recommendation to list if he or she determines that the
             facility has corrected the  condition which gave  rise  to the
             recommendation to list, §  IS.ll(d).

8.    Stays Of A Discretionary Listing  Action.  All stays of listing actions are
      presumed to be prejudicial to the proceedings. Consequently, a stay of a
      discretionary  listing action may  be granted only under the following
      circumstances:

      a.     Prior To The Listing Proceeding. The LO may grant a stay of the
             discretionary listing action (1) for a period not to exceed 60 days,
             (2) upon  timely notice, (3) for good cause shown, (4)  on the
             record, and (5) after consideration of the prejudice to the parties
             or the proceeding.

      b.     During The Listing Proceeding. The Case Examiner may grant a
             stay of the  listing proceeding  (1) for a period not to exceed 60
             days, (2)  to permit any party to obtain evidence, or (3) for any
             other reason that  will advance the proceedings, (4) giving due
             consideration to the prejudice to the parties.

      c.     After The Listing Proceeding.  The LO may grant a stay of the
             discretionary listing action (1) for a period  not to exceed 60 days,
             (2) upon  timely  notice, (3) for good cause  shown, (4) on the
             record, and (5) after consideration of the prejudice to the panics.
             Any stay shall QOJ extend  the time in which a party must request
             review by the EPA General Counsel of a Case Examiner's decision
             in a listing proceeding.

-------
                             17

9.     EPA Guidance On Implementing Discretionary T j^j

       a.     Summary of policy

             On November 26,  1986, the AA for Enforcement issued guidance
       on implementing discretionary listing program. Some of the main points
       and  subjects of this memorandum are:

       1.     Discretionary  listing process  is  effective  in achieving  more
             expeditious compliance and case settlements.

       2.     Recommendations  to list should be  considered for all cases of
             noncompliance with consent  decrees, all  civil  cases  where
             violations  are  ongoing,  violations  of administrative  orders,
             multifacility noncompliance within  a single company, (p.2-3)

       3.     Standard of proof in  listing proceedings. "Record must show by a
             preponderance of the evidence that  there is a record of continuing
             or recurring non-compliance, (p.4)

       4.     Fairness and discussion of contractor listing with opposing parties
             in settlement negotiations.  Case must  involve clearly applicable
             standard;  distinguishing  between  recommendations  and  final
             decisions. (p.S)

       5.     Coordination with  DOJ.   Making  sure listing activity does not
             compromise litigation. (p.S)

       6.     Requesting information from facilities about government contracts
             during a civil case.   Model letters,  (p. 6)

       b. Use of Discretionary Listing

       1.     Discretionary listing  continues to be an underutilized component
             of the contractor listing  program.  There are however  several
             examples  of situations where  discretionary  listing has  been a
             powerful tool.

             Ex 1. Frequently, merely sending a letter pursuant to CAA§ 114
             or CWA § 308 requesting information  on the company's  Federal
             contract can assist in the settlement of civil suits.

             Ex 2.  In the Wheeling Pittsburgh  case, EPA was  faced  with an
             intransigent company during settlement negotiations of a Clean Air

-------
                                    18

                    Act  civil  suit  involving  three  facilities.    Institution  of  a
                    discretionary listing procedure resulted in a settlement of the civil
                    suit within a month.

       10.    Big Apple Wrecking Corporation Case

                    On August 15, 1991,  the  Office of General counsel  issued a
             decision In  the Matter of: Big Apple  Wrecking  Corporation. In  this
             decision on appeal from a Case Examiner's decision to list  Big  Apple
             Wrecking Corp.'s Bronx, NY  facility, the General Counsel vacated the
             Case Examiners decision to list respondent's facility. Citing the preamble
             to the  1984  contractor listing regulations, the General Counsel ruled that
             continuing or recurring violations must be evaluated on case by case basis
             (evidence of two or more violations is not enough by itself). It  was held
             that the listing decision must  contain an explanation  of the Agency's
             reasons for concluding that a  particular series of  violations  presents a
             proper occasion for invoking the listing remedy. The Agency must decide
             whether  listing  the particular  facility  with continuing of  recurring
             violations is appropriate  "in light of the policies  and  purposes  which
             underlay  the listing remedy,"  namely to "undertake procurement  and
             assistance activities in manner that will result in effective enforcement of
             the Clean Air Act, and not to favor businesses which cut cost by failing
             to comply with environmental laws."

                    The  General Counsel  also upheld  the  policy  concerning  the
             definition of "facility" as it applies to asbestos removal operations, noting
             that defining the business  address as the violating  facility was  not only
             appropriate, but to do otherwise would gut the effectiveness of the listing
             program.

D.     Defining The Violating Facility

       1.    Introduction

             The CWA § 508 and CAA § 306 do  not define "facility."  Defining this
       important term has been accomplished through rulemaking.  40 CFR Part 15
       defines facility as:

             any building,  plant, installation, structure,  mine, vessel or other
             floating craft,  location or site of operation owned, leased,  or
             supervised by an applicant, contractor, grantee, or borrower to be
             used in the  performance of a contract, grant, or loan.

-------
                              19

This apparently straightforward definition is generally applied without difficulty.
However,  cases arise  where application of the definition presents a challenge.
For example:  If a facility where   NPDES violations occur  is supervised by
contractors and the contractors are  convicted, should the contractor's place of
business be listed as the facility?  What is-constitutes the "facility" where the oil
pipe running between a shipping terminal and storage tanks  ruptures?  What
should be listed where CWA violations occur when oil is discharged from the hull
of ship that has run aground.

2.     Role of Regional Counsel. Regional Program and CID.

       In certain cases, the conditions which gave rise to the criminal conviction
that results in mandatory listing may affect more than the site of the  violation,
and the violating facility may, therefore, be the company's business address, or
an operating unit of the company.  When such cases arise,  and these  situations
are not expressly addressed by existing guidance or policy (e.g., the policy that
states that  for asbestos violators, the business address is the violating facility),
Regional counsel, Regional program staff, and CID agents play a very important
role in providing  the  CLP, and  the AA,  information on which to base the
determination of what is the violating facility.

       In all cases which may result in mandatory listing, the Regional attorney(s)
handling the enforcement action against  the facility should  contact the CLP as
soon as possible,  so that relevant  information can  be provided to  assist in
determining the identity of the violating facility.  These determinations must be
made before the time of the conviction, or as soon after as is practicable.  This
is especially important  in cases where there  may be  an  issue  concerning
determining  what  is the violating facility, so early contact with the CLP is
extremely important.

3.     Guidance Document:  Defining the "Violating Facility"  for Purposes of
       Listing  Asbestos Demolition and Renovation Companies Pursuant to
       Section  306 of the Clean Air Act, March 11, 1988.

       This policy statement stands for the proposition that the business address
used by an asbestos demolition and renovation company may be used to identify
the "violating facility," rather than the address of the particular site involved in
the violating activity.  The basis  for this view is that the Congress intended, as
evidenced by the legislative history,  for the Administrator to ban other facilities
owned by a convicted company where the other facilities are circumventing the
listing  of the violating facility; the definition in Part 15 of "facility"  includes the
business address of company and there is no requirement under CAA § 306 or
CWA  § 508 that business address of the  facility coincide with the address of the
sites where the violation occurred.

-------
                              20

       In the fog Apple Wrecking case this policy was utilized and upheld by the
General Counsel.  Other cases where this policy has been invoked include, e.g.,
a wetlands filling case.

4.     Contractors

       In addition to asbestos removal cases,  certain convictions involve the
conviction of corporations and/or  their employees  who  are  responsible for
criminal violations under the CWA or CAA at facilities owned by other entities,
such  as  municipalities  (such as  municipally owned POTW),  or  the Federal
government. Similar to the asbestos removal cases, the issue arises as to whether
the contractor's operating office/division or headquarters should be listed. Unlike
asbestos removal cases,  these cases are frequently complex and present unique
factual circumstances in terms of the relationship of the contractor to the facility.
Consequently, no single policy or position by OE can achieve a fair and equitable
result in all cases. Accordingly, a flexible analysis/procedure is  described below
for determining whether the contractor's place of business should be listed.

       The following  is nonexclusive  list  of factors that are  considered and
weighed in such  cases.   These factors  are weighed in conjunction with the
concepts stated  in the memorandum discussed above regarding listing asbestos
contractors.

       *      If the convicted party is  a contractor, whether the contractor has
              an address separate from the facility.

       *      If the convicted  party  is contractor,  whether  the contractor
              continues to do business in the field for which its  employees were
              convicted.

       *      If the convicted party is a contractor, the degree of culpability on
              the part of the owner of facility.

       *      Degree  of knowledge/involvement of  the contractor  at  the
              contractor's division\HQ level.

       *      Extent to which interests of government will be unprotected if only
              the site or facility where the  violations took place is listed.

       41      Extent to  which other violations exist at other contractor operated
              facilities.

-------
                                          21

             5.     Independent Facilities

                          The definition of "facility", § 15.4, includes the following proviso:
                    Where a location or site of operations contains or includes more than one
                    building, plant, installation, or structure, the entire location or site shall
                    be deemed  to be  a facility except  where the Assistant administrator
                    determines that independent facilities are  located -in one  geographical
                    area."

                          This provision  has been invoked once in the course of a removal
                    petition.  On September 30, 1991, in In the Matter of Exxon Corporation
                    (Exxon Company.  USA..Linden and Bayonne. N.J.) (Contractor Listing
                    ML  Docket  No.  02-91-L034),  the  Assistant Administrator  issued a
                    Determination  Regarding   Exxon   Company  USA's  Petition   for
                    Determination of Independent Facilities: Inter-Refinery Pipeline, Bayway
                    Refinery, and Bayonne Terminal.

                          The Assistant Administrator determined that petitioner's terminal,
                    refinery, and connecting  pipeline were not independent facilities.  The
                    pipeline  ends were physically  located at  the  terminal and refinery
                    respectively; management and employees at each were  intertwined; and
                    the pipeline oil flow was controlled by both facilities.  The three locations
                    were held to serve a unitary purpose.
IV.    PROCEDURES FOR REMOVAL FROM THE LIST

       A facility may  be removed  from the List in one of four ways.  A facility may be
removed automatically if the conviction which was the basis for mandatory listing,  or  the
decision in the underlying enforcement action that was the basis  for discretionary listing, is
reversed, or after one year on the List in some discretionary listing cases.  A facility may also
be removed from the List following final Agency action as a result of a favorable decision by
the AA on  the facility's request for removal; a favorable decision by a CE following the AA's
denial  of the request to remove the  facility from  the List; or a  favorable decision  by  the
Administrator if die CE denies the removal request.

       Requests for removal will be processed by representatives of the EC(s), the ORC, the
regional program office, and the LO.  The regional representatives acts as  advocates  for the
Region's position on the removal request. The representative(s) of the EC(s) will act as counsel
to both the Region and the LO.  The LO is responsible for the adjudicative function and is the
recommending official  to the decisionmaker, the AA.  Each representative will be  responsible
for ensuring that his or her office completes its responsibilities in a timely fashion,  and  that all
necessary reviews and acknowledgements from policy level officials within his or her office are
obtained.

-------
                                    22

A.     Automatic Removal

       1.      Mandatory Listing

              a-     Reversal Of Conviction.  The owner, operator, or supervisor of
                    the facility is responsible'for informing the LO if any criminal
                    conviction  which   resulted  in listing is overturned, and must
                    provide a certified copy of the  judgment  order  reversing  the
                    conviction.

                           Upon receipt of such an order and upon confirmation that
                    a legal basis for mandatory listing no longer exists, the LO follows
                    the steps  set forth in the Listing Official's Removal Checklist,
                    found in Table Two.  If there is a dispute concerning the effect of
                    a court order purportedly reversing a conviction, the dispute shall
                    be  resolved by deeming the request to be a request for removal
                    based upon correcting the condition that gave rise to listing.  The
                    procedures set forth at paragraph IV.B.4. (page 27) apply to such
                    requests.   A further  appeal which leads to  reinstatement of the
                    judgment of conviction shall result in automatic relisting.

      2.      Discretionary Listing

              a.     Reversal  Of  Underlying  Order.   The clwner,  operator,  or
                    supervisor of the facility is responsible for informing the LO if any
                    order which was the basis  for a  determination to list has been
                    reversed,  and  must provide a certified copy of the document
                    evidencing the  reversal of the prior order.

                           Upon confirmation  that a  legal basis for discretionary
                    listing no longer exists, the LO follows the steps set forth in the
                    Listing Official's Removal Checklist (Table  Two).  If there is a
                    dispute concerning the effect of a court order purportedly reversing
                    a prior order which was the sole basis for a discretionary listing
                    determination, the dispute shall be resolved by deeming the request
                    to be a request for removal based upon correcting the condition
                    that gave rise to listing.  The procedures set forth  at paragraph
                    IV.B.4. (page 27) apply to such requests.  A  further appeal which
                    leads to reinstatement of the judgment of conviction shall result in
                    automatic relisting.

              b.     Expiration Of One Year. A facility listed under §§  15.11(a)(4),
                    (5), or (6),  is eligible to be  removed from the List after one year,
                    unless, within that  one year period, the LO  is informed that: (1)

-------
                                   23

                    a basis for mandatory listing exists as a result of the conviction of
                    the  owner, operator, or  supervisor of the  facility for violating
                    CAA  §  113(c) or CWA § 309(c); or (2) a basis for discretionary
                    listing exists as a result of the  facility's continuing  or recurring
                    noncompliance with clean air or clean water standards, and: (a) a
                    state or  local court has convicted any person who owns, operates,
                    or supervises  the facility of a  criminal offense on  the basis of
                    noncompliance with  clean air or  clean  water  standards,  §
                    15.11(a)(2); or (b) a federal, state, or local court has issued an
                    order  or civil ruling as a result of noncompliance with clean air or
                    clean  water standards, §  15.11(a)(3).

                    If, after a facility has remained on the List for one year, the LO
                    determines that the facility is entitled to removal from the List, the
                    LO follows the steps in the Listing Official's Removal Checklist
                    (Table Two).

B.     Requests For Removal.   Regardless  of the. underlying basis for removal, and
       regardless of whether listing was  the result of the mandatory or discretionary
       listing process, the  removal process can be  initiated by  filing a request for
       removal with the LO. The original recommending person,  or any person who
       owns, operates, or supervises a listed facility may  file a request for removal with
       the LO,  § 15.22(a).

                    45-DAY PERIOD.  As soon as the request is received, the  LO:
             (i) notes on the listing docket  the date on which the request for removal
             was filed;  (ii)  reviews the request to  determine the basis upon which
             removal is sought; and (iii) sends a  letter to the person requesting removal
             that acknowledges receipt  of the  request.   The letter also notifies the
             person requesting removal that the failure of EPA  to respond to the
             request  for  removal within 45 days  of  the  date  that  EPA  has  all
             information necessary to determine whether or not the request should be
             granted (i.e., within 45 days after  the administrative  record is complete)
             constitutes a  denial of the request for removal, at which point a removal
             hearing before a Case Examiner may be requested.

             The Agency's goal is to process  each request for removal before this 45-
             day period expires.   The 45-day period does not begin to  run until the
             administrative record is complete in order to permit EPA sufficient  time
             to analyze the often complex factual, technical and legal issues involved
             in a request for removal. This interpretation also ensures that a petitioner
             provides a complete removal request before it may presume that EPA has
             denied its petition,  and invoke its  right  to a  hearing  before a Case
             Examiner, based on the passage of the 45-day decision period.  It is based

-------
                                            24

                     upon the Agency's interpretatiop that the Assistant Administrator should
                     be able to  make  a decision based on a  complete administrative record,
                     before subsequent stages of administrative review are sought.

                     1.      Removal Of Underlying Court Order.  If the request for removal
                            is based upon the reversal of the  court order which  was the basis
                            for  listing,  then  the  LO follows the procedures in paragraphs
                            IV.A.l. (p. 22) or IV.A.2.a. (p.  23) above.

                     2.      Expiration  Of One Year (Discretionary Listing  Only).   If the
                            request for removal is based upon the expiration of  one year in a
                            discretionary listing case under §§ 15.1 l(a)(4), (5), or (6), then the
                            LO  follows the procedures in paragraphs  IV.A.2.b. (p. 23) above.

                     3.      Plan For Compliance  (Discretionary Listing Only).  If the request
                            for  removal is based upon  the facility's establishing a plan for
                            compliance which is acceptable to the AA, then the LO follows the
                            procedures described below.

                            a.     Requests Filed By The Regional Office.  If the request for
                                  removal was filed by the regional office, the  LO transmits
                                  the request to the EC(s), the owner, operator,  or supervisor
                                  of the listed facility, and the original recommending  person
                                  in the discretionary listing case, asking them to submit their
                                  comments on the  request for  removal  and  plan  for
                                  compliance,  to the LO within 10 days.

                            b.     Requests Filed Bv Others.  If the request for removal was
                                  filed by  some person other than  the  staff of an EPA
                                  regional office, the LO transmits a copy  of the request for
                                  removal to the EC(s), the RA,  ORC,  regional program
                                  office, the owner, operator, or  supervisor  of  the listed
                                  facility,  and the original  recommending  person  in  the
                                  discretionary listing case6.

                                         The LO notifies the Regional Counsel by telephone
                                  that a removal request has been filed,  and  the Regional
                                  Counsel designates a Regional attorney to  represent the
    6  The LO notifies the Regional Counsel by phone that a removal request has been filed and the Regional
Counsef designates a Regional attorney to represent the Agency o the removal request; the LO informs the ECs and
the owner, operator or supervisor of the listed facility (or its attorney) of who has been designated to represent the
Agency in regard to the removal request. The LO requests the ECs to submit their comments on the request for
removal and the plan for compliance to the designated Regional attorney within 10 days.

-------
               25

      Agency on the removal request; the LO informs the ECs
      and the owner, operator, or supervisor of the listed facility
      (or their attorney) who has been designated to represent the
      Agency in regard to the removal request.  The LO requests
      the EC(s) to  submit their comments on the request for
      removal and plan for compliance to the designated Regional
      attorney within 10 days.

c.     Regional Office Prepares Formal Recommendation. At the
      end of 10 days, the LO  reviews all comments that have
      been  received, forwards  copies of them to  the regional
      office for the  region in which the facility is  located, and
      ask ORC to prepare and return to the LO within 15 days:

      (1)    a formal recommendation  based on  the regional
             office's assessment of whether the  request for
             removal should be granted or denied, in light of the
             facility's proposed plan for compliance;

      (2)    a  memorandum   summarizing  the  supporting
             documentation for the formal recommendation; and

      (3)    the  written acknowledgement  of the Regional
             Administrator or  Deputy Regional Administrator
             indicating that he  or she has reviewed the formal
             recommendation and submitted any comments on it
             to the LO.

NOTE:       Both  Regional  and HQ program staff  for the
             appropriate medium (air or water) play an important
             role in advising on technical and factual issues, and
             should be involved in  the listing process,  where
             appropriate.

d.    Verification of Correction of Conditions Which Gave Rise
      To The Conviction:  EPA policy requires that the Agency
      verify in every case that the violating facility has corrected
      the condition which gave  rise to the conviction. This may
      involve, for  example,  a compliance  inspection  by  a
      delegated state under the NPDES  program, an inspection
      by a  local air  control board under the asbestos NESHAPS
      program, or an inspection by EPA's own personnel. The
      EPA Regional attorney who represents the Agency in each
      removal case should determine what type of inspection will

-------
               26

       be necessary promptly after receiving the removal request.
       The CLP staff is available to assist in determining  what
       type of inspection will be appropriate, and regional staff
       are encouraged to contact the CLP for assistance in this
       area.

e.      LO Drafts Determination. At the end of the 15-day period,
       the LO receives the region's formal recommendation on the
       request  for removal and plan for compliance,  and the
       summary of supporting documentation, confirms that the
       recommendation has  been  reviewed  by  the  Regional
       Administrator  or Deputy RA, and drafts a determination
       for the AA's signature.

f.      Headquarters   Review and Comment.    After the  draft
       determination  has been prepared, the LO transmits it for
       review  and  comment,  along  with  the  summary  of
       supporting  documentation, to: (1)  the  EC for  Air,  or
       Water, or both; (2)  the DCE, or DOCE, or both.  Each
       office must acknowledge that it has reviewed the document
       and  made any necessary comments before returning the
       draft determination to the LO.
                                        t

       NOTE:    The HQ  program office  (for  air or water
       enforcement, as appropriate) is also given the opportunity
       to review and  provide comments to the EC and to the LO
       concerning the draft determination.

g.      Decision Bv The AA.  After the appropriate Headquarters
       staff have  reviewed  and  commented  on  the   draft
       determination,  and  any  necessary  revisions have  been
       made,  the LO prepares a transmittal  memorandum and
       briefing  memorandum that summarizes: (i) the history of
       the case; (ii) the status of the case; (iii) the reasons for the
       recommended  determination; (iv) whether the RA, ORC,
       and regional   program office have expressed comments
       agreeing with the draft determination; and (v) any problems
       or  special  considerations.  The LO sends the briefing
       memorandum, the draft determination, and the summary of
       supporting documentation, to the AA  for  his or her
       decision.

             If an oral briefing is  requested, the LO schedules
       the  briefing,  arranges for representatives  of the EC(s),

-------
                      27

             DOCE and OCAPO  to be  present,  and offers the RA,
             DRA, ORC, and regional program office an opportunity to
             be present at the briefing,  in person or by telephone.

             (1)    AA  Grants  Removal  Based  Upon  Plan  For
                   Compliance.   If the  AA approves the plan for
                   compliance, the  LO follows the steps set forth in
                   the  Listing Official's  Removal  Checklist (Table
                   Two).

             (2)    AA  Denies Removal.  If the AA does not approve
                   the plan for compliance and denies the request for
                   removal, the LO notifies the owner, operator, or
                   supervisor  of  the facility, and the recommending
                   person, EC(s), RA, ORC, regional program office,
                   the Director, OCAPO, and the DCE and DOCE,
                   that the request- for removal has  been  denied, and
                   notifies the facility of the opportunity to request,
                   within 30 days, a hearing before a Case Examiner,
                   §§ 15.22(c), 15.23(a).

4.    The Condition Giving Rise To Listing Has Been Corrected.  If the
      request for removal is based on the facility  having corrected the
      condition that gave rise to listing, the LO follows the procedures
      described below.

      a.     Requests Filed Bv The Regional Office.  If the request for
             removal was filed by  the regional office, the LO transmits
             the request to the EC(s), the owner, operator, or supervisor
             of the listed facility, and the original recommending person
             in discretionary listing  cases, or the OCE in mandatory
             listing cases.   The LO informs the EC(s)  and the owner,
             operator, or  supervisor of the listed facility, (or their
             attorney), who has been designated  to represent the Agency
             in regard to the removal  request.   The LO  requests the
             EC(s) to submit their comments on the request for removal
             to the designated Regional attorney within 10 days.

      b.     Requests Filed By Others.  If the request for removal was
             filed  by some person  other  than the  staff  of an EPA
             regional office, the LO  transmits a copy of the request for
             removal  to the EC(s),  the RA, ORC,  regional program
             office, the owner, operator,  or supervisor of the  listed
             facility,  and  the original  recommending  person  in

-------
                                           28

                                  discretionary listing cases, or the OCE in mandatory listing
                                  cases. The LO notifies the EC(s) and the owner, operator,
                                  or supervisor of the listed facility, (or  their attorney), of
                                  who has been designated to represent the Agency in regard
                                  to the removal  request.   The  LO requests the EC(s) to
                                  submit their comments on the  request for removal to the
                                  designated Regional attorney within 10 days.

                           c.      Region  Prepares  Formal  Recommendation.    The  LO
                                  reviews  all comments that have  been received, forwards
                                  copies of them  to the regional office for the Region in
                                  which the listed facility is located, if necessary, and asks
                                  the ORC to prepare and return  to the LO:

                                  (1)    A formal recommendation, based upon the regional
                                        office's assessment  of  whether the  request  for
                                        removal should be granted or denied.7  The formal
                                        recommendation must contain:  (i) a  background
                                        section that summarizes the history and proposed
                                        resolution of the case; (ii) specific  factual findings
                                        covering all major events in the case, and technical
                                        tests that support the determination from the date of
                                        the original violation to the present time, and all
                                        expected events and test  results, including any
                                        environmental cleanup  under a compliance plan
                                        approved by EPA (any  consent  decree, probation
                                        order, administrative order, performance guarantee,
                                        or  permit evidencing  the compliance schedule
                                        should be attached to the recommendation); and (iii)
                                        a conclusion setting forth the recommendation.

                                  (2)    A   document   summarizing   the    supporting
                                        documentation  for  the recommendation.   The
                                        summary  of  supporting documentation  must:  (i)
                                        identify the source of all information available for
                                        making  the   determination;   (ii)  identify   all
                                        inspections made and state whether they satisfy the
                                        policy on independent verification; (iii) identify, in
                                        accordance with the policy defining the condition,
                                        the specific condition(s)  that gave rise to listing and
    7   See 'EPA Policy Regarding the Role of Corporate Attitude, Policies, Practice*,  and Procedures In
Determining Whether To Remove A Facility From The EPA List of Violating Facilitiea Following A Criminal
Conviction', October 31, 1991, 52 Fed. Reg. 64785 (Dec. 12, 1991).

-------
               29

             the manner in which the condition has been or is
             being  corrected;  (iv) describe the status of the
             facility's efforts to correct the condition; and (v)
             ensure  that any  comments  by  state  or  local
             authorities are reflected; and

      (3)    The acknowledgment of the Regional Administrator
             or Deputy  RA that he or she has reviewed the
             formal    recommendation   and   summary   of
             documentation,  and  has  made  any  necessary
             comments.

NOTE:       Both Regional and HQ  program staff for the
             appropriate medium (air or water) play an important
             role in advising on technical and factual issues, and
             should  be involved in the listing  process,  where
             appropriate.

d.    LO Drafts Determination.  The  LO  receives the formal
      recommendation on  the request  for removal  and the
      summary of supporting  documentation, confirms that he
      recommendation has  been reviewed by  the RA or DRA,
      notes on the summary of supporting documentation any
      materials available at Headquarters, and prepares a draft
      determination for the AA's signature.

e.  • Headquarters Review.  Once the draft determination has
      been  prepared,  the LO  transmits  it  for  review  and
      comment,  along  with  the   summary  of  supporting
      documentation, to  the EC for Air, or  Water, or both, and
      the OCE.  After each of these offices has acknowledged
      that it has reviewed  and commented upon  the draft
      determination  and summary  of documentation,  those
      documents are returned to the LO for any revisions the LO
      deems necessary.  The LO requests  the ECs to respond
      with their comments and concurrence within  3-5 business
      days of receiving the draft determination.

      NOTE:   The HQ  program  office  (for air or  water
      enforcement, as appropriate) is also given the opportunity
      to review and  provide comments  to the EC and to the LO
      concerning the draft determination.

-------
         30

Decision Bv The AA.  After the appropriate Headquarters
staff  have  reviewed  and  commented  on  the draft
determination, and  any necessary  revisions have been
made,  the  LO prepares a transmittal  memorandum  and
briefing memorandum that summarizes: (i) the history of
the case; (ii) the status of the case; (iii) the reasons for the
recommended determination; (iv)  whether the RA, ORC,
and regional program  office  have  expressed  comments
agreeing with the draft determination; and (v) any problems
or special  considerations.   The  LO  sends  the briefing
memorandum, the draft determination, and the summary of
supporting  documentation  to  the  AA for his  or  her
decision.  The goal  is for  the A A to  issue a decision or
request an oral briefing  within 3-5  days of receiving the
draft determination.

      If an oral briefing is requested, the LO schedules
the briefing,  arranges for  representatives of the EC(s),
OCE, and OCAPO to be present, and offers the RA, DRA,
ORC, and regional program office  an opportunity to be
present at the briefing, in person or  by telephone.
(1)    AA  Grants  Removal.   If the AA  approves  the
      request for removal, the LO removes the facility
      from the List; notifies the  owner, operator,  or
      supervisor of the facility, the recommending person
      (in discretionary listing cases), the EC(s), the OCE
      (in mandatory listing  cases), the RA, ORC, and
      regional program office, of the effective date  of
      removal, pursuant to § 15.27; the LO also notifies
      the General Services Administration (GSA) that the
      facility is to be removed from the "Lists of Parties
      Excluded   From   Federal   Procurement   or
      Nonprocurement Programs."

(2)    AA  Denies Removal.  If the AA denies the request
      for removal, the LO notifies the owner, operator,
      or supervisor  of the  facility,  the  recommending
      person, EC(s), RA, ORC, regional program office,
      the  Director, OCAPO, and the DCE and DOCE,
      that the request for removal has been denied. The
      LO  also notifies the facility of the opportunity to

-------
                            31

                          request, wjthin  30 days, a hearing before a Case
                          Examiner, §§ 15.22(c), 15.23(a).

5.     Removal Hearing.  The owner, operator, or supervisor of a listed facility,
       or the original recommending person in the case of a facility listed under
       the discretionary listing process, my file with the LO; within 30 calendar
       days after the decision of the AA denying removal, a written request for
       a removal hearing, § 15.23(a).

       a.     Removal Hearing Not Requested.  If the LO does not receive a
             request  for a removal hearing within 30 calendar days after the
             decision of the AA, the LO notifies: the owner,  operator,  or
             supervisor of the facility; the original recommending person; the
             AA; the Director, OCAPO; the DOCE; the EC(s);  and the RA,
             ORC, and regional program office, that the decision of the A A is
             final Agency action  on the request for removal, and that any
             person  who may make a request for removal may file a new
             request  for removal, based upon new information, § 15.23(b).

       b.     Removal Hearing Requested.  If the LO receives a request for a
             removal hearing within 30 days after the decision of the AA, the
             LO does the following:

             (1)    AA Designates A Case Examiner.  The A A designates a
                    Case Examiner, § 15.24. The Case Examiner may be any
                    EPA employee who has subject matter expertise, and who
                    was not involved in the underlying enforcement action or
                    listing action (except that the Case Examiner who served in
                    the listing proceeding involving the facility may serve as
                    Case Examiner in  the removal hearing).  The LO will
                    consult with the EC(s) to determine appropriate persons to
                    act as Case Examiners in removal hearings.

             (2)    Case Examiner Schedules Removal  Hearing.   The  CE
                    schedules  the removal  hearing and  notifies the owner,
                    operator, or supervisor of the facility, the LO, the original
                    recommending person, the federal, state, or local authority
                    responsible for  enforcement  of clean air or clean water
                    standards, and the listing case representatives (see § IV) of
                    the date, time, and  place of the listing proceeding.

                          That notice  letter also informs all parties of their
                    obligation  to provide to  all other parties at least 7 days
                    prior to the removal hearing, copies of all documents which

-------
                      32

              they intend to  submit  at the removal hearing.   It is the
              responsibility of the CE  to attempt to arrange the timing
              and  location  of  the  listing  proceeding  so  that  it  is
              convenient for all parties to attend.

       (3)     CE Obtains Court Reporter.  The LO retains the services
              of a court reporter, § 15.24(a)(2), paid for by EPA.

       (4)     Removal Hearing Held. The removal hearing is conducted
              in  accordance  with  §§  15.24(a)-(c).    EPA  will  be
              represented at the removal hearing by the EPA regional or
              headquarters  attorney  responsible for  the underlying
              enforcement action.

       (5)     LO Obtains Decision Of CE.  The Case Examiner issues
              his or her written decision on whether to grant the request
              for removal and files if with the LO as soon as practicable,
              with a target of filing  the decision no later than 30 days
              after  the  conclusion of the removal  hearing  and  any
              supplementation of the  record  allowed by  the CE,  §
              15.24(c).

c.     LQ Sends Notice  Of CE's Decision.  The LO is responsible for
       sending written notice of the CE's decision to the owner, operator,
       or supervisor of the facility, the original recommending person,
       the EC(s), the RA, ORC, and regional program office, and the
       federal, state, or  local authority responsible for enforcement of
       clean air or clean  water standards.

       (1)     If the Case Examiner grants removal, the LO removes the
              facility  from the List; notifies  the owner,  operator, or
              supervisor of the  facility, the recommending person (in
              discretionary listing cases),  the  EC(s),  the  OCE  (in
              mandatory listing cases), the RA, ORC, and  the regional
              program office, of the  effective date of removal, pursuant
              to § 15.27.  The LO  also notifies the General Services
              Administration  (GSA)  that the facility is to  be removed
              from the  "Lists  of  Parties  Excluded  From Federal
              Procurement or Nonprocurement Programs."

       (2)     If the Case Examiner denies removal, the LO notifies the
              owner,  operator,  or supervisor of the facility, the original
              recommending  person, the EC(s), the RA, ORC, and the
              regional program  office, and the  federal, state, or local

-------
                      33

             authority responsible for the enforcement of clean air or
             clean water standards,  of the decision.  The LO also
             advises  the facility of the opportunity to request the
             Administrator  to review the CE's decision,  §  15.24(d), if
             a written  request for such review  is filed with  the LO
             within 30  days after the date of  the  Case  Examiner's
             decision, § 15.25(a).

d.     Administrator's Review Not  Requested.   If the  LO does not
       receive a written request for review within 30 days after the date
       of the Case Examiner's decision, the LO sends a notice to  the
       owner,  operator, or supervisor  of the  facility,  the  original
       recommending person,  the  DCE and  DOCE,  the  Director,
       OCAPO, the EC(s), the RA, ORC, and regional program office,
       and the federal,  state,  or local  authority responsible  for  the
       enforcement of clean air or clean water standards, informing them
       that the CE's decision stands as final Agency action on the request
       for removal, § 15.25(c), and  that any person who may file a
       request for removal may file a new request for removal based upon
       new information.

e.     Administrator's Review Requested.  If the LO  receives a timely
       written  request  to have the  decision of  the  Case  Examiner
       reviewed by the Administrator:

       (1)   The  LO  Transmits The  Request For Administrator's
             Review To ORC. The LO transmits a copy of the request
             for Administrator's review to  ORC. ORC is responsible
             for obtaining  comments from  the EC(s) and  the  original
             recommending person (if the recommendation  to  list was
             filed by someone other than EPA), and any federal, state,
             or local authority responsible for the enforcement of clean
             air or clean water standards.  Within 14 days of receiving
             the copy of the request for Administrator's review, ORC
             must prepare and return to the LO a reply brief,  stating the
             Agency's response to the facility's claims in the request for
             Administrator's review.   Generally, the  attorney who
             represented EPA at the removal hearing should prepare the
             reply brief.

       (2)   LO  Transmits Request To The Administrator.  After the
             reply brief has been  received, the LO transmits to  the
             Administrator: (i) the Case Examiner's decision;  (ii) the

-------
                      34

             request for review; (iii) the reply brief;  (iv) the comments
             received; and (v) the entire record of the removal action.

       (3)    The Administrator  Reviews The CE-'s Decision.   The
             Administrator reviews the Case Examiner's decision, based
             upon  the record of the removal hearing  considered as a
             whole, and issues a final decision as soon as practicable. §
             15.25(b).   The Administrator's decision  is final Agency
             action. Id.

f.      The LO Obtains The Administrator's Decision.  The Administrator
       files  his decision  with the LO following  review of  the  Case
       Examiner's decision.  Once filed with the LO, the Administrator's
       decision is final Agency action on the request for removal, and the
       LO does the  following:

       (1)    If the Administrator affirms the CE's decision denying
             removal, the LO notifies the owner, operator, or supervisor
             of  the facility, the  original recommending  person, the
             EC(s), the RA, ORC, regional  program office, and the
             federal,  state,  or  local authority  responsible  for the
             enforcement of clean air or clean water  standards, that the
             Administrator's decision affirming  the Case  Examiner
             stands as final Agency  action  denying  the request for
             removal, § 15.25(b), and that any person who  may file a
             request for removal  may file a new  request  for removal
             based on new information,  § 15.25(d).

       (2)    If the Administrator reverses the Case Examiner and grants
             the request for removal, the LO removes the facility from
             the List;  notifies the owner, operator, or supervisor of the
             facility, the recommending person (in discretionary listing
             cases), the EC(s), the OCE (in  mandatory listing cases),
             the RA,  ORC, and the  regional program office, of the
             effective date of removal, pursuant to §  15.27; and notifies
             the General Services Administration (GSA) that the facility
             is to be removed from the "Lists of Parties Excluded  From
             Federal Procurement or Nonprocurement Programs."

-------
CL.2

-------
CL.2-1

-------
          UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                        WASHINGTON, D.C. 20460
                                                         CL.1-1
                             NW26 BBS
                                           OFFICE OF ENFORCEMENT
                                             AND COMPLIANCE
                                              MONITORING
MEMORANDUM

SUBJECT:


FROM:
 TO:
           Guidance on Implementing the Discretionary Contractor
           Listing Program
Thomas L. Adams, Jr.
Assistant Administrator for Enforcement
  and Compliance Monitoring

Assistant Administrator for Air and Radiation
Assistant Administrator for Water
General Counsel
Inspector General
Regional Administrators, Regions i-X
Regional Counsels, Regions 1-X.
 I.    Purpose

      This document establishes Agency policy and procedures for
 implementing the discretionary contractor listing program in EPA
 enforcement proceedings.  It should be read in conjunction with
 the final revisions to the contractor listing regulations (40 CFR
 Part 15,  50 FR 36188,  September 5, 1985), and the guidance document,
 "Implementation of Mandatory Contractor Listing" (General Enforce-
 ment Policy No. GM-32, August 8, 1984).  The procedures-to be
 followed  in all contractor listing actions are contained in the
 rule and  are summarized in an Appendix to this document.  This
 policy applies only to discretionary listing proceedings and super-
 sedes the "Guidance for Implementing EPA's Contractor Listing
 Authority" (General Enforcement Policy No. GM-31, July 18, 1984).

      The  revisions tc  the contractor listing regulationsr together
 with this guidance document and other management initiatives, should
-encourage greater use  of the Agency's listing authority and aiiwuld
 expedite  the process for listing a facility.

 II.  Background

      The  Clean Air Act (CAA), Section 306, and the Clean Water  Act
 (CWA),  Section 508, as implemented by Executive Order 11738, authorize
 EPA to prohibit facilities from obtaining federal government contracts,

-------
                                 -2-

 grants or loan* (including  subcontracts, subgrants and subloans),
 as a consequence  of  criminal or  civil violations of the CAA or CWA.
 Commonly called "contractor listing," this program provides EPA
 with an effective administrative tool to obtain compliance with
 the CAA and  CWA where administrative or judicial action against a
 facility has  failed  to do so.

      On July  31,  1984, EPA  proposed revisions to the contractor
 listing regulations  (40 CFR Part 15 (49 PR 30628)) to simplify and
 clarify the procedural opportunities which EPA will provide to
 parties to listing or removal actions and to provide for mandatory
 (i.e.,  automatic)  listing of facilities which give rise to criminal
 convictions under  Section 113(c)(l) of the CAA or Section 309(c)
 of  the  CWA.   Final rules were promulgated on September 5, 1985
 (50 FR  36188).

 III.  Appropriate  Cases for Discretionary Listing Recommendations

      In  numerous  cases, initiation of a listing action has
proved  to be  effective in achieving more expeditious compliance
and  case  settlements.  While regional offices should consider
making  contractor  listing recommendations in every case where
the  criteria  of 40 CFR Part 15 are met, listing is a tool to
be  used  in conjunction with other enforcement actions.   (See IV.
Standard of Proof  in Listing Proceedings, page 4.) The circumstanc
surrounding each case will  dictate whether a listing action should
be  initiated.   In particular, use of listing may be appropriate in
the  following cases:

          A.   Violations of Consent Decrees

     Regional offices should strongly consider making listing
recommendations for all cases of noncompliance with consent decrees
under the CAA or CWA.  The  recommendation should be prepared at
the earliest possible time  after the Region learns of noncompliance
with the decree, but no later than the filing of  a motion to enforce
the decree.   Initiation of  the listing action should be  supplementary
to, and  not in  lieu of* a motion to enforce the decree.  Where a
consent  decree  covers CAA or CWA violations as well as violations
of  other environmental statutes, such as the Resource Conservation
and  Recovery  Act  (f"RA) or  the Toxic Substances Control  Act  (TSCA)
 (where  EPA does not nave contractor listing authority),  a  listing
recommendation  also should  be considered.

          B.  Continuing or Recurring Violations  Following
              Filed Civil Judicial Action*

     Where EPA  has filed a  civil judicial enforcement  action,  the
Regional Office should initiate  a  listing action  at the  earliest
possible time after  it determines  that:   (1)  noncompliance is
ongoing,  (2)  the  defendant  is not  making good faith efforts to

-------
                                -3-

comply, and  (3) an expeditious settlement does not appear  likely.
For example, a" defendant may make a firm settlement offer  that  is
far below the economic savings it realized from its noncompliance,
making settlement unlikely*

     Similarly/ where EPA initiates a multi-media civil  enforcement
action against violations under the CAA or CWA and other environ-
mental statutes (such as RCRA or TSCA), and continuing water or
air compliance problems exist without good faith corrective  efforts,
the Region should consider bringing a listing action.  Therefore,
it is important that all CAA and CWA counts be included  in a multi-
media enforcement action.

          C.  Violations of Administrative Orders

     Where noncompliance continues after an administrative order
has been issued under the CAA or CWA, and the Regional Office
determines that the facility is not making sufficient efforts to
come into compliance, a listing recommendation should be considered.
Initiation of a listing action generally should not be in  lieu.of
filing a civil judicial action to enforce the administrative order,
but should support the civil action.  The Regional Office  should
consider initiating a listing action at the same time that it
files the civil judicial action.

          D.  Multi-Facility Noncompliance within a Single Company

     Contractor listing can be an effective tool to address a
pattern of noncompliance within a single company.  Where continuing
or recurring CAA or CWA violations occur at two or more facilities
within the same company, and EPA previously has taken an enforcement
action against each, the Regional Office should consider making
listing recommendations in all such cases.

     While each facility's continuing or recurring ndncompliance
must be proved separately  (i.e., one may not  use one violation  from
branch facility A and one violation from branch facility B to
constitute the minimum two violations  required), one  listing recom-
mendation describing noncompliance at two or  more  facilities may be
submitted to the Assistant Administrator for  the Office of Enforce-
ment and Compliance Monitoring (OECM).  A  joint listing proceeding
may be held concerning all facilities.  Joit   consideration  of two
or more facilities' violati   i will require fewer  Agency  resources
than listing each facility separately.   It will also  discourage
companies from switching government contracts from a  listed  facility
to another facility without taking steps to correct the violations
which gave rise to the listing.

     To accomplish this, the  Regional  Office, with headquarters
staff support, should review  the EPA enforcement  docket to  see if
a potential  listing candidate has committed CAA or CWA  violations
at other company facilities.  Note that  a  company's  facilities may
be known by the parent company name or by  the names  of  company

-------
                                 -4-

 subsidiaries. - Regional offices  may obtain information on
 other coinpany-'facilities  from Charlene Swibas, Chief, Information
 Services  Section, NEIC  (FTS  776-3219), who will search EPA's
 Facility  Index  System which  lists this information for all EPA
 regions,  or provide  a Dunn and Bradstreet report containing this
 information.

      The  Region may  also  request data on administrative orders
 issued against  a company  under the headquarters Permit Compliance
 System (for CWA violations)  and  the Compliance Data System (for
 CAA violations).  In some cases  EPA has issued administrative
 orders and filed civil enforcement actions against company facil-
 ities which are located in more  than one region.  Such multi-regiona
 inquiries may be coordinated with the Headquarters participating
 attorney and the Agency's Listing Official.

          E.  Other  Circumstances Where Listing is Appropriate

     The regulation  provides two other situations where listing may
 be appropriate.  First, EPA  can  list a facility after it has issued
 a Notice of Noncompliance under  Section 120 of the CAA.  The threat
 of listing in combination with noncompliance penalties can impose a
 sufficiently severe  economic cost on a facility to encourage efforts
 to achieve both compliance and quicker settlements.  Second, Regi^na
 Offices may recommend listing when a state or local court convic
 any person who  owns, operates, or leases a facility of a criminaj.
 offense on the  basis of noncompliance with the CAA or the CWA.
 They also may recommend listing when a state or local court has
 issued an injunction, order, judgement, decree  (including consent
 decrees),  or other civil  ruling  as a result of noncompliance with
 the CAA or CWA.

 IV.  Standard of Proof in Listing Proceedings

     It will be the  responsibility of the Office of'Regional
Counsel to represent the  Agency  at any listing proceeding  (where
one is requested by  the affected facility).  According to  40 CFR
 Section 15.13(c), "[t]o demonstrate an adequate basis  for  listing
a facility, the record must  show by a preponderance of the  evidence
 that there is a record of continuing or recurring non-compliance
at the facility named in  *.he recommendation to  list and  that  the
 requisite enforcement act  i has been taken."

      "Requisite enforcement  action" can be established by reference
 to an issued administrative  or court order, or  a  filed civil  judicia
 action.   "Continuing or recurring" violations are understood  to
 mean two or more violations  of any standard at  a  facility,  which
 violations either occur or  continue to exist  over  a period of time.
 Such a violation occurs even when different  standards are violate
 and time has elapsed between violations.   Thus,  in a listing prc   d
 ing, it is not  necessary  to prove all  violations  of CAA or CWA
 standards alleged in the  underlying  enforcement action.   Nonethel

-------
                              -5-

the regional attorney must carefully review the sufficiency  of  the
evidence and evaluate anticipated defenses.

V.   Fairness Concerns in EPA Use of Contractor Listing

     It is the intent of this guidance document to encourage the
use of the Agency's contractor listing authority in appropriate
cases.  However, it must be recognized that listing is a severe
sanction.  Before making a recommendation in any case, the Regional
Office should determine that the continuing or recurring noncompli-
ance involves clearly applicable CAA or CWA standards.  Likewise,
Agency enforcement personnel must be careful in using listing
terminology during discussions with defendants.  During settlement
negotiations, for example, it is certainly proper for EPA to advise
a defendant of the range of available EPA enforcement authorities,
including contractor listing.  However, EPA personnel must distin-
guish between a listing recommendation (made by a "recommending
person," usually the Regional Administrator, to the Assistant
Administrator for OECM), a notice of proposed listing by the Agency
to the affected facility (which is sent by the Listing Official
after a preliminary decision to proceed is made by the Assistant
Administrator for OECM), and a final decision to list which is made
either by an Agency Case Examiner at the end of a listing proceeding,
or by the Assistant Administrator for OECM if no listing proceeding
is requested.  Where appropriate, EPA-personnel should explain that
the Regional Administrator's listing recommendation does not consti-
tute a final Agency decision to list.

VI.   Press Releases on Contractor Listing Actions

     EPA will use press releases and other publicity  to inform
existing and potential violators of the CAA and the CWA that EPA
will use its contractor listing authority  in appropriate situations.
The November 21, 1985, "Policy on Publicizing Enforcement Activities"
(GM-46), states that "[i]t is EPA policy to issue press releases when
the Agency:  (1) files a judicial action or issues a  major  adminis-
trative order or complaint (including a notice of proposed  contractor
listing and the administrative decision to  list)...."  As discussed
in that policy, the press release should be distributed to  both the
local media in the area of the violative conduct and  the  trade
press of th« affected industry.

VII.  Coordination with the Departm«ut of  Justice

     To ensure that information presented  during a  listing  proceeding
will not compromise the litigation posture of  any pending legal
action against a party, EPA will coordinate with the  Department of
Justice (DOJ) before a recommendation  to list  is made to  the Assis-
tant Administrator for OECM.  If the recommending party  is  an  EPA
regional office official, he or  she shall  coordinate  with the
appropriate DOJ attorney before a recommendation  is  submitted  to
the Listing Official.  He or she shall also provide  the  DOJ attor-
ney's comments to the Listing Official as  part of  the recommendation

-------
                                -6-

 package.   If  the recommending party is not an EPA official,  the
 Listing Official shall coordinate with the EPA Office of Regional
 Counsel and the appropriate DOJ attorney before a recommendation
 to  list is presented to the Assistant Administrator for OECM.

 VIII.   Applicability of Contractor Listing to Municipalities

     Municipalities are subject to listing under appropriate cir-
 cumstances.   State and local governments and other municipal bodies
 are specifically identified by 40 CFR §15.4 as "persons" whose
 facilities may be listed.  The standards for recommending that a
 municipal facility be listed are the same as those for listing
 other facilities.  Listing may not be the most effective enforce-
 ment tool in  many municipal cases because often the only federal
 funds received by a municipal facility are grant funds to abate or
 control pollution,  which are exempted from the listing sanction by
 40 CFR  §15.5.  However, listing still should be considered in cases
 where a municipal facility receives nonexempt funds or where the
principles underlying the listing authority otherwise would be.
 furthered by  a recommendation to list.

 IX.   Use of Listing in Administrative Orders

     Enforcement offices may wish to inform violating facilities
early in the  enforcement process of the possibility of being Listt-
Many facilities do not know about the listing sanction; such knowl
edge may provide additional impetus for a facility to take steps
to come into  compliance.  For example, some EPA regions notify
 facilities whose violations make them potential candidates for
 Listing of this possibility in the cover letter which accompanies
an administrative order requiring them to take action to correct
 their noncompliance.

X.   Obtaining Information Concerning Government Contracts
     Held by  a Facility Under Consideration for Listing

     After an EPA recommending person, usually the Regional
Administrator, has submitted a listing recommendation to the
Listing Official, the regional office attorney handling the
case may require the facility to provide a  list of all federal
contract*, grants, and loans (incl *ing subcontracts, sub-
grants, ar.  subloans).  To insure that such a requirement is
not imposed prematurely, the regional office attorney should
require this  information from a facility only after advising
the Listing Official of his or her intention to do so.   Requiring
this information from the facility is not a prerequisite  for
 listing a facility.

     Requiring this information from  a  facility may be  accom-
plished by telephone or through a letter  similar  to  the models
provided in Attachments D and E.  Attachment  D is a  model letter
 requesting information from a facility  which  is  violating an
 administrative order issued under the authority of the Clean

-------
                                -7-

Water Act for -violating its National Pollutant Discharge Elimination
System (NPDES)" permit.  Attachment E is a letter to a facility
which EPA and the Department of Justice have filed a civil  suit
against for violating the Clean Air Act.  Regional office attorneys
may elect to have such a request letter serve as notification to
the facility that EPA is considering instituting a listing action,
or they may wish to inform the facility before sending such a
letter.  Which approach is taken will depend on the regional office
attorney's judgment of the notification's effects on the overall
case against the facility.

XI.  Headquarters Assistance in Preparing and Processing
     Listing Recommendations

     In order to encourage the use of the contractor listing author-
ity in appropriate cases, OECM staff have been directed to assist
regional offices in preparing listing recommendations.  Attached
are model listing recommendations indicating the level of detail
and support that should be provided with recommendations.  (See
Attachments A, B, and C for model listing recommendations.)  Where
a listing recommendation is sufficient, the Assistant Administrator
for OECM will decide whether to proceed with the listing action
under Section IS.ll(c) (i.e., by directing the Listing Official to
issue a notice of proposed listing to the affected facility) within
two weeks after receiving the recommendation.  Questions concerning
contractor listing may be directed to the Agency Listing Official,
Cynthia Psoras, LE-130A, FTS 475-878-5,  E-Mail Sox EPA2261.

Attachments

cc:  John Ulfelder
     Senior Enforcement Counsel
     Associate Enforcement Counsel for  Air
     Associate Enforcement Counsel for  Water
     Director, Office of Water Enforcement and  Permits
     Director, Stationary Source Compliance Division
     Director, Office of Compliance Analysis and  Program Operations
     Director, NEIC
     Director, Water Management Division  (Regions  I-X)
     Director, Air Management Division  (Regions  I,  III,  V  and IX)
     Director, Air and Waste Management Division  (Regions  IT and  VI)
     Director, Air, Pesticides and Toxics M
-------
                                                      Appendix




     The Listing Program and Final Revisions to 40 CFR Part  15

     A.  Mandatory Listing

     If a violation at a facility gives rise to a criminal con-
viction under Section 113(c)(l) of the CAA or Section 309(c)  of
the CWA, listing of the facility is mandatory (and effective  upon
conviction under 40 CFR Section 15.10).  As soon as a conviction
occurs, the Director of the Office of Criminal Enforcement,
within the Office of Enforcement and Compliance Monitoring  (OECM),
must verify the conviction and notify the Listing Official.   The
Listing Official sends written notification to the facility  and
to the Federal Register.  Both documents must state the basis for
and the effective date of the mandatory listing.

     Removal from the mandatory list may occur only if:  (1) the
Assistant Administrator certifies that the facility has corrected
the condition that gave rise to the criminal conviction under
Section 113(c)(l) of the CAA or Section 309(c) of the CWA,  or (2)
a court has overturned the criminal conviction.  The August 8,
1984, memorandum, "Implementation of Mandatory Contractor Listing,"
(GM-32) discusses the procedures for mandatory listing in more detai:

     B.  Discretionary Listing

     1.  Basis for Discretionary Listing

     The following enforcement actions may serve as a basis for
discretionary listing if there is also a record of continuing or
recurring noncompliance at a facility:

          a.  A federal court  finds any person guilty under Section
              113(c)(2) of the CAA, if that person owns, leases,
              or supervises the facility.

          b.  A state or local court convicts any person of a
              criminal offense on the basis of noncompliance with
              clean air or clean water standards  if that person
              owns, leases, or supervises  the  facility.

          c.  A federal, state, or local court issres an injunctior..
              order, judgment, decree  (including  err cent decrees),
              or other form of civil ruling as a  result of nor.
              compliance with  the CWA or CWA at  the  facility.

          d.  The facility is  the recipient of a  Notice of
              Noncompliance under Section  120  of  the  CAA.

          e.  The facility has violated an administrative order
              under:

-------
                                 -2-
               '  CAA  Section 113 (a)
              .*  CAA  Section 113(d)
               *  CAA  Section 167
               '  CAA  Section 303
               •  CWA  Section 309 (a)

           f.   The  facility is the subject of a district court
               civil enforcement action under:

                 CAA  Section 113(b)
                 CAA  Section 167
                 CAA  Section 204
                 CAA  Section 205
                 CAA  Section 211
                 CWA  .-Section 309 (b)

     2.  The Discretionary Listing Process

     a.  Listing Recommendation and Notice of Proposed Listing

     The discretionary listing process begins when a "recommending
person" files  a listing recommendation with the Listing Official.
Recommending persons may include  any member of the public, Region*1
Administrators, the Assistant Administrator for Air and Radiatior
the Assistant  Administrator for Water/ the Associate Enforcement
Counsel for Air, the Associate Enforcement Counsel for Water, and
the Governor of any State.  The recommendation to list:  (1) state
the name, address, and telephone  number of the recommending person;
(2) identifies the facility to be listed, and provides its street
address and mailing address; and  (3) describes the alleged continuing
or recurring noncompliance, and the requisite enforcement action
(see 40 CFR Section 15. 1Kb)).  The recommendation to list should
describe the history of violations in detail, including the specific
statutory, regulatory, or permit  requirements violated.  In addition,
regional offices may include as attachments to the listing recommen-
dation documents prepared for other purposes, such as complaints,
litigation reports, and other explanatory material which describes
the nature of  the  violations.  (See Attachments for model listing
recommendations.)

     The Listing Official must determine whether t  - recommendation
meets th« requirements of "action 15. 1Kb).   If the recommendation
is sufficient  and  the Assistant Administrator for OECM decides  to
proceed und-r  Section 15.11(c), the listing official will contact
the regional office to ensure that it still wishes  to proceed.  If
the decision is made to proceed,  the  listing  official provides  notice
of the proposed listing to the owner  or  operator of the  affected
facility and provides the owner or operator  of  the  facility 30
days to request a  listing proceeding.  A listing proceeding is
not a formal hearing; rather, it  is an informal administrative
proceeding presided over by an Agency Case Examiner.   If the facil-
ity's owner or operator requests  a  listing proceeding,  the  Listing
Official must  schedule  it  and notify  the recommending person and

-------
                                -3-
the owner or operator of the date, time, and location of
the proceeding^"  The Assistant Administrator designates a
Case Examiner to preside over the listing over the listing
proceeding.^/

     b.  Listing Proceeding

     The Federal Rules of Civil Procedure and Evidence are not
used during listing proceedings.  The Agency and the facility may
be represented by counsel and may present relevant oral and written
evidence.  With the approval of the Case Examiner, either party
may call, examine, and cross-examine witnesses.  The Case Examiner
may refuse to permit cross-examination to the extent it would:
(1) prematurely reveal sensitive enforcement information which  the
government may legally withhold, or (2) unduly extend the proceedings
in light of the usefulness of any additional information likely to
be produced (see Section 15.13(b>).  A transcript of the proceeding
along with any other evidence admitted in the proceeding constitutes
the record.  The Agency must prove each element of a discretionary
listing by a preponderance of the evidence (see Section 15.13(c)).

     The Case Examiner must issue a written decision within 30
calendar days after the proceeding.  The party adversely affected
may appeal the decision to the General Counsel.  The appeal, which
is filed with the Listing Official, must contain a statement of:
(1) the case and the facts involved, (2) the issues, and  (3)
why the decision of the Case Examiner is not correct based on
the record of the proceeding considered as a whole.  The General
Counsel must issue a final decision, in writing, as soon as
practicable after reviewing the record.  The Listing Official
then must send written notice of the decision to the recommending
person and to the facility, and must publish the effective date
of the listing in the Federal Register if the General Counsel
upholds the Case Examiner's decision to list.

     c.  Removal from the List of Violating Facilities'

     Removal from the List of Violating Facilities can occur in
any of the following circumstances:

          1.  Upon reversal or other modification of the
          criminal conviction decree, order,  judgment, or
          other civil ruling or finding which  formed the
          basis for the discretionary  listing, where the
          reversal or modification  removes the basis  tor  the
          listing;
I/ If the owner or operator of the  facility  does  not  make  a  timely
request for a listing proceeding, the  Assistant Administrator  will
determine whether to list the facility based upon the recommendation
to list and any other available  information.

-------
                                 -4-
           2.   If  the  Assistant Administrator for OECM
           determines  that  the facility has corrected the
           condition(s) which gave rise to the listing;

           3.   Automatically if, after the facility has
           remained on the  discretionary list for one year
           on  the  basis of  Section 15.11(a)(4) or Section
           15.11(a)(5) and  a basis for listing under Sections
           15.11(a)(l), (2). or (3) does not exist; or

           4.   If  the  Assistant Administrator for OECM has
           approved a  plan  for compliance which ensures
           correction  of the condition(a) which gave rise to
           the  discretionary listing.

     The original recommending person or the owner or operator of
the facility may  request removal from the list.  The Assistant
Administrator  for OECM then must review the request and issue a
decision as soon  as possible.  The Listing Official then must
transmit the decision to the person requesting removal.

     If the Assistant Administrator for OECM denies a request for
removal, the requesting person may file a written request for a
removal proceeding to be conducted by a Case Examiner designated
by the Assistant Administrator.  The Federal Rules of Civil
Procedure  and  Evidence are not used during a removal proceeding.
The Case Examiner's written decision must be based solely on the
record of  the  removal proceeding.

     within 30 calendar days after the date of the Case Examiner's
decision,  the  owner or operator of the facility may file with the
Listing Official a request for review by the Administrator.  The
Administrator will determine if the Case Examiner's decision is
correct based  upon the record of the removal proceeding considered
as a whole.  The Administrator then must issue a final written
decision.

-------
                                               Attachment  A

               MODEL LISTING RECOMMENDATION
         BASED ON ADMINISTRATIVE ENFORCEMENT ACTION

DATE:     10/01/86

SUBJECT:  Recommendation to List Violating Facility

FROM:     Regional Administrator, Region XI

TO:       Cynthia Psoras
          Listing Official
          Legal Enforcement Policy Division (LE-130A)

     The purpose of this memorandum is to recommend that
the [name of facility and type of operations conducted at
the facility] owned and operated by John Doe at [street
address, city and state] be placed on the EPA List of
Violating Facilities because of violations of clean air
standards.  Information concerning the recurring violations
and the history of action taken thus far by the Agency is
set forth below.  Copies of pertinent supporting materials
are attached. [Attach technical documents describing the
violation, the administrative order, and other documents
describing the enforcement action taken.]

     This plant is subject to the New Source Performance
Standards (NSPS) for Asphalt Concrete Plants.  40 CFR Part
60, Subpart I (1986).

     On July 5,  1985, the Region XI Director, Air Management
Division, notified [owner and operator] that on the basis
of performance tests conducted December 19, 1984, the
facility was in violation of 40 CFR 60.92(a)(l), in that
it was discharging gases into the atmosphere, and those
gases contained 256.5 milligrams of particulate matter per dry
standard cubic meter (0.114 grain per dry standard cubic  foot)
The allowable discharge of particulate matter into the
atmosphere is 90 milligrams per  dry standard cubic meter
(0.04 grain per dry standard cubic foot).

     On August 14, 1985, the Region XI Regional Administrator
issued an Administrative Order pursuant to Section 113(a)(3)
of the Clean Air Act.  That order required, in part, that
[name of facility] operate its [specific portion of the
plant or processes causing the violations] in compliance
with the NSPS for Asphalt Concrete PlanLs, 40 CFR  Part 60,
Subpart I, and to conduct performance tests for emissions
of particulate matter within sixty days following  the
effective date of the Administrative Order.

     Performance tests were completed on  September 1,  1985,
and the particulate emissions were 373.5  milligrams per dry
standard cubic meter (0.166 grain per dry standard cubic
foot).  Thus, [name of facility] is not in compliance, and has
violated the Administrative Order.  Further, the violation

-------
of the NSPS has been a continuing violation in that the
particulate;emissions have been greater than the permissible
limits since the December 19, 1985, test date.

     The recommending person for this listing recommendation
is Regional Administrator, Region XI, EPA, Government
Office Building, City, 51st State; her telephone number is
(FTS) 123-4567.

     This action is authorized under discretionary listing,
40 CFP 15.11(a)(4) (1986).  It meets the regulations' two
requirements that:  there is "continuing or recurring
noncompliance with clean air standards ...  at the facility
recommended for listing" and that the facility has violated
an administrative order issued under Section 113(a) of
the Clean Air Act. '

     If you have any questions, please contact Attorney, at
(FTS) 123-4568, or Engineer, at (FTS) 123-4569.

Attachments
[technical documents, Administrative Order,
documents describing the previous enforcement actions taken]

-------
                                               Attachment B
                MODEL LISTING RECOMMENDATION
            BASED ON JUDICIAL ENFORCEMENT ACTION
MEMORANDUM
SUBJECT:  Recommendation for Listing

FROM:     Regional Administrator,  EPA Region 12

TO:       Cynthia Psoras
          Listing Official
          Legal Enforcement Policy Division, LE-130A

     This is a recommendation that the [facility name and
address] be placed on the EPA List of Violating Facilities,
pursuant to Section 306 of the Clean Air Act, Executive
Order 11738, 40 CFR Part 15, and the October 1986 guidance
from the Assistant Administrator for Enforcement and Compliance
Monitoring.  This action is authorized under 40 CFR 15.11(a)(6)
(1986).  This recommendation is based on violations alleged
in the civil action currently being pursued against [facility
name] in the United States District Court for the Fifty
Second State.  [Facility name] operates four coal-fired
boilers (boilers nos. 2-5) at the [facility] without adequate
air pollution control equipment.

     As indicated in the attached counterclaim, motion for partial
summary judgment, and affidavits, [facility name] has been
in violation of the Federal New Source Performance Standards
(NSPS) for particulate emissions since startup of the boilers,
more than five years ago.  The United States issued a notice
of violation to [facility name] regarding mass emission
violations at the [facility name] boilers nos. 2-5 on May 30,
1981.  [Facility name] has not substantially modified the
particulate emission control system for these four boilers
since that time.  Particulate stack testing conducted as
recently as January 1986 shows continuing violations of
the boilers.  The complaint, attached to this memo, was
filed by defendant on June 15, 1985.  The United States
then filed a counterclaim on August 1, 1985.  The Government's
Motion for Partial Summary Judgment as to liability, filed  on  or
about December 12, 1985, was granted in part on April  8,
1986, wherein the court denied [facility name's] claim that
the four boilers were not covered by NSPS.  The remainder
of the Motion, requesting judgment on the counterclaim for
enforcement, is pending before the court.

     The [facility name] plant is located in  [City  and State]
which is a secondary nonattainment area for  Total Suspended
Particulates.

     The attached affidavits contain summaries of mass violations
at the [facility name's] boilers nos. 2-5.   All data summarized

-------
were  obtained  from  stack tests performed on the [facility name]
boilers by tKe [owner and operator corporation] and stack
tests performed by  a consultant retained by the [owner and
operator  corporation].

      Based on  the information contained above and in the
attachments to this recommendation/ I request that the
Assistant Administrator for Enforcement and Compliance Monitoring
find  that there is  adequate evidence of continuing or recurring
violations of  Clean Air Act standards at the [facility name]
and place this  facility on the EPA List of Violating Facilities
pursuant  to the procedures set forth in 40 CFR Part 15.

      For  further information please contact Attorney on
(FTS) 987-654  or Technical Specialist (FTS) 987-655.
                                 (Signed)

                                 Regional Administrator

Attachments

[technical documents, consultant's  report, documents describing
the judicial enforcement action]

-------
                                               Attachment  C

         ATTACHMENT TO MODEL LISTING RECOMMENDATION
            BASED ON JUDICIAL ENFORCEMENT ACTION

MEMORANDUM

SUBJECT:  Attachment to Recommendation for Listing

FROM:     Regional Administrator,  EPA Region 12

TO:       Cynthia Psoras
          Listing Official
          Legal Enforcement Policy Division (LE-103-A)

Description of Violations

     The four coal-fired boilers at [facility name] are
subject to 40 CFR part 60, Subpart D, "Standards of
Performance for Fossil-Fuel-Fired Steam Generators for
which Construction is Commenced after August 17, 1971," and
40 CFR part 60, Subpart A, "General Provisions," which are
applicable to all categories of sources for which New Source
Performance Standards (NSPS) have been promulgated.

     Subpart D includes emission limits for particulate
matter, opacity, sulfur dioxide and nitrogen oxides (40 CFR
§60.42).  It also requires installation, calibration,
maintenance and operation of continuous emission monitoring ("CEM")
systems for opacity, sulfur dioxide and nitrogen oxides (40
CFR §45(a)).  Each of the facility's boilers nos. 2, 3, 4, and
5 is subject to these emission limitations and CEM requirements.
When [owner and operator] constructed the facility's boilers
2-5 between 1978 and 1980, it equipped each of the boilers
with a double alkali venturi scrubber for combined control
of sulfur dioxide and particulate matter.  These scrubbers suc-
cessfully control sulfur dioxide emissions but they have
never achieved the Subpart D particulate emission limit, 40
CFR §60.42(a) (1) .  [Owner and operator] also equipped the
boilers with continuous monitoring systems for opacity, sulfur
dioxide and oxygen (it was exempt from the NOX CEM requirement,
pursuant to 40 CPR $60.45(b)(3)).  The sulfur dioxide
monitoring system has never operated properly.

     Subpart A includes requirements related to operation
and maintenance of CEM systems (40 CFR §60.13); notification
and recordkeeping (40 CFR $60.7) and performance testing
(40 CFR §60.8k).  Under 40 CFR §60.13, all CEM  systems
installed under applicable subparts must:

     a.  be installed and operational prior to conducting
         performance tests  (emissions tests) -  §60.13(b);

     b.  Undergo a performance evaluation  (monitor

-------
           certification  test)  during or within 30 days of
           the performance  tests  -  §60.13(c);

      c.    undergo  regular  calibration and maintenance -
           §60.13(d)(l).

      [Facility name]  violated  all  these provisions.  It
 never performed a  monitor  performance evaluation on, and
 has  never  operated and maintained, Its sulfur dioxide GEM
 system.

      Under 40 CFR  §60.7, owners  and operators of NSPS sources
 must:
                    •, *
      a.  Notify EPA of the anticipated date of initial
         start-up  of  an affected facility postmarked not
         less  than 30 days prior to such date -.§60.7(a)(2)?

      b.  Notify EPA of the actual  date of initial
         start-up  postmarked within 15 days of such date
         $60.7(a)(3);

      c.  Submit quarterly  reports  of "excess emissions"
         (emissions exceeding  applicable emission limits)
           as  measured by continuous monitoring systems
           - §60.7(c).

      [Facility  name]  failed to notify EPA of the anticipated
or actual  start-up of boilers  4  and 5.  [Facility name] has
never submitted any excess emissions reports to EPA.

      Under 40 CFR  $60.8, owners/operators are required to
conduct performance tests  of affected facilities not later
than  180 days after initial start-up.  [Facility name]
violated this provision with respect to boilers 4 and 5.

      It is [facility name's] customary practice to operate
one or more of  the boilers during  the winter heating season.
The steam  that  is  generated is used for space heating and
production.   The boilers are not operated, or are operated
using only natural gaa as  fuel,  in the warmer months.   E -h
heating season  since  the NOV was issued (in August  1980),
boilers 2  and 3 have been  regularly operated.  Each day a
boiler is  operated, particulate  emissions from that boiler
exceed the limit,  and violations of the CEM regulations
occur because  the  sulfur dioxide CEM remains inoperative.
This  winter,  [facility name] has informed us that  they  will  not
operate the boilers using  coal for fuel and will only use  nature
gas.  However,  they have made  no commitment to permanently
cease operating the boilers using  coal.

-------
The Motion for Summary Judgment

     On September  25, 1985, the District Court for the
Central District of the Fifty Second State ruled on EPA's
motiion for partial summary judgment with respect to the
Agency's counterclaim for enforcement.  EPA's motion dealt
only with the alleged violations of the subpart D particulate
emissions limit.  It did not deal with the monitoring,
notification and reporting violations.  EPA introduced
into evidence six stack tests conducted on boilers nos. 2-5,
all of which showed the tested boiler to be exceeding the
limit.  The court ruled that on the six days on which
those tests occurred, [facility name] violated the subpart
D particulate standard.  Enclosed is a copy of the transcript
of the September 26, 1985, hearing on the Motion for Summary
Judgment.  Judge X ruled from the bench following oral
argument by the parties.  See pages 21-25.  The judge
stated that he would issue a written order, but he has not
done so yet.  We will furnish you with a copy upon receipt.

     An evidentiary hearing is scheduled for March 1,  1985,
to establish days of violation other than the six stack
test days.


                                    (signed)

                              Regional Administrator

-------
                                               Attachment  D
           MODEL LETTER TO A FACILITY VIOLATING  THE
           CLEAN WATER ACT REQUESTING A LIST OF  ITS
             FEDERAL CONTRACTS,  GRANTS,  AND LOANS
CERTIFIED MAIL
RETURN RECEIPT REQUESTED

Mr. John Smith
President
XYZ Corporation
1000 Corporate Lane
Fifty Second State  12345

Dear Mr. Smith:

     The XYZ Corporation was issued National Pollutant
Discharge Elimination System (NPDES) permit number FS0100524
by the Regional Administrator of EPA, Region XI, pursuant to
Title 33, United States Code, Section 1342.  This permit
authorizes the discharge of pollutants into the Blue River
in accordance with the effluent limitations, monitoring
requirements, and other provisions of the permit.  On May 6,
1986, EPA issued Administrative Order 186-1570 to the XYZ
Corporation pursuant to the authority granted under Title
33, United States Code, Section 1319(a)(3) for exceeding the
effluent limitations for biochemical oxygen demand and total
suspended solids.  As discussed in our letter to you of July
6, 1986 you are currently in violation of this Administrative
Order.

     Under the provisions of Title 33, United States Code,
Section 1368(a), a facility owned, leased, or supervised by a
"person" (defined to include a corporation such as XYZ Corpora-
tion) who commits "continuing or recurring" violations of the
Clean Water Act may be placed on a "List of Violating Facilities"
and prohibited from receiving Federal contracts, grants and
loans.  Th« prohibition under Title  33, United States Code,
Section 1368(a) is implemented by the Environmental Protection
Agency (EPA) under regulations promulgated at Title 40 of
the Cod* of Federal Regulations Part  15, entitled  "Adminis-
tra ''on of The Clean Air Act and Federal Water  Pollution
Control Act with Respect to Federal  Contracts, Grants, cr
Loans."  These regulations state that a facility may be
placed on the "List of Violating Facilities" for a violation
of an administrative order under Title 33, United  States
Code, Section 1319(a).

     Under Title 33, United States Code, Section  1318,  EPA
has authority to require the owner or operator  of  any point
source to make such reports and to provide  such other  infor-
mation as are deemed reasonably necessary  to carry out  the

-------
                             -2-


 objectives  of the Clean Water Act, Title 33, United States
 Code,  Section 1251 et seq.

     Accordingly, for the purposes of implementing Title 33,
 United States Code, Section 1368(a), EPA hereby invokes its
 authority under Title 33, United States Code, Section 1318,
 and requires XYZ Corporation, as the owner and operator of a
 point source, identified in NPDES permit number FS0100524,
 to provide  the information specified below no later than 15
 calendar days from receipt of this letter.  The submittal
 should be addressed to:

                   Regional Attorney
                   Office of Regional Counsel
                   U.S. Environmental Protection Agency
                   Region XI

 Information to be Submitted to EPA

 1.   Identify, by contract number, contracting agency and con-
 tract date, all Federal contracts held by the facility for
 the procurement of personal property or nonpersonal services,
 for which XYZ Corporation is either the prime contractor or
 subcontractor .

 2.   Identify, by grant number, granting agency, and grant date,
all Federal grants received by the facility, including grants-in
 aid,  for which XYZ. Corporation is either the grantee (prime
 recipient of a grant) or a subgrantee (the holder of an
agreement or an arrangement under which any portion of the
activity or program is being assisted under the grant).
3.   Identify, by loan number, lending agency, and iQan date,
all Federal loans for which XYZ Corporation is a borrower
or subbor rower.

4.   Identify, by bid number, agency and date, all bids submit-
ted by XYZ Corporation for future Federal contracts or
subcontract*.

5.   Identify, by grant application number, agency and date, all
grant applications submitted by XYZ Corporation for any
future Federal grant or subgrant.

6.   Identify, by loan application number, agency and date,  all
loan applications submitted by XYZ Corporation  for future
Federal loans or subloans.

7.   Identify, by percentage estimate, the extent to which
XYZ Corporation's business is connected, in any degree,  to
Federal contracts, grants and loans.

-------
                             -3-
8.   Identify the effect, if any, of the prohibition of Title
33, United States Code, Section 1368(a), upon the business of
XYZ Corporation.

     This inquiry does not constitute an official notification
that XYZ Corportion is under consideration for placement on
the "List of Violating Facilities."  If deemed appropriate,
such a notice will be initiated by the Listing Official,
Office of Enforcement and Compliance Monitoring, EPA.

     Under Title 33, United States Code, Section 1318(b), XYZ
Corporation may assert a business confidentiality claim
with respect to part or all of the information submitted to
EPA in the manner described at 40 C.F.R. § 2.203(b).  Information
covered by such a claim will be disclosed by EPA only to the
extent, and by means of the procedures set forth in 40 C.F.R.
Part 2, Subpart B.  If no such claim accompanies the information
when it is submitted to EPA, it may be made available to the
public by EPA without further notice to XYZ Corporation.

     Care should be taken in ensuring that the  response  to this
letter is complete and accurate because Title 33, United
States Code, Section I319(c)(2) provides criminal penalties
for knowingly or willfully submitting false information  to
EPA in any report required by the Clean Water Act.   In  addition,
Title 18, United States Code, Section 1001 provides criminal
penalties for knowingly or willfully submitting  false
information to a federal official.

     This information request is not subject  to the  approval
requirements of the Paperwork Reduction Act of  1980, Title 44
United States Code, Sections 3501 e_t seg.

     Should you have any questions, please contact me, at (123)
456-7890.

                                 Sincerely yours,
                                  Regional Attorney
                                  Region  XI

-------
                                               Attachment  E
           MODEL LETTER TO A FACILITY VIOLATING THE
            CLEAN AIR ACT REQUESTING A LIST OF ITS
             FEDERAL CONTRACTS,  GRANTS,  AND LOANS
CERTIFIED MAIL
RETURN RECEIPT REQUESTED

Mr. John Smith
President
ABC Corporation
1000 Corporate.Lane
Fifty Third State  12345

Dear Mr. Smith:

     On May 5, 1986, in the Southern District of the Fifty
Third State, the Department of Justice instituted a civil
suit against the ABC Corporation for continuing and recurring
violations of Title 42, United States Code, Section 7413(b).

     Title 40 of the Code of Federal Regulations, Part 15,
entitled "Administration of The Clean Air Act and Federal
Water Pollution Control Act with Respect to Federal Contracts,
Grants, or Loans," promulgated pursuant to Title 42, United
States Code, Section 7606(a) and Executive Order 11738 (38 FR
25161, September 12, 1973) authorize EPA to establish a "List
of Violating Facilities."  Facilities on this List are prohibited
from receiving Federal contracts, grants, and loans.  A facility
who commits "continuing or recurring" violations of the
Clean Air Act may be placed on the List.  These regulations
state that a facility may be placed on the List after EPA,
through the Department of Justice, has filed a civil enforce-
ment action in federal court under Title 42, United States Code,
Section 7413{b).

     Under Title 42, United States Code, Section 7414(a), EPA
has authority to require the owner or operator of any emission
source to make such reports and  to provide such other infor-
mation ai are deemed reasonably  nece <*ary to carry out the
objectives of the Clean Air Act, Title 42, United States
Code, Section 7401 <*  seq.

     Accordingly, for  the purposes of implementing Title  42,
United States Code, Section 7606(a), EPA hereby  invokes its
authority under Title  42, United States  Code, Section 7414,
and requires ABC Corporation as  the owner  and operator of a
emission source, to provide the  information  specified below
no later than 15 calendar days from receipt  of this  letter.

-------
                             -2-
 The submittal  should be addressed to:

                    Regional Attorney
                    Office of Regional Counsel
                    U.S. Environmental Protection Agency
                    Region XI

 Information to be Submitted to EPA

 1.    Identify, by contract number, contracting agency and con-
 tract date, all Federal contracts held by this facility for
 the procurement of  personal property or nonpersonal services,
 for which ABC Corporation is either the prime contractor or
 subcontractor.

 2.    Identify, by grant number, granting agency, and grant date,
 all Federal grants  received by this facility, including
 grants-in-aid, for  which ABC Corporation is either the grantee
 (prime recipient of a grant) or a subgrantee (the holder of
 an agreement or an  arrangement under which any portion of
 the activity or program is being assisted under the grant)

 3.   Identify, by loan number, lending agency, and loan date,
all Federal loans for which ABC Corporation is a borrower
or subborrower.

4.   Identify, by bid number, agency and date, all bids submit-
ted by ABC Corporation for future Federal contracts or
subcontracts.

 5.   Identify, by grant application number, agency and date, all
grant applications  submitted by ABC Corporation for any
 future Federal grant or subgrant.

6.   Identify, by loan application number, agency and date, all
 loan applications submitted by ABC Corporation for future
Federal loans or subloans.

7.   Identify, by percentage estimate, the extent to which
ABC Corporation's t ciness is connected, in any degree, to
Federal contracts,  grants and loans.

8.   Identify the effect, if any, of the prohibition of Title
42, United States Code, Section 76Co(o), upon the business  of
ABC Corporation.

     This inquiry does not constitute an official notification
 that ABC Corportion is under consideration  for placement  on the
 "List of Violating  Facilities."   If deemed  appropriate,  such
a notice will be initiated by the Listing Official,  Office
of Enforcement and  Compliance Monitoring, EPA.

-------
                             -3-
     Under Title 42, United States Code, Section 7414(c),  ABC
Corporation may assert a business confidentiality claim with
respect to part or all of the information submitted to EPA in the
manner described at 40 C.F.R. § 2.203(b).  Information covered
by such a claim will be disclosed by EPA only to the extent, and
by means of the procedures set forth in 40 C.F.R. Part 2,
Subpart B.  If no such claim accompanies the information when
it is submitted to EPA, it may be made available to the public
by EPA without further notice to ABC Corporation.

     Care should be taken in ensuring that the response to this
letter is complete and accurate because Title 42, United
States Code, Section 7413(c)(2) provides criminal penalties
for knowingly submitting false information to EPA in any
report required by the Clean Air Act.   In addition, Title
18, United States Code, Section 1001 provides criminal penalties
for knowingly or willfully submitting false information to
a federal official.

     This information request is not subject to  the approval
requirements of the Paperwork Reduction Act of 1980, Title 44
United States Code, Sections 3501 et seq.

     Should you have any questions, please contact me at  (123)
456-7890.

                                 Sincerely yours,
                                 Regional Attorney
                                 Region XI

-------
CL.3

-------
CL.3-1

-------
              UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                         WASHINGTON. O.C. 20460
                             301988
                                                            OFFICE OF
                                                         AIM AND RADIATION
MEMORANDUM

SUBJECT:

FROM:



TO:
Asbestos Contractor List!
John S. Seitz, Director
Stationary Source Compl
Office of Air Quality
nning and Standards
James T. Wilburn
Deputy Director
Air, Pesticides and Toxics Management Division
Region IV
     I am writing in response to your April 1, 1988 memo
about the asbestos contractor listing policy.  You raised
the concern that an asbestos cgntractor nay not remain in
violation for long enough to be listed, or may not stay
listed for very long since a contractor can petition for
de-listing upon demonstration of compliance.  You pointed
out that most asbestos violations are short lived.  Since
other air compliance staff may share your concern, I am
sending copies of this response to all air nanagement
division directors.

     We discussed this problem in developing the new asbestos
contractor listing policy.  We believe that the short duration
of most violations will not preclude EPA from using the
contractor, listing sanction effectively against those companies
which have repeated violations.  Under 40 C.F.R. § 15.11 EPA
may place a facility on the list if EPA "determines that
there is a record of continuing or recurring noncompliance
with clean air (or water) standards" I T"  (emphasis added).

     If the facility violating the NESHAP  is an asbestos
demolition and renovation (D&R) company, then the  "facility"
to be listed is that asbestos D&R company.  Contractor listing
is an appropriate sanction to use against asbestos D&R companies
with a history of several violations over  a period of time.

-------
These  violations  may be at different demolition sites, as
long as  the  same  company "facility" is  responsible  for the
violations. I/  Such a  company has  a "record  of recurring
noncompliance" for the purposes of a listing action.

     If  an asbestos company has been placed  on the  list
in a discretionary listing action and then petitions to be
removed  from the  list, § 15.21 requires the Listing Official
to remove the facility from the list if the Assistant
Administrator has determined that "the  condition(s) which
gave rise to the discretionary listing have been corrected"
or "the  facility  is on a plan for compliance which will
insure that the condition(s) which gave rise to the
discretionary listing will be corrected."  The Office of
Enforcement and Compliance Monitoring has issued a policy
about what constitutes "correcting the condition giving rise
to listing".2/

     In  the case of an asbestos D&R company which has
repeatedly violated the asbestos NESHAP, we would not consider
that the company had demonstrated that  it had "corrected the
condition giving rise to the listing"  merely by sending
proper notice on its next job and/or using proper work practices
the next time an inspector visits the  site.  One day or
moment of compliance is no guarantee that the contractor will
be in compliance the next day or moment nor does it guarantee
correction of the conditions giving rise to the listing.
Where there have been recurring violations in the past, EPA
should require the company to demonstrate that it has taken
adequate steps to ensure that violations do not occur in  the
future.

     To  illustrate this point,  consider a power plant that
may have repeated, but not continuous,  particulate violations.
The compliance provisions of a consent decree for a power
plant might require that the company install an ESP or bag-
house and, in addition, require that certain operation and
maintenance measures be taken and that  quarterly reports  of
GEM data be submitted to EPA to demonstrate that the power
plant is now operating in continuous compliance with the
standard.
!_/  For a more complete discussion defining asbestos D&R
company "facility", see "Defining 'Violating Facility1 for the
Purpose of Listing Asbestos Demolition and Renovation Companies,
March 11, 1988 at 11-13.

2_/  "Policy on Correcting the Condition Giving Rise to Listing
    under the Contractor Listing Program", Attachment WW to the
    Contractor Listing Protocols, October 8, 1987.

-------
     Similarly,  with an asbestos D&R company,  we should
require a demonstration that steps have been taken to ensure
that the systemic problems which caused recurring violations
have been solved.  Depending on the particular requirements
of the asbestos NESHAP that the company has been violating,
EPA could require the asbestos D&R company to do one or more
of the following:

   0 Institute new office procedures which assure that
     the required notices are sent out on time.  Demonstrate
     that this has been done by maintaining records of all
     notices which have been sent and agree to an EPA audit
     of these records.

   0 Develop or have developed a written asbestos control
     program such as the one in the attached model consent
     decree provision II.

   0 Develop and implement a training program for asbestos
     D&R workers, and have every worker  (including managers)
     take the training course.  Keep records of which workers
     have taken the course.

   0 Demonstrate to EPA that the company has the equipment
     needed to comply with the NESHAP regulations, such as
     water tank trucks with hoses and spray equipment and
     metal drums for storing and disposing of asbestos.

Attached is a model consent decree with the language and
programs we suggest to demonstrate compliance.  If you have
any suggestions for improvements, we would welcome them.

     A discretionary listing action always has a prerequisite
enforcement action.  If the defendant and EPA have agreed to
the terms of a consent decree which incorporates the needed
remedies before the company is listed, the recommending
Regional office may withdraw the Recommendation to List.
Once a company has been notified of a proposed listing, a
listing action is resolved only by a determination that the
conditions giving rise to the listing have been corrected.

-------
                            - 4 -

This determination may be based on a certification by the
Regional program office that the facility has taken all
necessary remedial action and is now in compliance, or it may
be based on a signed consent decree which obligates the company
to take the needed remedial action in the future.

     I hope this discussion has addressed your concerns.   If
you still have some questions about the asbestos D&R company
listing program, you may want to talk to Tracy Gipson in the
Contractor Listing Program (FTS 475-8780) or Charlie Garlow
or Justina Fugh in the Air Enforcement Division (FTS 475-7088
or 382-2864).

Attachments

  Policy on Correcting the Condition Giving Rise to Listing
  under the Contractor Listing Program

  Model Consent Decree Provisions

cc:  Air and Waste Management Division Director
     Regi on 11

     Air Management Division Directors
     Regions I, III,  and IX

     Air and Radiation Division Director
     Region V

     Air, Pesticides,  and Toxics Management Division Directors
     Regionx IV and VI

     Air and Toxics Division Directors
     Regions VII, VIII, and X

-------
1987 Contractor Listing Protocols Attachment WW,

 Policy on Correcting the Condition Giving Rise to
   Listing Under the Contractor Listing Program,

          (Thomas L. Adams, Jr. AA)


         HAS BEEN SUPERCEDED

-------
                                                     ATTACHMENT  2
                   UNITED STATES DISTRICT COURT
               FOR THE MIDDLE DISTRICT OF LOUISIANA
UNITED STATES OF AMERICA,        )
                                 )
               Plaintiff,        )
                                 )
            v.                   )
                                 )
AMALGAMATED PROPERTY OWNERS,     )       Civil Action No.
                                 )
           INC. and              )
                                 )
XYZ DEMOLITION CONTRACTORS,      )
                                 )
           INC.,                 )
                                 )
              Defendants         )
                          CONSENT DECREE

     Plaintiff, United States of America, on behalf of the United
States Environmental Protection Agency  ("EPA") , having filed a
Complaint  alleging  violations of the National Emission Standard
for Hazardous  Air Pollutants ("NESHAP") for asbestos, codified at
40 C.F.R.  §61.140 et ŁŁŁ., and the Clean Air Act, 42 U.S.C. §7401
et seq. . and requesting  permanent injunctive relief and civil
penalties;

     And Defendant  having duly filed an Answer denying the claims
of the plaintiff;  [if  appropriate]

     And Plaintiff  and Defendant having agreed that settlement of
this action is in  the  public interest  and that entry of this
Consent  Decree without further litigation is  the most appropriate
means  of resolving  this  action and thus avoiding protracted
litigation costs  and  expenses;

-------
                               -2-

     And Plaintiff and Defendant having moved this Court tc
this Consent Decree, subject to the provisions of 28 C.F.R.

     NOW THEREFORE, before the taking of any testimony,  upc
pleadings, without adjudication of any issue of fact or  la;
with no finding or admission of liability against or by  th<
Defendant, and upon consent of the parties to this Consent
it is hereby Ordered, Adjudged, and Decreed as follows:

                                I.
                           JURISDICTION

     This Court has jurisdiction over the subject matter o
action under 28 U.S.C. §51331, 1345, and 1355, and 42 U.S.
$7413(b) and over the parties consenting to this.Consent D
Venue is proper in this Court.  The Complaint states a cla
which relief may be granted against the Defendant.

                               II.
                     DEFINITIONS AND PARTIES

     A.  "Defendants" shall mean Amalgamated Property Owne.o,
Inc., and XYZ Demolition Contractors, Inc.

     B. "Plaintiff" shall mean the United States of America and
the United States Environmental Protection Agency.

     C.   Terms used  in  this Consent Decree which are defi
42 U.S.C. S7412(a), 42  U.S.C.  §7602, 40 C.F.R. §61.02,  an
C.F.R.  §61.141 shall  have  the meanings contained therein.

-------
                               -3-

     D.  Defendant Amalgamated Property Owners,  Inc.  (APO)  is  a
corporation organized under the laws of the State of Delaware.
APO owns property in several states, including the facility
identified in the Complaint in this action.

     E.  Defendant XYZ Demolition Contractors, Inc. (XYZ) is a
corporation organized under the laws of the State of Louisiana.
The company is engaged in the business of demolition throughout
various states including Louisiana.  XYZ "operated" the facility
identified in the Complaint in that XYZ performed demolition
activities at the site.

     F.  Defendants are "persons" within the meaning of Section
302(e) of the Clean Air Act, 42 U.S.C. §7602(e).

                               III.
                          APPLICABILITY

     A.  The  undersigned  representatives of each  party to  this
Consent Decree certifies  that he  or she is fully  authorized by
each party whom  he  or  she represents  to enter  into the terms and
conditions of this  Decree,  and to execute  and legally bind  that
party  to  it.

     B.  The  provisions  of this Consent Decree shall apply  to  and
be  binding upon  the Defendants, as  well as their  officers,
directors, agents,  servants,  employees, successors, and  assigns,
and all  persons, firms and corporations having notice of this
Consent  Decree  and  who are, or will be, acting pursuant  to  this
Consent  Decree,  or  on  behalf of,  in concert with  or  in participa-
tion with  the Defendant  to this  action in  furtherance of this
Decree.

-------
                               -4-

     C.  The provisions of this Consent Decree shall apply  to  all
of Defendant APO's facilities in all states,  territories, and
possessions of the United States of America.

     D.  The provisions of this Consent Decree shall apply  to  all
of Defendant XYZ's demolitions or renovations in all states,
territories, and possessions of the United States of America.

     E.  Defendants shall condition any and all contracts for
demolitions or renovations subject to this Decree during its
effective period on compliance with the terras of this Decree.

                                IV.
                           ALLEGATIONS

     .A.'  Plaintiff alleged that APO hired XYZ to demolish a scotch
tape store at 1000 Main Street in Plain Dealing, Louisiana.  The
facility contained in excess of 80 linear meters of friable
asbestos material as defined in 40 C.F.R. §61.141, and therefore
the demolition operation was subject to the asbestos NESHAP,  40
C.F.R. §61.140 et seq.

     B.  Plaintiff alleged that XYZ commenced demolition of the
facility on or about March 17, 1987, without either Defendant
having submitted notice of the operation  to EPA, in violation of
40 C.F.R. §61.146.  Plaintiff further alleged that the Defendants
failed to comply with certain work practice requirements set
forth  in 40 C.F.R §§61.147 and 61.152.

-------
                               -5-

                                V.
                        COMPLIANCE  PROGRAM

     A.  Defendants shall comply with the requirements  of the'
National Emission Standards for Hazardous Air Pollutants (NESHAP)
for asbestos in 40 C.F.R §61.140 e_t seq.   Defendants  shall submit
written notification for demolition or renovation operations to
be postmarked or delivered at least ten (10)  days before each
demolition or renovation begins if the amount of asbestos is as
stated in 40 C.F.R §61.145(a), or at least twenty (20)  days before
each demolition or renovation begins if the amount of asbestos is
as stated in 40 C.F.R. S61.145(b).

     B.  In the case of an emergency renovation as defined in 40
C.F.R. §61.141, Defendants shall provide written, notice to the
     •                            .            •        . .         ,
appropriate EPA regional office and the appropriate delegated
state  or local air pollution control agency as early as possible
prior  to the commencement of any renovation operation involving
asbestos.   [Optional]

     C.  Defendant XYZ shall, on and after the date of entry of
the  Consent Decree,  implement the office procedure set forth as
Attachment  1 to  this  Consent Decree  to ensure compliance with  the
notice requirements  for  demolition and renovation operations
subject  to  the asbestos  regulations, and  shall use the notification
format set  forth  as  Attachments  2 and 3  to comply with this
Consent  Decree.   [Optional, but  suggested  if there have been
notice violations.]

      D.  All notifications  required  by this  Consent Decree  shall
be sent  by  certified  mail or hand delivery to the appropriate  EPA
Regional office  and  the  appropriate  delegated stata or  local  air
pollution control agency.   Defendants shall  maintain records  of
said notifications together with proof of mailing by certified
mail for the duration of this  Decree.

-------
                               -6-

     E.  This Consent Decree in no way affects the Defendant's
responsibility to comply with any State, Federal or local laws  or
regulations or any Order by the Court, including compliance with
all applicable NESHAPS requirements, and enforcement of any such
NESHAP requirements made applicable by reason of any revision of
the Clean Air Act and its implementing regulations.

     [Optional provisions.  Sections II (Notification),  III
(Asbestos Control Program), and IV (Asbestos Training Program)  of
the Geppert decree, attached, are recommended as targets for
settlement with contractors where appropriate, such as multiple
violations or situations in which the contractor has a large
number of work crews and inadequate centralized management of
them.]

                                VI.
                          CIVIL PENALTY

     Defendants shall pay a total civil penalty (penalty in accord
with penalty policy).  Said payment shall be in full satisfaction
of Plaintiff's claims alleged in the Complaint in this action.
Payment shall be made by cashier's or certified check payable to
"Treasurer of the United States of America" and tendered within
30 days after final entry of this Decree to the United States
Attorney for the Middle District of Louisiana, [Address].  Defen-
dants shall send a copy of the check to the Office of Regional
Coui.sel [Address] , and to the Land and Natural Resources Division,
U.S.  Department of Justice [Address].  Civil penalty payments
under  this decree  are not tax deductible.

      [Optional provisions.   Sections VLB, VI.C, VIII, and IX of
the PC&J decree,  attached, are recommended  if it  is necessary zo
provide  for an installment schedule  for  payment of civil penalties
particularly  if  there  is  any concern  about  the  solvency  of  the
defendant.]

-------
                               -7-

                               VII.
               CONTRACTOR DEBARMENT  AND SUSPENSION

     [Optional provision.  Section VII of the PC&J decree,
attached, may be a useful negotiating tool against contrac
which do business with the Federal government.  However,  t
Office of Inspector General, Suspension and Debannent Brai
475-8960) should be consulted prior to making any comroitm<
regarding suspension or debarment proceedings.]

                               VIII.
                       STIPULATED PENALTIES

[Applicable to  items other than violations of the regulat
such as  the training program   r a.sbestos control, program
Geppert  decree.]

     A.   Defendant XYZ shall pay  stipulated penalties of
per day  for each day of  noncompliance with any provision
Sections 	 of this Consent  Decree.

     B.   All  payments of stipulated  penalties  shall be mau«  *o.n
thirty  (30) days of  the  date of noncompliance by cashiers's  or
certified check made payable to the  "Treasurer of the United
States"  and mailed  to  the United  States  Attorney for  the Middle
District of Louisiana.   A copy of the  letter  forwarding -•
check,  together with a brief description of  the  noncorapl
shall be mailed to  the Office  of  Regional  Counsel,  EPA R
and  to  the Land and  Natural Resources Division,  U.S.  Dep_
of Justice.

-------
                               -8-
     C.  Nothing contained herein shall be construed to prevent
or limit the rights of the plaintiff to obtain any other remedy,
sanction, or relief which may be available to it by virtue of
Defendant's failure to comply with this Consent Decree, the Clean
Air Act, or the asbestos NESHAP.
                                IX.
                          FORCE MAJEURE

[Optional - may be inserted if demanded by Defendants.  Section
IX of the Geppert decree, attached, is recommended.]

                                X.
                           TERMINATION

     This Consent Decree shall terminate 3 years from the date of
its entry, provided the Defendant has complied with its terms.
The United States shall have the right to seek extension of this
period in the event of any violation of the Decree.  The Court
will retain jurisdiction over this matter to enforce the provisions
of this Decree.

                               XI.
                          PUBLIC NOTICE

     Each party consents to entry of this Consent Decree, subject
to the public notice and comment requirements of 28 C.F.R. §50.7.

                               XII.
                              COSTS

     Each  party  shall bear  its own costs.

-------
                               -9-


For Plaintiff - United States of America
                                        Dated
F. HENRY HABICHT II
Assistant Attorney General
Land and Natural Resources Division
United States Department of Justice
                                        Dated
THOMAS L. ADAMS, JR.
Assistant Administrator for
Enforcement and Compliance Monitoring
United States Environmental Protection
Agency
                                        Dated;
Assistant United  States Attorney
Middle  District of  Louisiana
                                        Dated;
 Trial  Attorney
 Land  and  Natural  Resources  Division
 Environmental  Enforcement Section
 United States  Department of Justice
                                        Dated
 For Defendant XYZ Demolition
 Contractors,  Inc.
                                         Dated
 For Defendant Amalgamated Property
 Owners,  Inc.

-------
                               -10-


                        ENTRY OF THE COURT
     Judgment entered in accordance with the foregoing Consent

Decree this 	 day of 	,  1987.
                                BY THE COURT:
                                United States District
                                Judge

-------
CL.3-2

-------
          UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                      WASHINGTON, D.C. 20460
                           MAR 11 1988
MEMORANDUM
SUBJECT:
FROM:
          Listing Asbestos  Demolition  and  Renovation Companies
          Pursuant to section  306  of the Clean Air Act
          Michael S. Alushin
          Associate  Enforcement'
          Air Enforcement  Divisi

          John S. seitz, Directo
          Stationary Source Compliance Division
          Office of  Air Qu/Ui-ty-^Planning
TO:
          Terrell  E.  ffunt/  Director
          Office of  Enforcement  Policy
          office of  compliance Analysis and Program Operations

          Addressees
     We urge you  to consider  listing,  under  Section  306 of the
Clean Air Act, contractors  who  are  violators of  the  asbestos
demolition and renovation  (DiR) standards,  40 C.F.R.  Part  61,
Subpart M.  Since significant amounts  of  federal money are
involved in asbestos  removal, we think that  you  will  find
that contractor listing  can be  an effective  sanction  against
recalcitrant violators.  It will deprive  then of the  privilege
of contracting or subcontracting with  federal agencies or  with
any other entity  which has  received federal  grants or loans
for asbestos removal.

     Contractors  convicted  of criminal violations under S  113
(c)(l) will be automatically  listed under the Mandatory Listing
provisions, 40 C.P.R.  S  15.10.   Under  40  C.F.R.  S 15.11, EPA
has the discretion to list  contractors who

     0 have violated  an  administrative order under S  113(a)  or
       (d), S 167 or  S 303,

     0 have been  issued  a  Notice of Noncompliance under S  120,

     0 have been  issued  any form of civil ruling by a federal,
       state or local court,  as a result  of  noncompliance  with
       clean air  standards,

-------
                                2.


     0 have been convicted  by a  state  or  local  court  of  any
       criminal violations  of the CAA  or  by  a federal  court
       for criminal violations under S  113(c)(2)  (for  making
       false statements, records or reports); or

     0 have had a civil judicial enforcement action filed
       against them in federal district court for CAA
       violations.

     Asbestos D&R contractors differ from the traditional
"stationary sources" of air pollution, because  each job  is
done at a different construction site, generally owned by
someone other than the asbestos D&R company.  Therefore,
the enclosed legal memorandum was prepared to clarify the
application of the contractor listing regulations to asbestos
D&R contractors.

     This memorandum addresses the question of whether the bus-
iness address of an asbestos D&R company may be listed as the
"violating facility" when placing an asbestos D&R company on
the List of Violating Facilities under Section 306 of the Clean
Air Act.  It concludes that the business address of an asbestos
D&R company, rather than the address of the demolition site,
should be used to identify the "violating facility" when placing
an asbestos D&R company on the List of Violating Facilities.

     We need your help to make this program a success.  To get
off to a good start, establishing some clear precedents, we
need your nomination of candidates for listing.   We hope to start
with contractors with both egregious substantive violations and
notice violations.  If a nationwide or very large contractor
has distinct regional or other sub-divisions, you should consider
whether naming the smaller unit as the "listed facility" is
more appropriate (cf. page 6 of the enclosed legal memorandum
for a discussion of this aspect).  Please contact Rich Biondi
in SSCD (382-2826) or Charlie Garlow (475-7088)  or Justina Fugh
(382-2864) in OECM-Air to consult about potential candidates
for listing before sending a formal recommendation to list to
Headquarters.

Addressees:

     Regional Counsels
     Regions I-X

     Air Management Division Directors
     Regions I, III, & IX

     Air and Waste Management Division Director
     Region II

-------
                          3.
Air, Pesticides and Toxics Management  Division  Directors
Regions IV and VI

Air and Toxics Division Directors
Regions VII, VIII, and X

Air and Radiation Division Director
Region V

-------
       I UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
^     /                 WASHINGTON. D.C. 20460
 '*   . i".^
                           MAR 11 1988
                                                         ENFORCEMENT AND
                                                       COMPUANCk MONlTOHIfcG
  MEMORANDUM
  SUBJECT:  Defining the "Violating  Facility"  for  Purposes  of
            Listing Asbestos Demolition  and  Renovation Companies
            Pursuant to Section  306  of the Clean Air  Act

  QUESTION PRESENTED: Can EPA use the business address or the
            address of some other property used by an asbestos
                                      i
            demolition and renovation company  to identify the
            "violating facility" when placing  the  company on the
            List of Violating Facilities?

  ANSWER PRESENTED: The business address or  the address of  some
            other property used  by an asbestos demolition and
            renovation company may be used to  identify the
            "violating facility," rather than  the  address of
            the particular site  involved in  the violating activity,
            when placing an asbestos demolition and renovation
            company on the List  of Violating Facilities.  Under
            the definition in S  15.4, the "facility"  includes
            "any ... location or site of operations ... to  be
            used in the performance of a contract, grant or loan."

-------
                              2.

DISCUSSION
Background
     Section 306(a) of the CAA  (42 U.S.C. S 7606(a)) prohibits
federal agencies from entering  into any contract  for goods,
materials or services with a person who has been  convicted of
certain violations of the CAA if the contract is  to be performed
at "any facility at which the violation which gave rise to such
conviction occurred if such facility is owned, leased or supervised
by such person."  This section provides the statutory authority
for mandatory listing of CAA violators.
     Section 306(c) of the CAA  (42 U.S.C. S 7606(c))  is the
statutory basis for the discretionary listing of CAA violators.
It directs the President to issue an order:
     (1) requiring each Federal Agency ... to effectuate the
     purpose and policy of [the CAA] in such contracting
     or assistance activities, and (2) setting forth  pro-
     cedures, sanctions, penalties, and such other provi-
     sions ... necessary to carry out such requirement.
Section 508(c) of the Clean Water Act (CWA)  (33 U.S.C.  S 1368)
as amended on October 18, 1982, by Pub. L. 95-500, 52,  contained
an almost identical provision.
     These provisions were implemented by Executive Order 11,738,
issued on September 12, 1973 (38 Fed. Reg. 25,161).  The Order
states that it is the policy of the Federal Government
     to assure that each Federal agency empowered to enter
     into contracts for the procurement of goods, materials,
     or services and each Federal agency empowered to extend
     Federal assistance ... shall undertake such procurement

-------
                            3.
     and assistance activities in a manner that will result
     in effective enforcement of the Clean Air Act and the
     [Clean Water Act].
Exec. Order No. 11,738,  35 Fed. Reg. 25,161 (1973)
     On April 16, 1975,  EPA promulgated regulations at 40
C.F.R.  Part 15 (40 Fed.  Reg. 17,124) which provide procedures
for insuring that Executive Branch agencies conduct their
procurement and assistance programs in accordance with the
President's responsibility for ensuring compliance with CAA
and CWA standards.  These regulations authorize EPA to suspend
or bar "facilities" which are violating the CAA or the CWA from
receiving Federal contracts or subcontracts, grants or loans,
by placing them on a List of Violating Facilities.  The regula-
tions require mandatory listing of violating "facilities" after
the owner or operator is convicted for criminal violations
under S 113(c)(l) of the CAA or § 309(c) of the CWA.  They
provide for discretionary listing of facilities where there are
continuing and recurring civil violations of the CAA or CWA.
     The EPA List of Violating facilities is published in the
Federal Register twice a year and is updated in the Federal
Register whenever a facility is added to the list or removed
from the list.  The List is also transmitted to Federal agencies
with assistance responsibilities and to the General Services
Administration, which publishes a consolidated list of barred,
suspended or ineligible contractors.
I/  These regulations were revised on September 5, 1985
(50 Fed. Reg.  36,188).

-------
                             4.

The Problem
     The question which this memorandum addresses  is  what
is the "facility" to be placed on the List  in  the  case of an
asbestos demolition and renovation company  which has  a history
of continuing and recurring violations of the  National Emission
Standard for Asbestos (hereafter the Asbestos  NESHAP) or which
is owned or operated by a person who has been  convicted of a
criminal violation of the Asbestos NESHAP-.1/   Since asbestos
demolition and renovation companies provide services, it is
sometimes more difficult to identify the "facility" of an as-
bestos demolition and renovation company than  it is to identify
the "facility" of a company which produces goods.  Goods are
generally produced in one or more buildings owned or leased by
the producer.  Sometimes services are provided at a location
owned or leased by the provider.   In other cases, services are
provided at a location owned or leased by the purchaser of the
service.
     Asbestos demolition and renovation companies which violate
the asbestos NESHAP regulations generally do so in the course
of performing a contract to demolish or renovate a building
which is owned or leased by someone else.   If  the contractor
violates the asbestos regulations, the violations are most
likely to occur at the demolition or renovation site.  Listing
2/  Asbestos NESHAP regulations, issued pursuant to S 112
of the Clean Air Act, are codified at 40 C.F.R. Part 61,
§ 61.140 et seq.

-------
                               5.

the address of the property at which the demolition or  renovation
work occurred as the "violating facility" would not accurately
identify the asbestos demolition and renovation company which
performed the work and, therefore, would not accomplish the
intended purpose of CAA S 306{a) — to assure that persons or
corporations convicted of a knowing violation of CAA standards
or limitations are ineligible to enter into Federal contracts
until the continuing or recurring violation has been corrected.2/
     The issue is whether CAA § 306 and the regulations promul-
gated to implement this section, 40 C.P.R. Part 15, permit EPA
to list, as a "facility", the executive office (or similar
address) of the person (or company) providing the services and
taking the action that violated the CAA.
Definition of Facility
     EPA regulations implementing the Contractor Listing Program
are found at 40 C.F.R. Part 15.  Section 15.11 authorizes the
Listing Official to "place a facility on the List" under stated
conditions.  Section 15.4 defines "facility":
     "Facility" means any building, plant, installation,
     structure, mine, vessel or other floating craft,
     location or site of operations owned, leased or
     supervised by an applicant, contractor, grantee,
     or borrower to be used in the performance of a con-
     tract grant or loan.  Where a location or site of
     operations contains or includes more than one build-
     ing, plant, installation, or structure, the entire
     location or site shall be deemed to be a facility,
 V  Of course, in cases where the owner of the building which
 was renovated or demolished has also violated the asbestos
 NESHAP, the building may also be listed as a "violating facility".

-------
                                6.
     except where  the  Assistant  Administrator  determines
     that independent  facilities  are  located  in  one
     geographic area,   (emphasis  added).
     For the purposes  of the Contractor Listing  Program,  the
"facility" of a company includes  any  location  used by  the  com-
pany to produce the particular goods  or provide  the particular
services which the government may wish to purchase or  assist
others to purchase under a particular contract.4/  To  determine
whether a particular "building, plant, installation ...  location
or site" is part of a  "facility" at which a violation  giving
rise to a criminal conviction occurred, or is part of  a  "facility"
which has a record of  continuing or recurring noncompliance
with clean air (or water) standards, one should look at the
relationship of the "building,  plant, installation ...  location
or site," to the production of the goods or services which the
government might procure or assist others in procuring.  Depend-
ing on circumstances,  the relevant "facility" may or may not
include all locations owned by a company.   If several  different
locations are involved in manufacturing a particular product or
4_/  A different definition of "facility" is used in the Asbestos
NESHAP, 40 C.P.R. S 61.141.  That definition should be used for
the purpose of determining whether the owner or operator an of
an asbestos demolition and renovation company complies with
the NESHAP.  If the Agency determines that the owner or operator
of the company violated any of the requirements of the NESHAP,
then the definition in 40 C.F.R. S 15.4 should be used to
determine what the "violating facility" is.

-------
                               7.

in supplying a particular service, all of those locations

together make up the "facility".5/


The Legislative History

     This definition of "facility" is consistent with the pur-

pose of § 306, which was designed to be a sanction available  to

EPA against those who would provide goods and services to the

Federal government using noncomplying facilities.  Section  306

of the CAA is derived from Senate bill S. 4358.  Section 306(a)

of the Senate bill read as follows:

     Sec. 306(a)  Any person (1) required to comply with
     an order issued by a Federal court pursuant to this Act
     who fails to comply within the time period specified
     in such order, or (2) convicted by a Federal court for
     knowing violation of any applicable schedule or time-
     table of compliance, emissions requirement, prohibition,
     emission standard, or standard of performance, shall be
     ineligible to enter into any contract with any Federal
     agency for the procurement of goods, materials, and
     services to perform such work at or with any facilities
     subject to such action by the court which are owned,
     leased or supervised by such person.  Such ineligibility
     shall continue until the Secretary [of HEW] certifies
     compliance with such order, or that the conviction
     giving rise to the violation has been corrected.
     (emphasis added).

S. 4358, 91st Cong., 2d Sess. S 306 (1970).
V Where a company has several different divisions or factories
or regional offices, each producing particular goods or services
independently from each other, each would be a separate facility;
and  if one of those divisions or factories or regional offices
is violating the CAA or the CWA, that particular unit of the
company is the only one that would be placed on the List of
Violating Facilities.

-------
                                8.


     The Senate Committee on Public Works  issued a  report  to

accompany S. 4358, in which the following  explanation of Section

306 was given:

          The committee considered proposals offered by
     Senator Muskie and Senator Cook to assure that the
     Federal Government does not patronize or subsidize
     polluters in its procurement practices and policies.

          Section 306 would make any person or corpora-
     tion who fails to comply with a court order issued
     under this Act or who is convicted of a knowing
     violation of any schedule or timetable of compli-
     ance, emission requirement, prohibition, emission
     standard, or standard of performance, ineligible
     for a Federal contract for any work to be done at
     the polluting facility....

          This section would be limited, whenever
     feasible and reasonable, to contracts affecting
     only the facility not in compliance, rather than
     the entire corporate entity or operating division.

          There might be cases where a plant could not
     participate in a Federal contract due to a violation
     but another plant owned by the same company might bid
     and transfer other work to the first plant.  This type
     of action would circumvent the intent of this pro-
     vision.  In this case, the company's second facility
     should also be barred from bidding until the first
     plant returns to compliance.

          There would also be instances where a second plant
     within a corporation was seeking a contract unrelated
     to the violation at the first plant.  In such a case,
     the unrelated facility should be permitted to bid and
     receive Federal contracts,  (emphasis added).

S. Kept. NO. 1196, 91st Cong., 2d Sess. 39 (1970).

     Section 306 of S. 4358 was passed by the Senate without

change.  A companion bill in the House, H.R. 17255, 91st Cong.,

2d Sess. (1970), had no provision about procurement policies.

In conference, the provision making persons convicted of knowing

violations of the CAA ineligible for Federal contracts or assis-

-------
                               9.


tance was retained.  In lieu of  the provision  of  the  Senate

bill extending ineligibility to  persons subject to, but  not

complying with, court orders, the conference committee substi-

tuted a more general requirement that  "the  President  shall

cause to be issued an order  (1)  requiring each Federal agency

... to effectuate the purpose and policy of this  chapter in

such contracting and assistance  activities,..."6/


The Executive Order

     The President complied with this  mandate  by  issuing

Executive Order No. 11,602 on June 29, 1971.   E.O. No. 11,602

was superseded by Executive Order No.  11,738,  on  September 10,

1973.I/  Exec. Order 11,738 sets forth the  following  Federal
6_/  When the CAA amendments were  reported out of  the conference
committee, the conference  report  on  Section  306 stated:

          The conference substitute  is more  limited than
     the Senate provision.  It provides  that persons con-
     victed of a knowing violation of standards or limita-
     tions shall be  ineligible to enter  into Federal con-
     tracts until the Administrator  certifies that the
     violation has been corrected.   The  remainder of the
     conference substitute follows the Senate amendment
     by requiring the President to issue an  order requiring
     Federal agencies (1)  to assist  in the implementation
     of this act and (2) to establish sanctions for non-
     compliance.

Conference Report No. 1783 (to accompany H.R. 17255), 91st
Cong. 2d Sess. (Dec.  17, 1970), reprinted in 1970 U.S. Code
Cong. & Ad. News 5356, 5389.

I/  Exec. Order No.  11,738, 38 Fed.  Reg. 25,161 (1973), amenJ-
ed Exec. Order 11,602, 36  Fed. Reg.  12,475 (1971), by adding  t-.e
words "Federal Water Pollution Control Act"  to S  1 and changi";:
references to "the Act" in SS 2,  4,  6 and 9  to "the Air Act"
and adding references to "the water  Act."  Exec. Order 11,738
also adds S 11, which requires that  regulations issued pursuar.-.
to CWA S 508 shall be uniform with regulations issued pursua-r
to CAA S 306 to the  maximum extent possible.

-------
                               10.
procurement policy:

     Section 1. policy.  It is the policy of the  Federal
     Government to improve and enhance environmental quality.
     In furtherance of that policy, the program prescribed
     in this Order is instituted to assure that Federal
     agencies are empowered to enter into contracts for
     the procurement of goods, materials or services Łr
     to extend Federal assistance by way of grants or
     contracts .in such a manner that will result  in effec-
     tive enforcement of the Clean Air Act ... and the
     Federal Water Pollution Control Act. ... (emphasis
     added) .

Section 2 of the Order states, in part:

     (b) In carrying out his responsibilities under this
     Order, the Administrator shall ... designate facili-
     ties which have given rise to a* conviction for an
     offense under section 113(c)(l) of the Air Act ...
     [and] publish and circulate ... lists of those faci-
     lities, together with the names and addresses of the
     persons who have been convicted of such offenses ...
     (emphasis added) .

Section 3 prohibits any Federal agency from entering into any

contract with or extending any assistance to any facility which

has been listed pursuant to CAA S 306.   Section 4 requires that

all Federal procurement regulations

     ... issued by any agency of the Executive Branch shall
     ... be amended to require ... inclusion of a provision
     requiring compliance with the Air Act, the Water Act,
     and standards issued pursuant thereto in the facili-
     ties in which the contract is to be performed, or
     which are involved in the activity or program to re-
     ceive assistance,  (emphasis added).

     Section 5 authorizes the Administrator of the Environmental

Protection Agency "to issue such rules, regulations, standards

and guidelines as he may deem necessary and appropriate to

carry out the purposes of this Order."  Sections  1 and 5 of

-------
                               11.

Exec. Order 11,738, together with S 306(c) of the CAA  (and
S 508(c) of the CWA), provide the authority for the discretion-
ary listing program.  EPA's Contractor Listing regulations,
codified at 40 C.F.R. Part 15, implement the Executive Order.

Discussion
     As defined in 40 C.F.R. S 15.4, a "facility" includes any
building, location, or site to be used in the course of perform-
ing the contract or loan.  While the buildings or sites at
which work is performed are often also the buildings or sites
at which a violation occurs, the fact that the violation may
occur "off-site",  i.e./ at a location owned or operated by a
customer, does not mean that such locations are not part of the
"facility" "to be  used in the performance of" a contract.  The
"facility" of a contractor also includes the business address
which the company  uses in its contracts, even if the business
address is simply  a post office box.
     AS Congress recognized, a company may be violating the
CAA or CWA at one  "facility" and have other complying "facilities'
which ace not involved in the production of the same goods and
services.  Congress differentiated between entirely uninvolved
"facilities", on the one hand, and involved "facilities", e.g.,
where a sister "facility" "B" was used to circumvent a ban on
goods or services  produced at "facility" "A".
     The definition of "facility" in S 15.4 implements that
concept.  If an asbestos demolition and renovation company has

-------
                              12.

two or more divisions which operate  independently  of  each
other, each division would, at least presumptively, be a separate
"facility" under the definition found in  S 15.4.   If  only one
of the divisions is convicted of criminal violations  of the
asbestos NESHAP or if only one of the divisions has a record of
continuing or recurring noncompliance with the asbestos NESHAP,
only that division of the company would be placed  on  the List
of Violating Facilities, absent the kind of situation described
by Congress.
     This is the only way that an asbestos demolition and reno-
vation "facility" can be defined which is consistent with the
intent of the statutes, the executive orders, and the regulations.
A contrary interpretation would fail to "effectuate the purpose
and policy of [the CAA] in [the government's] contracting and
assistance activities" as required by S 306.   The "facility"
concept is intended to carry out, not to thwart,  the intent  of
S 306.  While the business address of the "facility"  will
often coincide with the address of the site where violations
occurred, there is no requirement in S 306 that it do so.
Listing is.intended broadly to sanction "persons" who continue
to violate the CAA by depriving them of access to Federal  con-
tracts for goods and services and to federal  grants and loans.
Congress did not intend to limit this sanction to contractors
who engage in violative conduct on property that  they happen to
own or control.  So long as the business address  of the asbestos

-------
                               13.





demolition and renovation company is fairly associated with



the activity which is the violating conduct, that address may



be used to identify the "facility" to be placed on the List,



notwithstanding that additional, related work (and the actual



violations) occurred elsewhere.

-------
CL.4-1

-------
*l PBOrt
     s UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
    t                WASHINGTON, D.C. 20460


                                08 1984
                                                        n
                                                         OFFICE OF
                                                       ENFORCEMENT AN?
                                                      COMPLIANCE MOwrrpKittG
 MEMORANDUM

 SUBJECT:   Implementation of jjandatory Contractor Listing

 FROM:
          Courtney M.
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Assistant Administrator for Air and Radiation
          Assistant Administrator for Water
          Associate Enforcement Counsel for Air Enforcement
          Associate Enforcement Counsel for Water Enforcement
          Associate Enforcement Counsel for Criminal  Enforcement
          Assistant Attorney General for Land and Natural
            Resources
          Regional Counsels I-X

Introduction and Purpose

     Pursuant to statutory requirements, the proposed revisions
to 40 CFR Part 15 require that the List of Violating  Facilities
("the Lisr") automatically include any facility which gives  rise
to a criminal conviction of a person under Section  113(c)(l) of
the Clean Air Act or Section 309(c) of the Clean Water Act.
Any facility on the List is ineligible to receive any non-exempt
Federal government contract, grant, or loan.  Removal of a
facility from the List occurs only if I certify that  the condition
giving rise to the conviction has been corrected or if a court
reverses or vacates the conviction.  This memorandum  establishes
the procedure to implement the mandatory portion of the contractor
listing program. V
 V Guidance on implementation of the discretionary listing
 authority issued on July 18, 1984.

-------
                                -2-

  Procedure for Mandatory Listing

  I.  A federal district court must enter a guilty verdict or
      guilty plea of a person under Section 113(c)(l) of the
      Clean Air Act or Section 309(c) of the Clean Water Act.
      The convicted person must own, operate, lease, supervise
      or have a financial interest in the facility which gave
      rise to the conviction.  Note that criminal convictions
      under Section 113(c)(2) of the Clean Air Act and criminal
      convictions entered by a State or local court do not qualify
      a facility for mandatory listing.

 II.  Upon notification of an entry of a guilty verdict or guilty
      plea by the clerk of the district court, the Department of
      Justice must immediately notify the Associate Enforcement
      Counsel for Crimir.^1 Enforcement (LE-134E).  This notification
      must occur even if the defendant still awaits sentencing,
      has moved for a ne. trial or a reduced sentence, or has
      appealed the conviction.

III.  The Associate Enforcement Counsel for Criminal Enforcement
      must independently verify that the court has entered the
      guilty verdict or guilty plea.

 IV.  Upon such verification, the Associate Enforcement Counsel
      for Criminal Enforcement shall notify EPA's Listing Official
      (LE-130A) in writing,  of the name and location of the facility
      and of the condition giving rise to the guilty verdict or
      guilty plea.

  V.  The Listing Official shall then update the List by publishing
      a notice in the- Federal Register, and shall notify the
      Associate Enforcement Counsel for Air or Water; the appropriate
      Regional Counsel; the Compliance Staff, Grants Administration
      Division, Office of Administration and Resource Management;
      the General Services Administration, and the facility.  A
      facility remains on the mandatory List indefinitely until
      it establishes a basis for removal.

  Procedure for Removal from the Mandatory List

   I.  Any person who owns, operates, leases, supervises, or has
       a financial interest in the listed facility may file with
       the Listing Official a request to remove that facility from
       the List.  The request must establish one of the following
       grounds for removal:

       A.  The condition at the facility that gave rise to the
           conviction has been corrected.

       D.  The conviction (not just the sentence) v?as reversed or
           vacated.

-------
                               -3-

 II.  The Listing Official must transmit the request for removal
      to the Assistant Administrator for OECM.

III.  The Assistant Administrator for OECM, or her or his designee,
      shall review the request for removal and shall consult the
      appropriate Regional Counsel to determine whether the
      condition at the facility giving rise to the conviction
      has been corrected, or if the conviction has been reversed
      or vacated.

 IV.  The Assistant Administrator for OECM shall determine as
      expeditiously as practicable whether to remove the facility
      from the list.

  V.  If the Assistant Administrator for OECM decides to remove
      the facility from the list, a written notification of
      such determination shall be sent to the facility and to
      the Listing Official who shall promptly publish a notice
      of removal in the Federal Register.

 VI.  If the Assistant Administrator for OECM decides not to
      remove the facility from the List, the Listing Official
      shall send written notice of the decision to the person
      requesting removal.  The notice shall inform the person
      owning, operating, leasing, supervising or having a
      financial interest in the facility of the opportunity
      to request a removal hearing before a Case Examiner
      (See 40 CFR Part 15 for the selection and duties of the
      Case Examiner).

VII.  If the Case Examiner, or the Administrator upon appeal of
      the Case Examiner's decision, decides to remove the facility
      from the List, the Listing Official shall be notified.
      The Listing Official shall then promptly remove the facility
     'from the List.  If the Case Examiner or the Administrator
      upon appeal, decides not to remove the facility from the
      list, then the Listing Official shall send written notice
      of the decision to the person requesting removal.

      It is important to note that any decision regarding the
 listing or removal of a facility from the List does not affect
 any other action by any government agency against such a facility,
 including debarment from government contracting.

      I believe these procedures will enable us to conduct the
 mandatory listing program in an efficient manner.  If you have
 any questions, please contact EPA's Listing Official, Allen J.
 Danzig, at (FTS) 475-8777.

 cc:  Stephen Ramsey, DOJ
      Belle DCvis, GAD/OARM
      Judson W. Starr,/DOJ

-------
CL.4-2

-------
                  UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                                WASHINGTON, D.C. 20460
                                                               a .
                                                                    OFFICE OF ENFORCEMENT
MEMORANDUM
SUBJECT:
FROM:
TO:
      EPA Policy Regarding The Role of Corporate Attitude, Policies, Practices, and
      Procedures, In Determining Whether To Remove A Facility From The EPA List
      of Violating Facilities Following A Criminal Conviction
      Edward E. Reich
      Acting Assistant Administrator

      Assistant Administrator and General Counsel
      Assistant Administrator for Air and Radiation
      Assistant Administrator for Water
      Regional Administrators
      Regional Counsels
      Regional Air & Water Division Directors
      Enforcement Counsels for Air and Water
      Director, Office of Criminal Enforcement
 I.
Introduction
       This guidance memorandum clarities  EPA policy  concerning  the  role of corporate

 attitude1, policies, practices, and procedures in determining whether, in mandatory contractor

 listing cases3, the condition giving rise to a criminal conviction has been corrected.  Clean Air

 Act ("CAA") \ 306 and Gean Water Act ("CWA") § 508 require correction of the condition
    1   The term 'corporate attitude* refers to all organizational defendants, not only to incorporated enucm

    2   Although discretionary listing is outside the scope of this guidance, evaluation of corporate utirude.
 policies, practices, and procedures may be applied appropriately in discretionary listing cases as well.

                                           1

-------
giving rise to the conviction as a prerequisite for removal of a facility owned, operated, or




supervised by a convicted person from the EPA List of Violating Facilities ("the List").



II.     Background




       In  1990, EPA formally recognized that the condition leading to a conviction under CWA




§ 309(c) or CAA § 113(c) could include a convicted environmental violator's corporate attitude,



policies,  practices,  and procedures  regarding environmental compliance.   In  the Matter of



Valmont Industries.  Inc.. (ML Docket No. 07-89-LO68, Jan. 12, 1990) ("Valmont").  In



Valmont. the decisions of both the Assistant Administrator for Enforcement (AA) and the EPA



Case Examiner established the principle that the presence of a poor corporate attitude regarding



compliance with environmental standards, thus creating a climate facilitating the likelihood of



a violation, may be part of the condition giving rise to the conviction which must be corrected



prior to removal of the facility from the List.  40 CFR § 15.20.



       Valmont was convicted of crimes of falsification and deception. The AA determined that



not only was Valmont required to correct the physical conditions which led to its conviction, but



that it also was required to demonstrate that it had implemented appropriate corporate policies,



practices, and procedures, designed to ensure  that the  mere appearance of compliance with



environmental standards was not put above actual compliance with those standards.  The Case



Examiner later affirmed the use of the corporate attitude standard in determining whether the



condition leading to listing has been corrected.



       Following Valmont. EPA has applied the corporate attitude test in other cases where



 facilities have requested removal from the List, including cases involving knowing or negligent



 conduct, not involving deliberate deception.  See. Colorado River Sewage System Joint Venture.

-------
(ML Docket No. 09-89-L047, August 20, 1991); Zarcon Corp. (ML Docket No. 09-89-L058,

Aug.  1, 1990); Sellen Construction Co. (ML Docket No. 10-89-L073, June 13, 1990).  This

memorandum clarifies the extent to which corporate attitude may be a relevant factor in cases

involving knowing or negligent criminal conduct, which does not involve willful falsification or

deception.  It also clarifies the criteria which will be applied by EPA in determining whether the

condition giving rise to a conviction has been corrected in a given case.

       The purposes  of this guidance are to inform the public and the regulated community,

thereby facilitating greater compliance with environmental standards; to formally restate criteria

applied in EPA contractor listing cases over the past two years; and to provide EPA personnel

with a readily available summary of EPA policies which will enable them to evaluate contractor

listing cases.

in.    Scope of Application

       The corporate attitude, policies, practices, and procedures of a listed facility's owner,

operator, or supervisor will always be relevant when a facility that has been listed as the result

of a criminal conviction requests removal from the List. How significant a factor the corporate

attitude, policies, practices, and procedures will be depends upon the degree of intent involved

in the violation at issue.  The degree of intent shall be determined (for purposes of removal from

the List) by the AAJ, with reference to the facts of, and the nature of the conduct involved in,
    1   The Assistant Administrator will, is in all contractor listing removal cases, give considerable weight co the
 recommendation of the EPA Region in which the listed facility is located.

-------
each case.  This shall not be determined solely by the nature or title of the crime4, or by  the

terms or language contained in any plea agreement.

       In every case involving fraud, concealment, falsification, or deliberate deception, proof

of change of corporate attitude must be demonstrated  over an  appropriate and generally

substantial period  of time, commensurate with  the  seriousness of the facts  involved in the

violation(s) (see Section IV).

       In most cases involving knowing misconduct, proof of change of corporate attitude must

also be demonstrated over an appropriate period of time, commensurate with the seriousness  of

the facts involved in violation(s) (even if there was not affirmative fraud or concealment). There

may be some extremely rare cases in which knowing conduct (not involving affirmative fraud

or concealment) may be deemed to be relatively minor. In such rare cases, proof of change of

corporate attitude may not be a significant factor.

       In cases involving criminal negligence, proof of change in  corporate attitude may be

significant as  it relates to ensuring prevention of further negligent violations.   (E.g.,  in  a

negligent discharge  case,  proof of change  of corporate attitude  may  be  demonstrated by

educating and training employees on proper treatment and disposal requirements and practices).

In cases of serious negligence1,  more  significance may be placed on demonstrating proof of
    4   E.g., a conviction for 'negligent discharge* of pollutants under Clean Water Act 9 309(c) may be a minor
violation requiring minimal proof of change of corporate attitude, or it may be a significant violation reflecting
knowing or deliberate conduct, requiring more substantial proof of such change. The determination will be made
on the facts of each case.  Criminal defendants and prosecutors frequently agree to enter a plea to a misdemeanor.
rather than go to trial on more serious felony charges which may be supported by the facts.


    1   Cases involving convictions for criminal negligence may include a wide range of conduct, from relatively
minor' e.g.,  accidental spillage of a can of paint, up to potentially disastrous, e.g., failure to train employees
properly and to respond to oil leak detection systems, which results in a massive oil spill. The label of 'negligence*
alone does not adequately describe the nature and severity of the criminal conduct in a given case.

-------
change of corporate attitude, before a facility will be removed from the List.  In other cases of

negligent violations6, a limited set  of minor violations may  exist which constitute criminal

conduct  resulting in  conviction,  but in  which  minimal  significance will  be placed  on

demonstrating proof of change of corporate attitude, policies, practices,  and procedures.

       In addition, a case may arise in which the violations which gave rise to listing occurred

considerably before the request for removal. Nevertheless, as set forth at section IV., infra, to

warrant removal, proof of change of corporate attitude for an appropriate continuing period of

time, until the removal request is granted, is required if the crime involved fraud, or deliberate

falsification or concealment, knowing misconduct (unless minor), or serious negligent violations.

       If a listed facility is sold (after the conduct which gave rise to the conviction or listing),

the new owner of that facility is obligated to demonstrate that appropriate and effective corporate

policies,  practices, and procedures  are in place, in  accordance with the criteria and factors

outlined in this guidance, before the facility will be removed from the List.

IV.   Criteria For Demonstrating Proof Of Change in Corporate Attitude

       In cases where proof of change of corporate attitude is relevant to determining whether

 the condition giving rise to a criminal conviction has been corrected, factors to which EPA will

 look include, but are not limited to, the following7:

       A.    Whether the owner, operator, or supervisor of the [listed facility] has put
       in place an effective program to prevent and detect environmental problems and
       violations of the law. An "effective program to prevent and detect environmental
       problems and violations of the law" means a program that has been reasonably
       designed, implemented, and enforced so that it will be effective in preventing and
       detecting environmental problems  or violations, and criminal conduct.
    '   E.g., accidental spillage of paint into a storm sewer.

    7   These criteria are adapted from the proposed U.S. sentencing guidelines for organizational defendants.

                                            5

-------
             The hallmark of an effective program is that the organization exercises due
      diligence in seeking to prevent and detect environmental problems or violations,
      or criminal conduct. Due diligence requires, at a minimum, that the organization
      has  taken  at least the  following types of  steps to  assure  compliance  with
      environmental requirements.

      1.     The organization must  have written policies defining the standards and
             procedures to be  followed  by its agents or employees'.

      2.     The organization  must have specific high-level persons, not reporting to
             production managers, who  have authority to ensure compliance with those
             standards and procedures.

      3.     The organization  must have  effectively communicated its standards and
             procedures to agents and employees, e.g., by  requiring participation  in
             training programs and by the dissemination of publications.

      4.     The organization  must establish or have established an effective program
             for enforcing its standards, e.g., monitoring and auditing systems designed
             to prevent or detect noncompliance; and a well-publicized system, under
             which agents and employees are encouraged to report, without  fear of
             retaliation, evidence of environmental problems or violations, or criminal
             conduct within the organization.

      5.     The standards  referred  to in paragraph  1,  above,  must have been
             consistently enforced through appropriate disciplinary mechanisms.

      6.     After an offense or a violation has been detected, the organization must
             immediately take  appropriate steps to correct the condition giving rise to
             the  listing (even prior to the conviction or listing). The organization must
             also take all reasonable steps to prevent  further similar offenses or
             violations,  including notifying appropriate authorities of such offenses or
             violations,  making any  necessary  modifications to  the  organization's
             program to prevent  and detect environmental problems or violations of
             law, and discipline of individuals responsible for the offense or violation.
             This may include conducting an independent environmental  audit to ensure
             that there are no other environmental problems or violations at the facility.
   *   Although specifics will be determined on » case-by-case basis, with reference to the conduct
the violation, examples include, but are not limited to, training on company rules.  EPA requiranau
standards and considerations, and standards of criminal liability.

-------
      B.     The precise actions necessary for an effective program to prevent and detect
      environmental problems or violations of law will depend upon a number of factors.
      Among the relevant factors are:

      1.     Size of organization:  The requisite degree of formality of a program to
             prevent and detect violations of law or environmental problems will vary
             with the size of the organization;  the larger  the organization, the more
             formal the program should typically be.

      2.     Likelihood that certain offenses  may occur because of the nature of its
             business:  If, because of the nature of an organization's business, there is
             a substantial risk that certain types of offenses or violations may occur,
             management must have taken steps to prevent and detect those types of
             offenses or violations.  For  example, if an  organization handles toxic
             substances, it must have established standards and procedures designed to
             ensure that those substances are handled properly at all times.

      3.     Prior history of the organization:   An organization's  prior history may
             indicate types of offenses or violations that it should have taken actions to
             prevent.  Recurrence of misconduct similar to that which an organization
             has previously committed casts doubt on whether  it took all reasonable
             steps  to prevent such misconduct.

      An organization's failure to incorporate and follow applicable industry practice or the
      standards called for by any applicable governmental regulation weighs against a finding
      of an effective.program to  prevent and  detect violations  of law or  environmental
      problems.

      C.    EPA  will also consider additional voluntary environmental cleanup, or pollution
      prevention or reduction measures performed, above and beyond  those  required by
      environmental statutes  or  regulations,  and  voluntary  compliance   with  pending
      environmental requirements significantly before such compliance is actually required.

      In cases where probation is imposed by the sentencing court, the term of probation will

be presumed to be an appropriate period of time for demonstrating a change of corporate

attitude, policies, practices, and procedures9. This presumption may be rebutted by either the

owner, operator, or supervisor of the listed facility, or by the government, upon a demonstration
   9   The presumption is derived from the determination, which will already have been made by the sentencing
court, that the convicted person's criminal conduct justifies a period of supervision and oversight by the court, i.e..
probation.

-------
that the probation term is not an appropriate time in which to demonstrate such change.  If
probation is not imposed in  the criminal case, the AA shall determine, after a request for
removal from the List is filed, what is an appropriate period of time in which to demonstrate that
the condition leading to conviction has been corrected. This determination shall be based upon
the facts  of each case.
       The time required to demonstrate a change of corporate attitude, policies, practices, and
procedures shall be presumed to  be an  appropriate period,  as determined  by the AA,
commensurate with (a) the nature, extent,  and severity of the violations (including the length of
time during which the violations occurred), and (b) the complexity and extent of remedial action
necessary to ensure  that appropriate policies, practices, and procedures  (including, but not
limited to, any necessary employee education or training programs) have been completed. At
a  minimum, the period of time shall  be sufficient to demonstrate successful  performance,
consistent with those policies, practices, and procedures, including consideration of steps  which
were taken prior to conviction or listing..
       The policies and procedures set out in this document are intended for the guidance of
government personnel and to inform the public. 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.

-------
SE.1

-------
SE.1-1

-------
    i       UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                         WASHINGTON, D.C. 20460
**«?'


                               JJL2A
                                                        omci or ENFOftciMttrr
                                                         ANDCOMFtUNCX
                                                           MONITOKINO
    MEMORANDUM
    SUBJECT:  Form of Settlement of Civil Judftial Cases
    FROM:     Courtney M.
              Assistant Administrator  for  Enforcement
                and Compliance Monitoring  (LE-133)

    TO:       Regional Counsels
              Associate Enforcement Counsels

         This memorandum  is  intended to  confirm  the Agency's
    general policy regarding  the  form  of settlement of  civil
    judicial enforcement  cases.   The need  for  a  statement of Agency
    policy on the form of settlement recently  arose because a cat*
    had been settled without  a consent decree, and the  defendant
    later refused to abide by the terms  of the informal settlement.
    In order to make sure that the problem does  not recur/ OECM is
    reducing this policy  to writing.

         Agency policy is that after a complaint is filed, all civil
    judicial cases should be  settled only  (1)  by consent decree, or
    (2) where appropriate, by a stipulation of dismissal.  This
    second approach should be utilized only when the settlement
    requires payment of a penalty, and the penalty has  been paid in
    tull at the time of settlement.  In  such cases, the continued
    jurisdiction provided by  a consent decree  is not needed or
    required.  This form  of settlement policy  is the established
    practice of the Department of Justice,  and all EPA  enforcement
    attorneys should continue to  abide by  it.

         Extraordinary and compelling  circumstances may arise when
    EPA, in consultation  with DOJ, might wish  to settle a case with-
    out the use of a consent  decree or a stipulation of dismissal.
    If such a situation arises, then the involved Agency attorneys
    should obtain my advance  concurrence before  representing to
    the defendants any willingness to  settle a case without either
    a consent decree or stipulation of dismissal.

-------
                               -2-
/»-,.  	-••». uwuumenbs snouia n* n*-m>^/-^.i             *'wfjr wt

Office  following  ny concurrence in ?he  setM    ^ D°cktt Contro1
appropriate data  can be entered.        settlement  so that the


cc:  F. Henry  Habicht,  II

-------
SE.1-2

-------
         UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                       WASHINGTON. D.C  20460
                           AUGI4I987
                                              THE ADMINISTRATOR
MEMORANDUM

SUBJECT:  Final Guidance on Use of Alternative Dispute
          Resolution Techniques in Enforcement Actions

TO:       Assistant Administrators
          Regional Administrators


I .   Purpose

     Attached is the final guidance on the use of alternative
dispute resolution (ADR) techniques in enforcement actions.  This
guidance has been reviewed by EPA Headquarters and Regional
offices, the Department of Justice, as well as by representatives
of the regulated community.  We have also sought the advice of
leading ADR professionals, including many of the renowned partici-
pants at a recent Colloquium on ADR sponsored by the Administrative
Conference of the United States.

     The reaction to the draft guidance has been overwhelmingly
favorable and helpful.  In response to comments, the guidance more
clearly distinguishes the uses of binding and non-binding techniques,
emphasizes the need to protect the confidentiality of conversations
before a neutral, and includes model agreements and procedures for
the use of each ADR technique.

II.  Use of ADR

     As the guidance explains, ADR involves the use of third-party
neutrals to aid in the resolution of disputes through arbitration,
mediation, mini-trials and fact-finding.  ADR is being used increas-
ingly to resolve private commercial disputes.  EPA is likewise
applying forms of ADR in various contexts:  negotiated rulemaking,
RCRA citing, and Superfund remedial actions.  ADR holds the promise
of lowering the transaction costs to both the Agency and the
regulated community of resolving applicable enforcement disputes.

-------
                                 -2-

     I view ADR as a new, innovative and potentially more effective
way  to accomplish the results we have sought for years using
conventional enforcement techniques.  We retain our strict adherence
to the principle that the regulated community must comply with the
environmental laws.  The following tasks will be undertaken to
enable the Agency to utilize ADR to more effectively and efficiently
foster compliance:

     Training.  Some within the Agency may fear that using less
adversarial techniques to resolve enforcement actions implies that
the  agency will be seeking less rigorous settlements.  This is not
the  case.  We must train our own people in what ADR is, what it is
not, and how it can help us meet our own compliance objectives.  We
plan to accomplish this by making presentations at national program
and  regional counsel meetings, and by consulting on particular cases.

     Outreach.  We must also make an affirmative effort to demon-
strate to the regulated community that EPA is receptive to sugges-
tions from them about using ADR in a given case.  Nominating
a case for ADR need not be viewed as a sign of weakness in either
party.  After we have gained experience,  we plan to conduct a
national conference to broaden willingness to apply ADR in the
enforcement context.

     Pilot Cases.  Ultimately, the value of ADR must be proven by
its successful application in a few pilot cases.  ADR is being used
to resolve an important municipal water supply problem involving
the city of Sheridan,  Wyoming.  Two recent TSCA settlements also
utilized ADR to resolve disputes which may arise in conducting
environmental audits  required under the consent agreements.  Beyond
these, however,  we need to explore the applicability of ADR to
additional cases.

III.  Action and Follow-Up

    I challenge each  of you to help in our efforts to apply ADR
to the enforcement process.   I ask the Assistant Administrators to
include criteria for  using ADR in future program guidance,  and to
include discussions of ADR at upcoming national meetings.  I ask
the Regional Administrators to review the enforcement actions now
under development and those cases which have already been filed to
find cases which could be resolved by ADR.  I expect each Region
to nominate at least  one case for ADR this fiscal year.  Cases
should be identified  and nominated using the procedure set forth
in the guidance by September 4, 1987
                             Lee M. Thomas

Attachment

cc:  Regional Enforcement Contacts
     Regional Counsels

-------
GUIDANCE ON THE USE OF ALTERNATIVE DISPUTE RESOLUTION




               IN EPA ENFORCEMENT CASES
    United States Environmental  Protection Agency

-------
                        TABLE OF CONTENTS

   Guidance on the Use of Alternative Dispute Resolution (ADR)
                   in EPA Enforcement Cases

                                                            Pages

I.    INTRODUCTION 	"	   1

II.   ALTERNATIVE DISPUTE RESOLUTION METHODS	   2

III. CHARACTERISTICS OF ENFORCEMENT CASES
     SUITABLE FOR ADR	   4

         A.  Impasse or Potential for Impasse	   5
         B.  Resource Considerations	   5
         C.  Remedies Affecting Parties Not Subject to an
             Enforcement Action	   6

IV.   PROCEDURES FOR APPROVAL OF CASES FOR ADR	   6

     A.  Decisionmakers  	   7
     B.  Case Selection Procedures  	   7

         1.  Non Binding ADR .	   8
         2.  Binding ADR	   8

V.    SELECTION OF A THIRD-PARTY NEUTRAL  	   8

     A.  Procedures for Selection 	   8
     B.  Qualifications for Third-Party Neutrals  	   9

         1.  Qualifications for Individuals	   10
         2.  Qualifications for Corporations and  Other
             Organizations	   11

VI.   OTHER ISSUES 	   12

     A.  Memorialization of Agreements  	   12
     B.  Fees for Third-Party  Neutrals  	   12
     C.  Confidentiality  	   12
     D.  Relationship of ADR to Timely and Appropriate and
         Signi f icant Noncompliance  Requirements	   14

VII. PROCEDURES FOR MANAGEMENT OF ADR CASES	   14

     A.  Arbitration  	   14
     B.  Mediation 	   15
     C.  Mini-trial  	   17
     D.  Fact-finding  	   18

VIII. ATTACHMENTS

     A.  Attachment A:  Letter of Nomination of Case  for Mediation
     B.  Attachment B:  Letter of Nomination of Case  for Binding
                        Resolution
     C.  Attachment C:  Arbitration Procedures
     D.  Attachment D:  Mediation Protocols
     E.  Attachment E:  Agreement to Institute Mini-Trial Proceeding
     F.  Attachment F:  Agreement to Institute Fact-Finding

-------
       GUIDANCE ON THE USE OF ALTERNATIVE DISPUTE RESOLUTION

                      I~N EPA ENFORCEMENT CASES
I.   INTRODUCTION

     To effect compliance with the nation's environmental laws,
the United States Environmental Protection Agency (EPA) has
developed and maintained a vigorous judicial and administrative
enforcement program.  Cases instituted under the program must be
resolved, either through settlement or decision by the appro-
priate authority, as rapidly as possible in order to maintain
the integrity and credibility of the program, and to reduce the
backlog of cases.

     Traditionally, the Agency's enforcement cases have been
settled through negotiations solely between representatives of
the Government and the alleged violator.  With a 95 percent
success rate, this negotiation process has proved effective,
and will continue to be used in most of the Agency's cases.
Nevertheless, other means of reaching resolution, known col-
lectively as alternative dispute resolution (ADR), have evolved.
Long accepted and used in commercial, domestic, and labor disputes,
ADR techniques, such as arbitration and mediation, are adaptable
to environmental enforcement disputes.  These ADR procedures
hold the promise for resolution of some of EPA's enforcement
cases more efficiently than, but just as effectively as, those
used in traditional enforcement.  Furthermore, ADR provisions
can also be incorporated into judicial consent decrees and consent
agreements ordered by administrative law judges to address
future disputes.

     EPA does not mean to indicate that by endorsing the use of
ADR in its enforcement actions, it is backing away from a strong
enforcement position.  On the contrary, the Agency views ADR as
merely another tool in its arsenal for achieving environmental
compliance.  EPA intends to use the ADR process, where appropriate,
to resolve enforcement actions with outcomes similar to those
the Agency reaches through litigation and negotiation.  Since
ADR addresses only the process (and not the substance) of case
resolution, its use will not necessarily lead to more lenient
results for violators; rather, ADR should take EPA to its desired
ends by more efficient means.

     ADR is increasingly becoming accepted by many federal
agencies, private citizens, and organizations as a method of
handling disputes.  The Administrative Conference of the United
States has repeatedly called for federal agencies to make greater

-------
                               -2-

use of ADR techniques, and has sponsored numerous studies to
further their use by the federal government.  The Attorney
General of the United States has stated that it is the policy
of the United States to use ADR in appropriate cases.  By
memorandum, dated February 2, 1987, the Administrator of EPA
endorsed the concept in enforcement disputes, and urged senior
Agency officials to nominate appropriate cases.

     This guidance seeks to:

    (1)  Establish Policy - establish that it is EPA policy
         to utilize ADR in the resolution of appropriate civil
         enforcement cases.

    (2)  Describe Methods - describe some of the applicable
         types of ADR, and the characteristics of cases which
         might call for the use of ADR;

    (3)  Formulate Case Selection Procedures - formulate
         procedures for determining whether to use ADR in
         particular cases,  and for selection and procurement
         of a "third-party neutral" (i.e., mediators,
         arbitrators, or others employed in the use of ADR);

    (4)  Establish Qualifications - establish qualifications
         for third-party neutrals; and

    (5)  Formulate Case Management Procedures - formulate
         procedures for management of cases in which some
         or all issues are submitted for ADR.
II.  ALTERNATIVE DISPUTE RESOLUTION METHODS

     ADR mechanisms which are potentially useful in environ-
mental enforcement cases will primarily be mediation and nonbind-
ing arbitration.  Fact-finding and mini-trials may also be helpful
in a number of cases.  A general description of these mechanisms
follows.  (See also Section VIII, below, which describes in
greater detail how each of these techniques works.) Many other
forms of ADR exist, none of which are precluded by this guidance.
Regardless of the technique employed, ADR can be used to resolve
any or all of the issues presented by a case.

     A.  Mediation1 is the facilitation of negotiations by a
person not a party to the dispute (herein "third-party neutral")
who has no power to decide the issues, but whose function is to
1 For further information on the mediation role of Clean Sites Inc.,
  see guidance from the Assistant Administrator, Office of Solid
  Waste and Emergency Response and Assistant Administrator, Office
  of Enforcement and Compliance Monitoring on the "Role of Clean
  Sites Inc. at Superfund Sites," dated April 24, 1987.

-------
                              -3-

assist the parties in reaching settlement.   The mediator serves
to schedule and structure negotiations,  acts as a catalyst between
the parties, focuses the discussions,  facilitates exchange between
the parties, and serves as an assessor - but not a judge - of
the positions taken by the parties during the course of negotia-
tions.  With the parties' consent, the mediator may take on
additional functions such as proposing solutions to the problem.
Nevertheless, as in traditional negotiation, the parties retain
the power to resolve the issues through an informal, voluntary
process, in order to reach a mutually acceptable agreement.
Having agreed to a mediated settlement,  parties can then make
the results binding.

     B.  Arbitration involves the use of a person — not a party
to the dispute — to hear stipulated issues pursuant to procedures
specified by the parties.  Depending upon the agreement of the
parties and any legal constraints against entering into binding
arbitration, the decision of the arbitrator may or may not be
binding.  All or a portion of the issues — whether factual,
legal or remedial — may be submitted to the arbitrator.  Because
arbitration is less formal than a courtroom proceeding, parties
can agree to relax rules of evidence and utilize other time-saving
devices.  For the present, EPA appears to be restricted by law
to use binding arbitration only for small CERCLA cost recovery
cases.  We are conducting further research regarding its use to
decide factual issues.

     C.  Fact-finding entails the investigation of specified
issues by a neutral with subject matter expertise, and selected
by the parties to the dispute.  The process may be binding or
nonbinding, but if the parties agree, the material presented
by the fact-finder may be admissible as an established fact in
a subsequent judicial or administrative hearing, or determinative
of the issues presented.  As an essentially investigatory process,
fact-finding employs informal procedures.  Because this ADR
mechanism seeks to narrow factual or technical issues in dispute,
fact-finding usually results in a report, testimony, or established
fact which may be admitted as evidence, or in a binding or advisory
opinion.

     D.  Mini-trials permit the parties to present their case, or
an agreed upon portion of it, to principals who have authority
to settle the dispute (e.g., vice-president of a company and a
senior EPA official) and, in some cases as agreed by the parties,
to a neutral third-party advisor.  Limited discovery may precede
the case presentation.  The presentation itself may be summary
or an abbreviated hearing with testimony and cross-examination
as the parties agree.  Following the presentation, the principals
reinstitute negotiations, possibly with the aid of the neutral
as mediator.  The principals are the decisionmakers while the
third-party neutral, who usually has specialized subject matter
expertise in trial procedures and evidence, acts as an advisor
on potential rulings on issues if the dispute were to proceed to
trial.  This ADR mechanism is useful in narrowing factual issues

-------
                               —4 —

or mixed questions of law and fact, and in giving the principals
a realistic view of the strengths and weaknesses of their cases.


III. CHARACTERISTICS OF ENFORCEMENT CASES SUITABLE FOR ADR

     This section suggests characteristics of cases which may be
most suitable for use of ADR.  These characteristics are neces-
sarily broad, as ADR may theoretically be used in any type of
dispute.  Enforcement personnel can use these characteristics to
make a preliminary assessment of whether ADR should be considered
for use in a particular case, including a discrete portion or
issue in a case.

     ADR procedures may be introduced into a case at any point
in its development or while pending in court.  However, it is
preferable that ADR be considered as early as possible in the
progress of the case to avoid the polarizing effect which frequently
results from long and intense negotiations or the filing of a
lawsuit.  ADR should, therefore,  be considered prior to referral
of a case to DOJ.  Indeed, the threat of a referral may be used
as an incentive to convince the other parties to utilize an
appropriate ADR technique.

     Notwithstanding the preference for consideration and use
of ADR at an early stage in the progress of a case, there are
occasions when ADR should be considered after a case has been
referred and filed in court.  This is particularly true when the
parties have reached an apparent impasse in negotiations, or the
court does not appear to be willing to expeditiously move the
case to conclusion through establishing discovery deadlines,
conducting motions hearings or scheduling trial dates.  In such
cases, introduction of a mediator into the case, or submission
of some contested facts to an arbitrator may help to break the
impasse.  Cases which have been filed and pending in court for a
number of years without significant movement toward resolution
should be scrutinized for prospective use of ADR.

     In addition to those circumstances, the complexity of legal
and technical issues in environmental cases have resulted in a
recent trend of courts to appoint special masters with increasing
frequency.  Those masters greatly increase the cost of the litigation
and, while they may speed the progress of the case, the parties
have little direct control over the selection or authority of
the masters.  The government should give careful consideration
to anticipating a court's desire to refer complex issues to a
master by proposing that the parties themselves select a mediator
to assist in negotiations or an arbitrator to determine some
factual issues.

-------
                               -5-
     The following characteristics of cases which may be candidates
for use of some form of. ADR are not intended to be exhaustive.
Agency personnel must rely upon their own judgment and experience
to evaluate their cases for potential applications of ADR.   In all
instances where the other parties demonstrate their willingness to
use ADR, EPA should consider its use.  Sample characteristics of
cases for ADR^:

A.   Impasse or Potential for Impasse

     When the resolution of a case is prevented through impasse,
EPA is prevented from carrying out its mission to protect and
enhance the environment, and is required to continue to commit
resources to the case which could otherwise be utilized to address
other problems.  It is highly desirable to anticipate and avoid,
if possible, the occurrence of an impasse.

     Impasse, or the possibility for impasse, is commonly created
by the following conditions, among others:

     (1) Personality conflicts or poor communication among
negotiators;

     (2) Multiple parties with conflicting interests;

     (3) Difficult technical issues which may benefit from
independent analysis;

     (4) Apparent unwillingness of a court to rule on matters
which would advance the case toward resolution; or

     (5) High visibility concerns making it difficult for the
parties to settle such as cases involving particularly sensitive
environmental concerns such as national parks or wild and scenic
rivers, issues of national significance, or significant adverse
employment implications.

     In such cases, the involvement of a neutral to structure,
stimulate and focus negotiations and, if necessary, to serve as an
intermediary between personally conflicting negotiators should be
considered as early as possible.

B.  Resource Considerations

     All enforcement cases are important in that all have, or
should have, some deterrent effect upon the violator and other
members of the regulated community who hear of the case.  It is,
therefore, important that EPA's cases be supported with the
   ADR is not considered appropriate in cases where the Agency is
   contemplating criminal action.

-------
                               -6-

level of resources necessary to achieve the desired result.
Nevertheless, because of the size of EPA's enforcement effort,
it is recognized that resource efficiencies must be achieved
whenever possible to enable EPA to address as many violations as
possible.

     There are many cases in which utilizing some form of ADR
would achieve resource efficiencies for EPA.  Generally, those
cases contain the following characteristics:

     (1) Those brought in a program area with which EPA has had
considerable experience, and in which the procedures, case law
and remedies are relatively well-settled and routine; or

     (2) Those having a large number of parties or issues where
ADR can be a valuable case management tool.


C.   Remedies Affecting Parties not Subject to an Enforcement Action

     Sometimes, the resolution of an underlying environmental problem
would benefit from the involvement of persons, organizations or
entities not a party to an impending enforcement action.  This is
becoming more common as EPA and the Congress place greater emphasis
on public participation in major decisions affecting remedies in
enforcement actions.  Such cases might include those in which:

     (1) A state or local governmental unit have expressed an
interest,  but are not a party;

     (2) A citizens group has expressed, or is likely to express
an interest; or

     (3) The remedy is likely to affect not only the violator,
but the community in which the violator is located as well (e.g.,
those cases in which the contamination is wide-spread, leading
to a portion of the remedy being conducted off-site).

     In such cases, EPA should consider the use of a neutral very
early in the enforcement process in order to establish communication
with those interested persons who are not parties to the action,
but whose understanding and acceptance of the remedy will be
important to an expeditious resolution of the case.


IV.  PROCEDURES FOR APPROVAL OF CASES FOR ADR

     This section describes procedures for the nomination of
cases for ADR.  These procedures are designed to eliminate confusion
regarding the selection of cases for ADR by:  (1) integrating the

-------
                               -7-
selection of cases for ADR into the existing enforcement case
selection process; and (2) creating decision points and contacts
in the regions,  headquarters,  and DOJ to determine whether to
use ADR in particular actions.

     A.  Decisionmakers

     To facilitate decisions whether to use ADR in a particular
action, decision points in headquarters, the regions and DOJ
must be established.  At headquarters, the decisionmaker will
be the appropriate Associate Enforcement Counsel (AEC).  The AEC
should consult on this decision with his/her corresponding head-
quarters compliance division director.  At DOJ, the decisionmaker
will be the Chief, Environmental Enforcement Section.  In the
regions, the decisionmakers will be the Regional Counsel in con-
sultation with the appropriate regional program division director.
If the two Regional authorities disagree on whether to use ADR
in a particular case, then the Regional Administrator (RA) or
the Deputy Regional Administrator  (DRA), will decide the matter.
This decisionmaking process guarantees consultation with and
concurrence of all relevant interests.

     B.  Case Selection Procedures

     Anyone in the regions, headquarters, or DOJ who is partici-
pating in the development or management of an enforcement action,
or any defendant or PRP not yet named as a defendant, may suggest
a case or selected issues in a case for ADR.3  Any suggestion,
however, must be communicated to and discussed with the appropriate
regional office for its consent.  The respective roles of the AECs
and DOJ are discussed below.  After a decision by the Region or
litigation team to use ADR in a particular case, the nomination
should be forwarded to headquarters and, if it is a referred
case, to DOJ.  The nominations must be in writing, and must
enumerate why the case is appropriate for ADR.  (See Section III
of this document which describes the characteristics for selection
of cases for ADR.)  Attachments A and B are sample case nomination
communications.  Attachment A pertains to nonbinding ADR, and
Attachment B pertains to binding ADR.

     Upon a determination by the Government to use ADR, Government
enforcement personnel assigned to the case (case team) must
approach the PRP(s) or other defendant(s) with the suggestion.
The case team should indicate to the PRP(s) or defendant(s) the
factors which have led to the Agency's recommendation to use
3 Nomination papers should always be deemed attorney work product
  so that they are discovery free.

-------
                                -8-

ADR, and the potential benefits to all parties  from its use.
The  PRP(s) or other defendant(s) should understand, nevertheless,
that the Government is prepared to proceed with vigorous litigation
in the case if the use of a third-party neutral fails to resolve
the matter.  Further, for cases which are referrable, the defendant(s)
should be advised that EPA will not hesitate to refer the matter
to DOJ for prosecution.

     1.  Nonbinding ADR

     For mediation, mini-trials, nonbinding arbitration, and
other ADR mechanisms involving use of a third-party neutral as a
nonbinding decisionmaker, regions should notify the appropriate
AEC and, if the case is referred,  DOJ of:  (1) its intent to use
ADR in a particular case, and (2) the opportunity to consult
with the Region on its decision.  Such notification should be in
writing and by telephone call.  The AEC will consult with the
appropriate headquarters program division director.  The Region
may presume that the AEC and DOJ agree with the selection of the
case for ADR unless the AEC or DOJ object within fifteen (15)
calendar days of receipt of the nomination of the case.  If
either the AEC or DOJ object,  however, the Region should not
proceed to use ADR in the case until consensus is reached.

     2.  Binding ADR

     For binding arbitration and fact-finding, and other ADR
mechanisms involving the use of third-party neutrals as binding
decisionmakers,  the appropriate AEC must concur in the nomination
of the case by the Region.  In addition,  DOJ must also concur in
the use of binding ADR in referred cases.  Finally, in non-CERCLA
cases which may involve compromise of claims in excess of $20,000
or where the neutral's decision will be embodied in a court order,
DOJ must also concur.   Without the concurrence of headquarters
and DOJ under these circumstances,  the Region may not proceed
with ADR.   OECM and DOJ should attempt to concur in the nomina-
tion within fifteen (15) days  of receipt of the nomination.

     Under the Superfund Amendments and Reauthorization Act (SARA),
Pub. L. No. 99-499, §122(h)(2)(1986), EPA may enter into binding
arbitration for cost recovery claims under Section 107 of CERCLA,
provided the claims are not in excess of $500,000, exclusive of
interest.   Until regulations are promulgated under this section,
EPA is precluded from entering into binding arbitration in cost
recovery actions.  Accordingly,  Attachment C is not yet appropriate
for use in cases brought under this section.  It is, however, avail-
able for use in nonbinding arbitration.

V.   SELECTION OF A THIRD-PARTY NEUTRAL

     A.  Procedures for Selection

     Both the Government and all defendants must agree on the need

-------
                               -9-
for a neutral in order .to proceed with ADR.  In some situations
(e.g., in a Superfund case), however, the parties may proceed with
ADR with consensus of only some of the parties depending on the
issue and the parties.  Once agreed, the method for selecting
the neutral and the actual selection in both Superfund and other
cases will be determined by all parties involved with the excep-
tion of cases governed by §107 of CERCLA.  To help narrow the
search for a third-party neutral, it is useful, although not
required, for the parties to agree preliminarily on one or more
ADR mechanisms.  OECM is available to help at this point in the
process, including the procurement of in-house or outside persons
to aid the parties in selecting an appropriate ADR mechanism.

     In Section VIII below, we have indicated some of the situations
where each ADR mechanism may be most appropriate.  Of course, the
parties are free to employ whichever technique they deem appropriate
for the case.  Because the ADR mechanisms are flexible, they are
adaptable to meet the needs and desires of the parties.

     The parties can select a third-party neutral in many ways.
Each party may offer names of proposed neutrals until all parties
agree on one person or organization.  Alternatively, each party
may propose a list of candidates, and allow the other parties to
strike unacceptable names from the list until agreement is
reached.  For additional methods, see Attachments C, D, and E.
Regardless of how the parties decide to proceed, the Government
may obtain names of qualified neutrals from the Chief, Legal
Enforcement Policy Branch (LEPB)  (FTS 475-8777, LE-130A, E-Mail
box EPA 2261), by written or telephone request.  With the help
of the Administrative Conference of the U.S. and the Federal
Mediation and Conciliation Service, OECM is working to establish
a national list of candidates from which the case team may select
neutrals.  In selecting neutrals, however, the case team is not
limited to such a list.

     It is important to apply the qualifications enumerated below
in section V.B. in evaluating the appropriateness of a proposed
third-party neutral for each case.  Only the case team can decide
whether a particular neutral is acceptable in its case.  The
qualifications described below provide guidance in this area.

     At any point in the process of selecting an ADR mechanism or
third-party neutral, the case team may consult with the Chie_f,
LEPB, for guidance.

     B.  Qualifications for Third-Party Neutrals

     The following qualifications are to be applied in the
selection of all third-party neutrals who may be considered for
service in ADR procedures to which EPA is a party.  While a

-------
                               -10-


third-party neutral should meet as many of the qualifications as
possible, it may be difficult to identify candidates who possess
all the qualifications for selection of a third-party neutral.
Failure to meet one or more of these qualifications should not
necessarily preclude a neutral who all the parties agree would
be satisfactory to serve in a particular case.  The qualifications
are, therefore, intended only as guidance rather than as pre-
requisites to the use of ADR.  Further, one should apply a greater
degree of flexibility regarding the qualifications of neutrals
involved in nonbinding activities such as mediation, and a stricter
adherence to the qualifications for neutrals making binding
decisions such as arbitrators.

          1.  Qualifications for Individuals

             a.  Demonstrated Experience.  The candidate should
have experience as a third-party neutral in arbitration, mediation
or other relevant forms of ADR.  However, other actual and active
participation in negotiations, .judicial or administrative hearings
or other forms of dispute resolution, service as an administrative
law judge, judicial officer or judge, or formal training as a
neutral may be considered.  The candidate should have experience
in negotiating, resolving or otherwise managing cases of similar
complexity to the dispute in question, e.g.,  cases involving
multiple issues, multiple parties,  and mixed technical and legal
issues where applicable.

             b.  Independence.  The candidate must disclose any
interest or relationship which may give rise to bias or the
appearance of bias toward or against any party.  These interests
or relationships include:

     (a)  past, present or prospective positions with or financial
          interests in any of the parties;

     (b)  any existing or past financial, business, professional,
          family or social relationships with any of the parties
          to the dispute or their attorneys;

     (c)  previous or current involvement in the specific dispute;

     (d)  past or prospective employment, including employment as
          a neutral in previous disputes, by any of the parties;

     (e)  past or present receipt of a significant portion of the
          neutral's general operating funds or grants from one or
          more of the parties to the dispute.

     The existence of such an interest or relationship does not
necessarily preclude the candidate from serving as a neutral,
particularly if the candidate has demonstrated sufficient
independence by reputation and performance.  The neutrals with

-------
                               -li-
the most experience are most likely to have past or current
relationships with some parties to the dispute,  including the
Government.  Nevertheless,  the candidate must disclose all
interests, and the parties  should then determine whether the
interests create actual or  apparent bias.

             c.  Subject Matter Expertise.  The  candidate should
have sufficient general knowledge of the subject matter of the
dispute to understand and follow the issues, assist the parties
in recognizing and establishing priorities and the order of
consideration of those issues, ensure that all possible avenues
and alternatives to settlement are explored, and otherwise serve
in the most effective manner as a third-party neutral.  Depending
on the case, it may also be helpful if the candidate has specific
expertise in the issues under consideration.

             d.  Single Role.  The candidate should not be serving
in any other capacity in the enforcement process for that particular
case that would create actual or apparent bias.   The case team
should consider any prior involvement in the dispute which may
prevent the candidate from acting with objectivity.  For example,
involvement in developing a settlement proposal, particularly
when the proposal is developed on behalf of certain parties, may
preclude the prospective neutral from being objective during
binding arbitration or other ADR activities between EPA and the
parties concerning that particular proposal.

     Of course, rejection of a candidate for a particular ADR
activity, such as arbitration, does not necessarily preclude
any role for the candidate in that case.  The candidate may
continue to serve in other capacities by, for example, relaying
information among parties and presenting offers on behalf of
particular parties.

         2.  Qualifications for Corporations and Other Organiza-
tions. 4  Corporations or other entities or organizations which
propose to act as third-party neutrals, through their officers,
employees or other agents,  in disputes involving EPA, must:

      (a) like unaffiliated individuals, make the disclosures
         listed above; and

      (b) submit to the parties a list of all persons who, on
         behalf of the corporation, entity or organization, will
         or may be significantly involved in the ADR procedure.
         These representatives should also make the disclosures
         listed above.
4 For further guidance regarding Clean Sites Inc., see guidance
  from the Assistant Administrator, Office of Solid Waste and
  Emergency Response and Assistant Administrator, Office of
  Enforcement and Compliance Monitoring on the "Role of Clean Sites
  Inc. at Superfund Sites," dated April 24, 1987.

-------
                               -12-
      In selecting a thi-rd-party neutral to resolve or aid in the
resolution of a dispute to which EPA is a party, Agency personnel
should remain at all times aware that the Agency must not only
uphold its obligation to protect public health, welfare and the
environment, but also develop and maintain public confidence
that  the Agency is performing its mission.  Care should be taken
in the application of these qualifications to avoid the selection
of third-party neutrals whose involvement in the resolution of
the case might undermine the integrity of that resolution and
the enforcement efforts of the Agency.


VII. OTHER ISSUES;

     A.  Memorialization of Agreements

     Just as it would in cases where ADR has not been used,  the
case team should memorialize agreements reached through ADR in
orders and settlement documents and obtain DOJ and headquarters
approval (as appropriate) of the terms of any agreement reached
through ADR.

     B.  Fees For Third-Party Neutrals

     The Government's share of ADR costs will be paid by Head-
quarters.   Contact LEPB to initiate payment mechanisms.  Because
such mechanisms require lead time, contact with LEPB should be
made as early as possible after approval of a case for ADR.

     It is EPA policy that PRPs and defendants bear a share of
these costs equal to EPA except in unusual circumstances.  This
policy ensures that these parties "buy in" to the process.  It
is important that the exact financial terms with these parties
be settled and set forth in writing before the initiation of ADR
in the case.

     C.  Confidentiality

     Unless otherwise discoverable, records and communications
arising from ADR shall be confidential and cannot be used in
litigation or disclosed to the opposing party without permission.
This policy does not include issues where the Agency is required
to make decisions on the basis of an administrative record such
as the selection of a remedy in CERCLA cases.  Public policy
interests in fostering settlement compel the confidentiality of
ADR negotiations and documents.  These interests are reflected
in a number of measures which seek to guarantee confidentiality
and are recognized by a growing body of legal authority.

     Most indicative of the support for non-litigious settlement
of disputes is Rule 408 of the Federal Rules of Evidence which

-------
                               -13-
renders offers of compromise or settlement or statements made
during discussions inadmissable in subsequent litigation between
the parties to prove liability.  Noting the underlying policy
behind the rule, courts have construed the rule to preclude
admission of evidence regarding the defendant's settlement of
similar cases.5

     Exemption protection under the Freedom of Information Act
(FOIA), 15 U.S.C. §552, could also accommodate the interest in
confidentiality.  While some courts have failed to recognize the
"settlement negotiations privilege,"6 other courts have recognized
the privilege.'

     In addition to these legal authorities and policy arguments,
confidentiality can be ensured by professional ethical codes.
Recognizing that promoting candor on the parties' part and
impartiality on the neutral's part is critical to the success of
ADR, confidentiality provisions are incorporated into codes of
conduct as well as written ADR agreements  (See Attachment D).
The attachment provides liquidated damages where a neutral reveals
confidential information except under court order.

     Furthermore, confidentiality can be effected by court order,
if ADR is court supervised.  Finally, as many states have done
See Scaramuzzo v. Glenmore Distilleries Co., 501 F.Supp. 727
(N.D. 111. 1980), and to bar discovery, see Branch v. Phillips
Petroleum Co., 638 F.2d 873 (5th Cir. 198TJ.  Courts have
also construed labor laws to favor mediation or arbitration
and have therefore prevented third-party neutrals from being
compelled to testify.  See, e .g. ,  N . L . R . B .  v. Joseph Macaluso,
Inc., 618 F.2d 51 (9th Cir. 1980)  (upholding N.L.R. B. 's
revocation of subpoena issued to mediator to avoid breach of
impartiality) .

See, e.g. , Center for Auto Safety v.  Department of Justice, 576
   See, e.g. , Center  or Auto Safe
   F.Supp. 739, 749 (D.D.C. 1983).
   See Bottaro v. Hatton Associates, 96 F.R.D. 158-60 (E.D.N.Y 1982)
   (noting "strong public policy of favoring settlements" and public
   interest in "insulating the bargaining table from unnecessary
   intrusions").  In interpreting Exemption 5 of the FOIA, the Supreme
   Court asserted that the "contention that [a requester could] obtain
   through the FOIA material that is normally privileged would create
   an anomaly in that the FOIA could be used to supplement civil
   discovery.  ...We do not think that Congress could have intended
   that the weighty policies underlying discovery privileges could
   be so easily circumvented."  United States v. Weber Aircraft,
   104 S.Ct. 1488, 1494 (1984).

-------
                               -14-

statutorily, EPA is considering the promulgation of regulations
which further ensure th.e confidentiality of ADR proceedings.

     D.  Relationship of ADR to Timely and Appropriate and
         Significant Noncompliance Requirements

     The decision to use ADR would have no particular impact under
the "timely and appropriate" (T&A) criteria in a case where there
is already an administrative order or a civil referral since the
"timely and appropriate" criteria would have been met by the
initiation of the formal enforcement action.  In the case of a
civil referral, the 60-day period by which DOJ is to review and
file an action may be extended if ADR is used during this time.

     The decision to use ADR to resolve a violation prior to the
initiation of a formal enforcement action, however, would be
affected by applicable "timely and appropriate" criteria (e.g.,
if the violation fell under a program's Significant Noncompliance
(SNC) definition, the specific timeframes in which compliance
must be achieved or a formal enforcement action taken would
apply).  The use of ADR would not exempt applicable "T&A"
requirements and the ADR process would normally have to proceed
to resolve the case or "escalate" the enforcement response.
However, since, "T&A" is not an immutable deadline, that ADR
is being used for a particular violation would be of central
significance to any program management review of that case (e.g.,
the Deputy Administrator's discussion of "timely and appropriate"
enforcement during a regional review would identify the cases in
which ADR is being used.)


VIII. PROCEDURES FOR MANAGEMENT OF ADR CASES

     This section elaborates on the various ADR techniques:  How
they work, some problems that may be encountered in their use,
and their relationship to negotiation and litigation.  For each
ADR technique, we have provided, as an attachment to this guidance,
an example of procedures reflecting its use.  These attachments
are for illustrative purposes only, and do not represent required
procedures.  The specific provisions of the attachments should
be adapted to the circumstances of the case or eliminated if not
applicable.

     A.   Arbitration

          1.   Scope and Nature

     As stated in Section II, above, arbitration involves the
selection by the parties of a neutral decisionmaker to hear
selected issues and render an opinion.  Depending on the parties'
agreement, the arbitrator's decision may or may not be binding.

-------
                               -15-
For the present-, EPA appears to be restricted by law to use
binding arbitration only for small CERCLA cost recovery cases.
We are conducting further research regarding its use to decide
factual issues.  Included as Attachment C are draft generic
arbitration procedures for formal arbitration.  To conduct less
formal proceedings, the parties may modify the procedures.

          2.  Use

     Arbitration is most appropriate in resolving routine cases
that do not merit the resources required to generate and process
a civil judicial referral.  It may aid in resolving technical
disputes that are usually submitted to the courts or administrative
law judges  (ALJs), which disputes require subject-matter expertise
which federal district court judges and ALJs may lack.8

     B.  Mediation

         1.  Scope and Nature

     Mediation, an informal process, is entered into voluntarily
by the parties  to a dispute and in no way binds them beyond their
own agreement.  More than the other ADR processes, mediation  is
best viewed as  an extension of the direct negotiation process
begun by the parties.  As in direct negotiation, the parties
continue to control the substance of discussions and any agree-
ment reached.   In mediation, however, the mediator directs and
structures  the  course of discussions.

     The mediation format varies with the individual style of the
mediator and the needs of the parties.  Initially, the mediator is
likely to call  a joint meeting with the parties to work out ground
rules such  as how and when meetings will be scheduled.  Included
as Attachment D are generic mediation protocols for use and
adaptation  in all EPA mediations.  Most of the items covered  in
the attachment  would be useful as ground rules for most EPA
enforcement negotiations.  Ordinarily, mediators will hold a
series of meetings with the parties in joint  session, as well as
with each party.   In joint meetings, the mediator facilitates
discussion.  In separate caucuses, the mediator may ask questions
or pose hypothetical terms to a party in order to clarify its
position and identify possible areas for exchange and agreement
with the opposing party.  Some mediators will be more aggressive
than others in  this role; they may even suggest possible settlement
alternatives to resolve deadlocks between the parties.  In general,
however, the mediator serves as a facilitator of discussions  and
abstains from taking positions on substantive points.
  Arbitration is specifically authorized under Section 107 of CERCLA
  for cost recovery claims not in excess of $500,000, exclusive of
  interest.

-------
                              -16-


     There are no external time limits on mediation other than
those  imposed by the parties  or by external pressures from the
courts, the community or public interest groups.  In all cases,
the Government should insist  on a time limit for the mediation
to ensure that the defendants do not use mediation as a stalling
device.  The Government should also insist on establishing points
in the process to evaluate progress of the mediation.  As the
parties approach settlement terms through mediation, final authority
for decisionmaking remains the same as during direct negotiations,
i.e., requirements for approval or concurrence from senior managers
are applicable.

         2.  Use of Mediation

     Mediation is appropriate for disputes in which the parties
have reached or anticipate a negotiation impasse based on, among
other things, personality conflicts, poor communication, multiple
parties, or inflexible negotiating postures.  Additionally,
mediation is useful in those cases where all necessary parties are
not before the court (e.g., a state which can help with the funding
for a municipality's violation).  Mediation is the most flexible
ADR mechanism, and should be  the most widely used in Agency disputes.

         3.  Withdrawal from Mediation

     As a voluntary and unstructured process, mediation proceeds
entirely at the will of the parties and, therefore,  may be concluded
by the parties prior to settlement.  A determination to withdraw
from mediation should be considered only when compelling factors
militate against proceeding.   If the mediation has extended
beyond a reasonable time period (or the period agreed upon by
the parties) without significant progress toward agreement,  it
may be best to withdraw and proceed with direct negotiations or
litigation.  Withdrawing from mediation might also be considered
in the unlikely event that prospects for settlement appear more
remote than at the outset of the mediation.  Finally, inappropriate
conduct by the mediator would warrant concluding the mediation
effort or changing mediators.

         4.  Relation to Litigation

     In the ordinary case, prior to referral or the filing of an
administrative complaint, the time limits for mediation could be
the same as those for negotiation.  In contrast to normal
negotiations, however, the parties may agree that during the
time period specified for mediation, litigation activities
such as serving interrogatories, taking depositions, or filing
motions may be suspended.  In filed civil judicial cases, where
the court imposes deadlines,  it will be necessary to apprise the

-------
                               -17-
court of the parties'  activities and to build ADR into the court's
timetable.  For agreements relating ADR activities to ongoing
litigation, see paragraph 17 of Attachment E.

     C.  Mini-Trial

         1.  Scope and Nature

    Like other ADR techniques, the mini-trial is also voluntary
and nonbinding on the parties.  In the mini-trial, authority for
resolution of one or more issues rests with senior managers who,
representing each party in the dispute, act as decisionmakers.
In some cases a neutral referee is appointed to supervise the
proceedings and assist the decisionmakers in resolving an issue
by providing the parties with a. more realistic view of their
case.  In addition, the neutral's presence can enhance public
acceptability of a resolution by effectively balancing the
interests of the Government and the defendant.

     The scope and format of the mini-trial are determined solely
by the parties to the dispute and are outlined in an initiating
agreement.  Because the agreement will govern the proceedings,
the parties should carefully consider and define issues in advance
of the mini-trial.  Points that could be covered include the
option of and role for a neutral, issues to be considered, and
procedural matters such as order and schedule of proceedings and
time limits.  Attachment E is a sample mini-trial agreement.

     The mini-trial proceeds before a panel of decisionmakers
representing the parties and, in some cases, a neutral referee.
Preferably, the decisionmakers will not have participated directly
in the case prior to the mini-trial.  The defendant's represen-
tative should be a principal or executive of the entity with
decisionmaking authority.  EPA's representative should be a
senior Agency official comparable in authority to the defendant's
representative.  In some cases, each side may want to use a
panel consisting of several decisionmakers as its representatives.
The neutral referee is selected by both parties and should have
expertise in the issues under consideration.

     At the mini-trial, counsel for each side presents his or her
strongest and most persuasive case to the decisionmakers in an
informal, trial-like proceeding.  In light of this structure,
strict rules of evidence do not apply, and the format for the
presentation is unrestricted.  Each decisionmaker is then afforded
the unique opportunity to proceed, as agreed, with open and
direct questioning of the other side.  This  information exchange
allows the decisionmakers to adjust their perspectives and posi-
tions in light of a preview of the case.  Following this phase
of the mini-trial, the decisionmakers meet, with or without
counsel or the neutral referee, to resolve the issue(s) or case
presented, through negotiation.

-------
                               -18-

         2.  Role of the Neutral

     The neutral referee may serve in more than one capacity
in this process, and should be selected with a clearly defined
concept of his or her role.  The most common role is to act as
an advisor to the decisionmakers during the information exchange.
The neutral may offer opinions on points made or on adjudication
of the case in litigation, and offer assistance to the decision-
makers in seeing the relative merits of their positions.  The
neutral's second role can be to mediate the negotiation between
the decisionmakers should they reach an impasse or seek assistance
in forming an agreement.  Unless otherwise agreed by the parties,
no evidence used in the mini-trial is admissible in litigation.

         3.  Use

         As with mediation, prior to referral or the filing of an
administrative complaint, the time limits for a mini-trial would
be the same as those for negotiation.  The parties usually agree,
however, that during the time period specified for a mini-trial,
litigation activities such as serving interrogatories,  taking
depositions,  or filing motions may be suspended except as otherwise
agreed.  In general, mini-trials are appropriate in cases involving
only a small number of parties, and are most useful in four kinds
of disputes:

         1.  Where the parties have reached or anticipate reaching
a negotiation impasse due to one party's overestimation, in the
view of the other party, of the strength of its position;

         2.  Where significant policy issues exist which would
benefit from a face-to-face presentation to decisionmakers (without
use of a neutral);

         3.  Where the issues are technical, and the decisionmakers
and neutral referee have subject-matter expertise; or

         4.  Where the imprimatur of a neutral's expertise would
aid in the resolution of the case.

     D.  Fact-finding

         1.  Scope and Nature

     Binding or nonbinding fact-finding may be adopted voluntarily
by parties to a dispute, or imposed by a court.  It is most
appropriate for issues involving technical or factual disputes.
The primary purpose of this process is to reduce or eliminate
conflict over facts at issue in a case.  The fact-finder's role
is to act as an independent investigator, within the scope of the
authority delegated by the parties.  The findings may be used in
reaching settlement, as "facts" by a judge or ALJ in litigation,

-------
                               -19-


or as binding determinations.   Like other ADR processes involving
a neutral, a resolution based on a fact-finder's report will have
greater credibility with the public.

     The neutral's role in fact-finding is clearly defined by an
initial agreement of the parties on the issue(s) to be referred
to the fact-finder and the use to be made of the findings or
recommendations, e.g., whether they will be binding or advisory.
Once this agreement is framed, the role of the parties in the
process is limited and the fact-finder proceeds independently.
The fact-finder may hold joint or separate meetings or both with
the parties in which the parties offer documents, statements, or
testimony in support of their positions.  The fact-finder is also
free to pursue other sources of information relevant to the
issue(s).  The initial agreement of the parties should include a
deadline for receipt of the fact-finder's report.  Attachment F
is a sample fact-finding agreement.

     The fact-finder issues a formal report of findings, and
recommendations, if appropriate, to the parties, ALJ or the
court.  If the report is advisory, the findings and recommenda-
tions are used to influence the parties' positions and give
impetus to further settlement negotiations.  If the report is
binding, the parties adopt the findings and recommendations as
provisions of the settlement agreement.  In case of litigation,
the findings will be adopted by the judge or ALJ as "facts" in
the case.

         2.  Relation to Litigation

     Decisions regarding pursuit of litigation when fact-finding
is instituted are contingent upon the circumstances of the case
and the issues to be referred to the fact-finder.  If fact-find-
ing is undertaken in connection with an ongoing settlement
negotiation, in most cases it is recommended that the parties
suspend negotiations on the issues requiring fact-finding until
the fact-finder's report is received.  If fact-finding is part
of the litigation process, a decision must be made whether to
proceed with litigation of the rest of the case or to suspend
litigation while awaiting the fact-finder's report.

-------
                           ATTACHMENT A
MEMORANDUM

SUBJECT:  Nomination of U.S.  v. XYZ Co. for Non-binding
          Alternative for Dispute Resolution

FROM:     Deputy Regional Administrator

TO:       Associate Enforcement Counsel
            for Hazardous Waste Enforcement

          Chief, Environmental.Enforcement Section
          Department of Justice

     This memorandum is to nominate U.S. v. XYZ Co.  for alterna-
tive dispute resolution (ADR).  The case is a CERCLA enforcement
action involving multiple PRPs as well as a number of complex
technical and legal issues.  The RI/FS and the record of decision
have both been completed.  We anticipate that the PRPs are inte-
rested in settling this matter and, we believe, a trained mediator
will greatly aid negotiations.  The members of the litigation
team concur in this judgment.

     We understand that if you object within 15 days of the receipt
of this letter, we will not proceed with ADR in this case without
your approval.  We do believe, however, that ADR is appropriate
in this action.  We look forward to working with your offices in
this matter.

-------
                         ATTACHMENT B
MEMORANDUM

SUBJECT:  Nomination of United States v. ABC Co. for Binding
          Alternative Dispute Resolution

FROM:     Deputy Regional Administrator

TO:       Associate Enforcement Counsel for Water Enforcement

          Chief, Environmental Enforcement Section
          Department of Justice

     This memorandum requests concurrence in the use of a binding
fact-finding procedure in United States v. ABC Co.  The case
involves the following facts:

     ABC Co. owns and operates a specialty chemical production
and formulation facility.  Wastewater streams come from a variety
of production areas which change with product demand.  Because
of these diverse processes, the company's permit to discharge
wastewater must be based on the best professional judgment of
the permit writer as to the level of pollution control achievable.

     The company was issued an NPDES permit in 1986.  The permit
authorizes four (4) outfalls and contains limits for both conven-
tional and toxic organic pollutants.  The effluent limitations of
the permit incorporate the Best Available Technology requirements
of the Clean Water Act (CWA).

     EPA filed a civil lawsuit against the company for violating
effluent limits of the 1986 permit.  As part of the settlement of
the action, the company was required to submit a compliance plan
which would provide for modification of its existing equipment,
including institution of efficient operation and maintenance
procedures to obtain compliance with the new permit.  The settle-
ment agreement provides for Agency concurrence in the company's
compliance plan.

     The company submitted a compliance plan, designed by in-house
engineers, which proposed to slightly upgrade their existing
activated sludge treatment system.  The company has claimed that
this upgraded system provides for treatment adequate to meet the
permit limits.  EPA has refused to concur in the plan because EPA
experts believe that additional treatment modifications to enhance
pollutant removals are required to meet permit limits on a con-
tinuous basis.  This enhancement, EPA believes, is possible with
moderate additional capital expenditures.

-------
                             -2-


     A fact-finding panel, consisting of experts in utility,
sanitation and chemical engineering, is needed to assess the
adequacy of the treatment system improvements in the compliance
plan in satisfying permit requirements.  Resolution of this
issue by binding, neutral fact-finding will obviate the
expenditure of resources needed to litigate the issue.

     We request your concurrence in the nomination of this case
for fact-finding within fifteen (15) days.  We look forward to
hearing from you.

-------
                           ATTACHMENT C

                      ARBITRATION PROCEDURES*

SUBPART A - GENERAL

1.   Purpose

       This document establishes and governs procedures for the
       arbitration of EPA disputes arising under [insert applicable
       statutory citations].

2.    Scope and Applicability

       The procedures enunciated in this document may be used to
       arbitrate claims or disputes of the EPA regarding [insert
       applicable statutory citations and limitations on scope, if
       any. ]

SUBPART B - JURISDICTION OF ARBITRATOR, REFERRAL OF CLAIMS,
            AND ARBITRATOR SELECTION	

1.    Jurisdiction of Arbitrator

       (a) In accordance with the procedures set forth in this
           document, the Arbitrator is authorized to arbitrate
           [insert applicable categories of claims or disputes.]

       (b) The Arbitrator is authorized to resolve disputes
           and award claims within the scope of the issues
           presented in the joint request for arbitration.

2.    Referral of Disputes

       (a) EPA [insert reference to mechanism by which EPA has
           entered into dispute, e.g., after EPA has issued
           demand letters or an administrative order], and one
           or more parties to the case may submit a joint request
           for arbitration of [EPA's claim, or one or more issues
           in dispute among the parties] 	 [a group
           authorized to arbitrate such matters, e.g., the National
           Arbitration Association  (NAA)] if [restate any general
           limitations on scope].  The joint request shall include:
           A statement of the matter in dispute; a statement of
           the issues to be submitted for resolution; a statement
           that the signatories consent to arbitration of the
           dispute in accordance with the procedures established
           by this document; and the appropriate filing fee.

       (b) Within thirty days after submission of the joint request
           for arbitration, each signatory to the joint request shall
           individually submit to the National Arbitration Association
   Regulations applicable to section 112 of SARA are currently
   being prepared.

-------
                               -2-


           two copies of a written statement which shall include:

              (1) An assertion of the parties' positions in the
                  matter in dispute;

              (2) The amount of money in dispute, if appropriate;

              (3) The remedy sought;

              (4) Any documentation which the party deems necessary
                  to support its position;

             [(5) A statement of the legal standard applicable to
                  the claim and any other applicable principles of
                  law relating to the claim;]

              (6) The identity of any known parties who are not
                  signatories to the joint request for arbitration;
                  and

              (7) A recommendation for the locale for the arbitral
                  hearing.

       A copy of the statement shall be sent to all parties.

3.   Selection of Arbitrator

   (a)  The NAA has established and maintains a National Panel of
       Environmental Arbitrators.

   (b)  After the filing of  the joint request for arbitration, the
       NAA shall submit simultaneously to all parties to the
       dispute an identical list of ten [five] names of persons
       chosen from the National Panel of Environmental Arbitrators.
       Each party to the dispute shall have seven days from the
       date of receipt to strike any names objected to, number
       the remaining names  to indicate order of preference, and
       return the list to the NAA.  If a party does not return
       the list within the  time specified, all persons named
       shall be deemed acceptable.  From among the persons
       who have been approved on all lists, and if possible,  in
       accordance with the  designated order of mutual preference,
       the NAA shall invite an Arbitrator to serve.  If the
       parties fail to agree upon any of the persons named, or
       if acceptable Arbitrators are unable to serve, or if for
       any other reason the appointment cannot be made from the
       submitted lists, the NAA shall make the appointment from
       among other members  of the Panel without the submission
       of any additional lists.  Once the NAA makes the appointment,
       it shall immediately notify the parties of the identity
       of the Arbitrator and the date of the appointment.

-------
                             -3-

   (c)  The dispute shall be heard and determined by one
       Arbitrator, unless the NAA decides  that  three Arbitrators
       should be approved based on the complexity of the  issues
       or the number of parties.

   (d)  The NAA shall notify the parties of the  appointment of the
       Arbitrator and send a copy of these rules to each  party.
       A signed acceptance of the case by  the Arbitrator  shall
       be filed with the NAA prior to the  opening of the  hearing.
       After the Arbitrator is appointed,  all communications
       from the parties shall be directed  to the Arbitrator.

   (e)  If any Arbitrator should resign, die, withdraw,  or be
       disqualified, unable or refuse to perform the duties of the
       office, the NAA may declare the office vacant.  Vacancies
       shall be filled in accordance with  the applicable  provisions
       of this Section, and unless the parties  agree otherwise,
       the matter shall be reheard.

4.   Disclosure

   (a)  A person appointed as an Arbitrator under the above section.
       shall, within five days of receipt  of his or her notice of
       appointment disclose to the NAA any circumstances  likely
       to affect impartiality, including [those factors listed in
       section V.B. of the accompanying guidance]

   (b)  Upon receipt of such information from an appointed
       Arbitrator or other source, the NAA shall on the same day
       communicate such information to the parties and,  if it
       deems it appropriate, to the Arbitrator  and others.

   (c)  The parties may request within seven days of receipt of
       such information from the NAA that  an Arbitrator be
       disqualified.

   (d)  The NAA shall make a determination  on any request  for
       disqualification of an Arbitrator within seven days after
       the NAA receives any such request.   This determination
       shall be within the sole discretion of the NAA,  and its
       decision shall be final.

5.   Intervention and Withdrawal

   (a)  Subject to the approval of the parties and the Arbitrator,
       any person [insert applicable limitations, if any, e.g.
       any person with a substantial interest in the subject of
       the referred dispute] may move to intervene in the arbitral
       proceeding.  Intervening parties shall be bound by rules
       that the Arbitrator may establish.

-------
                            -4-

    (b) Any party may for good cause shown move to withdraw from
       the arbitral proceeding.  The Arbitrator may approve such
       withdrawal, with or without prejudice to the moving party,
       and may assess administrative fees or expenses against
       the withdrawing party as the Arbitrator deems appropriate.

SUBPART C - HEARINGS BEFORE THE ARBITRATOR

1. Filing of Pleadings

    (a) Any party may file an answering statement with the NAA no
       later than seven days from the date of receipt of an
       opposing party's written statement.  A copy of any
       answering statement shall be served upon all parties.

    (b) Any party may file an amended written statement with
       the NAA prior to the appointment of the Arbitrator.  A
       copy of the amended written statement shall be served
       upon all parties.  After the Arbitrator is appointed,
       however, no amended written statement may be submitted
       except with the Arbitrator's consent.

  E(c) Any party may file an answering statement to the amended
       written statement with the NAA no later than seven days
       from the date of receipt of an opposing party's amended
       written statement.  A copy of any answering statement
       shall be served upon all parties.]

2.  Pre-hearing Conference

    At the request of one or more of the parties or at the
discretion of the Arbitrator, a pre-hearing conference with the
Arbitrator and the parties and their counsel will be scheduled in
appropriate cases to arrange for an exchange of information,
including witness statements, documents, and the stipulation
of uncontested facts to expedite the arbitration proceedings.
The Arbitrator may encourage further settlement discussions
during the pre-hearing conference to expedite the arbitration
proceedings.  Any pre-hearing conference must be held within
sixty days of the appointment of the Arbitrator.

3.  Arbitral Hearing

    (a) The Arbitrator shall select the locale for the arbitral
       hearing, giving due consideration to any recommendations
       by the parties.

    (b) The Arbitrator shall fix the time and place for the
       hearing.

    (c) The hearing shall commence within thirty days of the
       pre-hearing conference, if such conference is held, or

-------
                          -5-

    within sixty [thirty]  days  of  the  appointment of  the
    Arbitrator,  if no pre-hearing  conference  is  held.   The
    Arbitrator  shall  notify each party by mail of the
    hearing at  least  thirty days in  advance,  unless the parties
    by mutual agreement  waive  such notice or  modify the terms
    thereof.

(d)  Any party may be  represented by  counsel.  A  party who
    intends to  be represented  shall  notify the other  parties
    and the Arbitrator of  the  name and address of counsel at
    least three days  prior to  the  date set for the hearing  at
    which counsel is  to  appear. When  an arbitration  is
    initiated by counsel,  or where an  attorney replies for
    the other parties, such notice is  deemed  to  have  been
    given.

(e)  The Arbitrator shall make  the  necessary arrangements  for
    making a record of the arbitral  hearing.

(f)  The Arbitrator shall make  the  necessary arrangements  for
    the services of an interpreter upon the request of one  or
    more of the parties, and the requesting parties shall
    assume the  cost of such service.

(g)  The Arbitrator may halt the proceedings upon the  request of
    any party or upon the Arbitrator's own initiative.

(h)  The Arbitrator shall administer  oaths to  all witnesses
    before they testify  at the arbitral hearing.

(i)  (1) A hearing shall  be opened  by the recording  of the
        place,  time,  and date  of the hearing, the presence
        of the  Arbitrator and  parties, and counsel, if any,
        and by  the receipt by  the  Arbitrator  of  the written
        statements, amended written  statements,  if  any, and
        answering statements,  if any.   The Arbitrator may,  at
        the beginning of the hearing,  ask for oral  statements
        clarifying the issues  involved.

    (2) The EPA shall then present its case,  information  and
        witnesses, if any, who shall answer questions posed
        by both parties.  The  Arbitrator has  discretion to
        vary this procedure but shall afford  full and equal
        opportunity to all parties for the presentation
        of any  material  or relevant  information.

    (3) Exhibits, when offered by  any party,  may be received
        by the  Arbitrator.  The names and addresses of all
        witnesses, and exhibits in the order  received, shall
        be part of the record.

-------
                           -6-

(j) The arbitration may proceed in the absence of any party
    which, after notification, fails to be present or fails
    to obtain a stay of proceedings.  If a party, after
    notification, fails to be present, fails to obtain a
    stay, or fails to present information, the party will be
    in default and will have waived the right to be present
    at the arbitration.  A decision shall not be made solely
    on the default of a party.  The Arbitrator shall require
    the parties who are present to submit such information as
    the Arbitrator may require for the making of a decision.

(Jc) Information and Evidence

    (1) The parties may offer information as they desire,
    subject to reasonable limitations as the Arbitrator deems
    appropriate, and shall produce additional information as
    the Arbitrator may deem necessary to an understanding and
    determination of the dispute.   The Arbitrator shall be
    the judge of the relevancy and materiality of the information
    offered, and conformity to legal rules of evidence shall
    not be necessary.

    (2) All information shall be introduced in the presence
    of the Arbitrator and all parties, except where any of
    the parties has waived the right to be present pursuant
    to paragraph (j) of this section.   All information
    pertinent to the issues presented to the Arbitrator for
    decision, whether in oral or written form,  shall be made
    a part of the record.

(1) The Arbitrator may receive and consider the evidence
    of witnesses by affidavit, interrogatory or deposition,
    but shall give the information only such weight as the
    Arbitrator deems appropriate after consideration of any
    objections made to its admission.

(m) After the presentation of all  information,  the Arbitrator
    shall specifically inquire of  all parties whether they
    have any further information to offer or witnesses to be
    heard.  Upon receiving negative replies, the Arbitrator
    shall declare the hearing closed and minutes thereof
    shall be recorded.

(n) The parties may provide, by written agreement, for the
    waiver of the oral hearing.

(o) All documents not submitted to the Arbitrator at the
    hearing, but arranged for at the hearing or by subsequent
    agreement of the parties, shall be filed with the Arbitrator.

-------
                             -7-

       All parties shall be given an opportunity to examine
       documents.

4.  Arbitral Decision

   (a) The Arbitrator shall render a decision within thirty [five]
       days after  the hearing is declared closed except if:

          (1) All  parties agree in writing to an extension; or

          (2) The  Arbitrator determines that an extension of the
              time limit is necessary.

   (b) The decision of the Arbitrator shall be signed and in
       writing.  It shall contain a brief statement of the basis
       and rationale for the Arbitrator's determination.  At the
       close of the hearing, the Arbitrator may issue an oral
       opinion which shall be incorporated into a subsequent written
       opinion.

   (c) The Arbitrator may grant any remedy or relief within the
       scope of the issues presented in the joint request for
       arbitration.

   (d) The Arbitrator shall assess arbitration fees and expenses
       in favor of any party, and, in the event any administra-
       tive fees or expenses are due the NAA, in favor of the
       NAA.

   (e) If the dispute has been heard by three Arbitrators, all
       decisions and awards must be made by at least a majority,
       unless the  parties agree in writing otherwise.

   (f) If the parties settle their dispute during the course of
       the arbitration, the Arbitrator, upon the parties' request,
       may set forth the terms of the agreed settlement.

   (g) The Arbitrator shall mail to or serve the decision on
       the parties.

   (h) The Arbitrator shall, upon written request of any party,
       furnish certified facsimiles of any papers in the Arbitrator's
       possession  that may be required in judicial proceedings
       relating to the arbitration.

SUBPART D - APPEALS, FEES AND OTHER PROVISIONS

1.  Appeals Procedures

   (a) Any party may appeal the award or decision within thirty
       days of notification of the decision.  Any such appeal

-------
                            -8-

    shall be made to the [insert "Federal district court for
    the district in which the arbitral hearing took place" or
    "Chief Judicial Officer,  U.S.  Environmental Protection
    Agency"].

(b) The award or decision of  the Arbitrator shall be binding
    and conclusive, and shall not be overturned unless achieved
    through fraud,  misrepresentation, abuse of discretion,
    other misconduct by any of the parties, or mutual mistake
    of fact.  [Insert "No court shall" or "The Chief Judicial
    Officer shall not"] have  jurisdiction to review the award
    or decision unless there  is a verified complaint with
    supporting affidavits attesting to specific instances
    of such fraud,  misrepresentation, abuse of discretion,
    other misconduct, or mutual mistake of fact.

(c) Judgment upon the arbitration award may be entered in
    any Federal district court having jurisdiction.   The award
    may be enforced in any Federal district court having
    jurisdiction.

(d) Except as provided in paragraph (c),  no award or decision
    shall be admissible as evidence of any issue  of fact or
    law in any proceeding brought  under any other provision
    of [insert applicable statutory acronyms] or  any other
    provision of law, nor shall any prearbitral settlement be
    admissible as evidence in any such proceeding.   Arbitration
    decisions shall have no precedential  value for future
    arbitration, administratiave or judicial proceedings.

 Administrative Fees, Expenses, and Arbitrator's  Fee

(a) The NAA shall prescribe an Administrative Fee Schedule
    and a Refund Schedule. The schedules in effect at the
    time of filing or the time of refund  shall be applicable.
    The filing fee shall be advanced by the parties to the
    NAA as part of the joint  request for  arbitration, subject
    to apportionment of the total administrative  fees by the
    Arbitrator in the award.   If a matter is withdrawn or
    settled, a refund shall be made in accordance with the
    Refund Schedule.

(b) Expenses of witnesses shall be borne  by the party presenting
    such witnesses.  The expense of the stenographic record
    and all transcripts thereof shall be  prorated equally
    among all parties ordering copies, unless otherwise
    agreed by the parties, or unless the  Arbitrator assesses
    such expenses or any part thereof against any specified
    party in the award.

-------
                               -9-

   (c)  The per  diem fee for  the Arbitrator  shall  be  agreed  upon
       by the parties  and  the  NAA prior  to  the  commencement of
       any activities  by the Arbitrator.  Arrangements  for
       compensation of the Arbitrator shall be  made  by  the  NAA.

   (d)  The NAA  may require an  advance deposit  from the  parties
       to defray the Arbitrator's Fee and the Administrative
       Fee, but shall  render an accounting  to  the parties and
       return any balance of such deposit in accordance with
       the Arbitrator's award.

3.   Miscellaneous Provisions

   (a)  Any party who proceeds  with  the arbitration after know-
       ledge that any  provision or  requirement  of this  Part
       has not  been complied with,  and who  fails  to  object
       either orally or in writing, shall be deemed  to
       have waived the right to object.   An objection,  whether
       oral or  written, must be made at  the earliest possible
       opportunity.

   (b)  Before  the selection  of the  Arbitrator,  all oral or
       written  communications  from  the parties  for the  Arbitra-
       tor's consideration shall be directed to the  NAA for
       eventual transmittal  to the  Arbitrator.

   (c)  Neither  a party nor any other interested person  shall
       engage  in ex parte communication with the Arbitrator.

   (d)  All papers connected  with the arbitration shall  be served
       on an opposing  party either  by personal  service  or United
       States  mail, First Class, addressed  to  the party's attorney,
       or if the party is not  represented by an attorney or the
       attorney cannot be located,  to the last  known address of
       the party.

-------
                          ATTACHMENT  D

                      MEDIATION PROTOCOLS

I.    PARTICIPANTS

     A.    Interests Represented.   Any interest  that  would  be
          substantially affected by EPA's  action in
          [specify case]  may be represented.   Parties  may
          group together  into caucuses  to represent  allied
          interests.

     B.    Additional  Parties.  After  negotiations  have begun,  addi-
          tional parties  may join the negotiations only with the
          concurrence of  all parties  already  represented.

     C.    Representatives.   A representative  of each party  or
          alternate must  attend each  full negotiating  session.
          The designated  representative may be accompanied  by  such
          other individuals as the representative  believes  is
          appropriate to  represent his/her interest, but only  the
          designated  representative will have the  privilege of
          sitting at  the  negotiating  table and of  speaking
          during the  negotiations, except that any repre-
          sentative may call upon a technical or legal adviser
          to elaborate on a relevant  point.

II.   DECISIONMAKING

     A.    Agendas. Meeting agendas will be developed  by consensus.
          Agendas will be provided before every negotiating
          session.

     B.    Caucus.  A  caucus can be declared by any participant at
          any time.  The  participant  calling  the caucus will inform
          the others  of the expected  length of the caucus.

III.  SAFEGUARDS FOR THE PARTIES

     A.    Good Faith.  All participants must  act in  good faith in
          all aspects of  these negotiations.   Specific offers,
          positions,  or statements made during the negotiations
          may not be  used by other parties for any other purpose
          or as a basis for pending or  future litigation.  Personal
          attacks and prejudiced statements are unacceptable.

     B.    RighttoWi thdraw.  Parties may withdraw from the
          negotiations at any time without prejudice.   Withdrawing
          parties remain  bound by protocol provisions  on public
          comment and confidentiality.

-------
                         -2-


C.   Minutes.   Ses'sions shall not be recorded verbatim.
     Formal minutes of the proceedings shall not be kept.

D.   Confidentiality and the Use of Information

     (1)  [All parties agree not to withhold relevant information,
          If a party believes it cannot or should not release
          such information, it will provide the substance  of
          the  information in some form (such as by aggregating
          data, by deleting non-relevant confidential informa-
          tion, by providing summaries, or by furnishing it
          to a neutral consultant to use or abstract) or a
          general description of it and the reason for not
          providing it directly.]

     (2)  [Parties will provide information called for by  this
          paragraph as much in advance of the meetings as
          possible.]

     (3)  The  entire process is confidential.  The parties and
          the  mediator will not disclose information regarding
          the  process, including settlement terms,  to third
          parties, unless the participants otherwise agree.   The
          process shall be treated as compromise negotiation
          for  purposes of the Federal Rules of Evidence  and
          state rules of evidence.  The mediator will be
          disqualified as a witness,  consultant or expert  in
          any  pending or future action relating to the subject
          matter of the mediation, including those between
          persons not parties to the mediation.  Failure to
          meet the confidentiality or press requirements of
          these protocols is a basis for exclusion from the
          negotiations.

     (4)  The  mediator agrees that if he/she discloses informa-
          tion regarding the process, including settlement terms,
          to third parties without the participants' agreement,
          except as ordered by a court with appropriate juris-
          diction, he/she agrees to the following as liquidated
          damages to the parties:

          (a)  Removal from the case;

          (b)  Removal from any EPA list of approved neutrals;
              and

          (c)  Payment of an amount equal to  	[at  a
              minimum, the amount of the mediator's fee].

-------
                              -3-

IV.  SCHEDULE

     A.   Time and location.  Negotiating sessions will initially
          be held 	^___^ [insert how often].   The first
          negotiating session is scheduled for
          Unless otherwise agreed upon,  a deadline of 	
          months for the negotiations will be established.
          The location of the meetings will be decided by the
          participants.

     B.   Discontinue if unproductive.  The participants may dis-
          continue negotiations at any time if they do not appear
          productive.
V.   Press
     A.   [Joint Statements.  A joint press statement shall be
          agreed to by the participants at the conclusion
          of each session.  A joint concluding statement shall
          be agreed to by the participants and issued by the
          mediator at the conclusion of the process.  Participants
          and the mediator shall respond to press inquires within
          the spirit of the press statement agreed to at the
          conclusion of each session.]

     B.   [Meetings with the Press.  Participants and the
          mediator will strictly observe the protocols regarding
          confidentiality in all contacts with the press and
          in other public forums.  The mediator shall be
          available to discuss with the press any questions on
          the process and progress of the negotiations.  No
          party will hold discussions with the press concerning
          specific offers, positions, or statements made during
          the negotiations by any other party.]
VI.   MEDIATOR
          A neutral mediator will work with all the parties to
          ensure that the process runs smoothly.
VII.  APPROVAL OF PROPOSALS
          Partial Approval.  It is recognized that unqualified
          acceptance of individual provisions is not possible
          out of context of a full and final agreement.  However,
          tentative agreement of individual provisions or portions
          thereof will be signed by initialing of the agreed
          upon items by the representatives of all interests
          represented.  This shall not preclude the parties from
          considering or revising the agreed upon items by mutual
          consent.

-------
                              -4-
     B.
Final Approval.  Upon final agreement, all representatives
shall sign and date the appropriate document.  It is
explicitly recognized that the representatives of the
U.S. EPA do not have the final authority to agree to any
terms in this case.  Final approval must be obtained
from 	 [insert names of proper officials].
VIII. EFFECTIVE DATE

     These protocols shall be effective upon the signature of the
representatives.
For the U.S. Environmental Protection Agency
          Signature
                                          Date
For
                 [Name of violator]
          Signature
                                         Date

-------
                         Attachment E

        AGREEMENT TO INSTITUTE MINI-TRIAL PROCEEDINGS


     The United States Environmental Protection Agency (EPA)
and XYZ Corporation, complainant and respondent, respectively,
in the matter of XYZ Corp.,  Docket No. 	,  agree to
the alternative dispute resolution procedure set forth in
this document for the purpose of fostering the potential
settlement of this case.  This agreement, and all of the
actions that are taken pursuant to this agreement, are
confidential.  They are considered to be part of the settlement
process and subject to the same privileges that apply to
settlement negotiations.

     1.  The parties agree to hold a mini-trial to inform
their management representatives of the theories,  strengths,
and weaknesses of the parties' respective positions.  At the
mini-trial, each side will have the opportunity and responsibility
to present its "best case" on all of the issues involved in
this proceeding.

     2.  Management Representatives of both parties, including
an EPA official and an XYZ official at the Division Vice
President level or higher, will attend the mini-trial.  The
representatives have authority to settle the dispute.

     3.  A mutually selected "Neutral Advisor" will attend the
mini-trial.  The, Neutral Advisor will be chosen in the
following manner.  By	, [insert date] the parties
shall exchange a list of five potential Neutral Advisors
selected from the list of candidates offered by 	
[insert neutral organization].  The potential candidates
shall be numbered in order of preference.  The candidate who
appears on both lists and who has the lowest total score
shall be selected as the Neutral Advisor.  If no candidate
appears on both lists, the parties shall negotiate and shall
select and agree upon a Neutral Advisor by 	
[insert date].

     4.  The fees and expenses of the Neutral Advisor will be
borne equally by both parties.  [However, if the Neutral
Advisor provides an opinion as to how the case should be
resolved, and a party does not follow the recommended
disposition of the Neutral Advisor, that party shall bear the
Advisor's entire fees and expenses.]

     5.  Neither party, nor anyone on behalf of either party,
shall unilaterally approach, contact or communicate with the
Advisor.  The parties and their attorneys represent and
warrant that they will make a diligent effort to ascertain
all prior contact between themselves and the Neutral Advisor,
and that all such contacts will be disclosed to counsel for
the opposing party.

-------
                             -2-

     6.  Within 10 days" after the appointment of the Neutral
Advisor, mutually agreed upon basic source material will be
jointly sent to the Neutral Advisor to assist him or her in
familiarizing himself or herself with the basic issues of the
case.  This material will consist of neutral matter including
this agreement, the complaint and answer, the statute, any
relevant Agency guidance, a statement of interpretation and
enforcement policy, the applicable civil penalty policy, and
any correspondence between the parties prior to the filing
of the complaint.

     7.  All discovery will be completed in the 	
[insert number] working days following the execution of this
agreement.  Neither party shall propound more than 25 inter-
rogatories or requests for admissions, including subparts;
nor shall either party take more than five depositions and
no deposition shall last more than three hours.  Discovery
taken during the period prior to the mini-trial shall be
admissible for all purposes in this litigation, including
any subsequent hearing before [a federal judge or administrative
law judge] in the event this mini-trial does not result in a
resolution of this dispute.  It is agreed that the pursuit
of discovery during the period prior to the mini-trial shall
not restrict either party's ability to take additional discovery
at a later date.  In particular, it is understood and agreed
that partial depositions may be necessary to prepare for the
mini-trial.  If this matter is not resolved informally as a
result of this procedure, more complete depositions of the
same individuals may be necessary.  In that event, the partial
depositions taken during this interim period shall in no way
foreclose additional depositions of the same individual regarding
the same or additional subject matter for a later hearing.

     8.  By 	   	,  [insert date] the parties shall
exchange all exhibits they plan to use at the mini-trial,
and send copies at the same time to the Neutral Advisor.  On
the same date the parties also shall exchange and submit to
the Neutral Advisor and to the designated trial attorney for
the opposing side:  (a) introductory statements no longer than
25 double-spaced pages (not including exhibits), (b) the
names of witnesses planned for the mini-trial, and (c) all
documentary evidence proposed for utilization at the mini-tial.

     9.  Two weeks before the mini-trial, if he or she so
desires and if the parties agree, the Neutral Advisor may
confer jointly with counsel for both parties to resolve any
outstanding procedural questions.

-------
                             -3-
     10.  The mini-trial proceeding shall be held on 	,
and shall take 	 day(s).  The morning proceedings shall begin
at 	 a.m. and shall "continue until 	 a.m.   The afternoon's
proceedings shall begin at
A sample two day schedule follows:
                   p.m.  and continue until
                                   p.m.
     Day 1

 8:30 a.m. -

12:00 Noon -

 1:00 p.m. -

 2:30 p.m. -

 4:00 p.m. -
12:00 Noon

1:00 p.m.

2:30 p.m.

4:00 p.m.

5:00 p.m.
     Day 2

 8:30 a.m  - 12:00 Noon

12:00 Noon -  1:00 p.m.

 1:00 p.m. -  2:30 p.m.

 2:30 p.m. -  3:00 p.m.

 3:00 p.m. -  4:30 p.m.

 4:30 p.m. -  4:45 p.m.

 4:45 p.m. -  5:00 p.m.
EPA's position and case presentation

Lunch*

XYZ's cross-examination

EPA's re-examination

Open question and answer period




XYZ's position and case presentation

Lunch*

EPA's cross-examination

XYZ's re-examination

Open question and answer period

EPA's closing argument

XYZ's closing argument
*Flexible time period for lunch of a stated duration.

-------
                             -4-

     11.  The presentations at the mini-trial will be informal.
Formal rules of evidence will not apply, and witnesses may
provide testimony in the narrative.  The management repre-
sentatives may question a witness at the conclusion of the
witness' testimony for a period not exceeding ten minutes
per witness.  In addition, at the conclusion of each day's
presentation, the management repesentatives may ask any
further questions that they deem appropriate, subject to the
time limitations specified in paragraph 10.  Cross-examination
will occur at the conclusion of each party's direct case
presentation.

     12.  At the mini-trial proceeding, the trial attorneys
will have complete discretion to structure their presentations
as desired.  Forms of presentation include, but are not
limited to, expert witnesses, lay witnesses, audio visual
aids, demonstrative evidence, and oral argument.  The parties
agree that there will be no objection by either party to
the form or content of the other party's presentation.

     13.  In addition to asking clarifying questions, the Neutral
Advisor may act as a moderator.  However, the Neutral Advisor
will not preside like a judge or arbitrator, nor have the
power to limit,  modify or enlarge the scope or substance of
the parties' presentations.  The presentations will not be
recorded, but either party may take notes of the proceedings.

     14.  In addition to counsel, each management representative
may have advisors in attendance at the mini-trial, provided
that all parties and the Neutral Advisor shall have been
notified of the identity of such advisors at least ten days
before commencement of the mini-trial.

     15.  At the conclusion of the mini-trial, the management
representatives shall meet, by themselves, and shall attempt
to agree on a resolution of the dispute.  By agreement, other
members of their teams may be invited to participate in the
meetings.

     16.  At the request of any management representative,
the Neutral Advisor will render an oral opinion as to the
likely outcome at trial of each issue raised during the mini-
trial.  Following that opinion, the management representatives
will again attempt to resolve the dispute.  If all management^.
representatives agree to request a written opinion on such
matters, the Neutral Advisor shall render a written opinion
within 14 days.  Following issuance of any such written
opinion, the management representatives will again attempt
to resolve the dispute.

     17.  If the parties agree, the [adminstrative law judge or
federal district court judge] may be informed in a confidential
communication that an alternative dispute resolution procedure

-------
                             -5-

is being employed, but neither party shall inform the
[administrative law judge or federal district court judge]
at any time as to any aspect of the mini-trial or of the
Advisor.  Furthermore, the parties may file a joint motion to
suspend proceedings in the	 [appropriate court] in
this case.  The motion shall advise the court that the suspension
is for the purpose of conducting a mini-trial.  The court will
be advised as to the time schedule established for completing
the mini-trial proceedings.  Written and oral statements
made by one party in the course of the mini-trial proceedings
cannot be utilized by the other party and shall be inadmissible
at the hearing of this matter before the [administrative law
judge or federal district court judge] for any purpose,
including impeachment.  However, documentary evidence that
is otherwise admissible shall not be rendered inadmissible
as a result of its use at the mini-trial.

     18.  Any violation of these rules by either party will
seriously prejudice the opposing party and be prima facie
grounds for a motion for a new hearing; and to the extent
that the violation results in the communication of information
to the [administrative law judge or federal district court judge]
contrary to the terms of this agreement, it shall be prima
facie grounds for recusal of the [administrative law judge or
federal district court judge].  Moreover, notwithstanding the
provisions of Paragraph 4 above, any violation of these rules
by either party will entitle the opposing party to full
compensation for its share of the Neutral Advisor's fees and
expenses, irrespective of the outcome of any administrative
or court proceeding.

     19.  The Neutral Advisor will be disqualified as a hearing
witness, consultant, or expert for either party, and his or her
advisory response will be inadmissible for all purposes in
this or any other dispute involving the parties.  The Neutral
Advisor will treat the subject matter of the presentations
as confidential and will refrain from disclosing any trade
secret information disclosed by the parties.  After the
Advisor renders his or her opinion to the parties, he or she
shall return all materials provided by the parties (including
any copies) and destroy all notes concerning this matter.

-------
                             -6-
Dated:
Dated:
By:
    Attorney for United States
    Environmental Protection
    Agency
By:
    Attorney for XYZ
    Corporation
Affirmation of Neutral Advisor:

     I agree to the foregoing provisions of this Alternative

Dispute Resolution Agreement.



Dated:
Signed:
           Neutral Advisor

-------
                         ATTACHMENT F
                           UNITED STATES
                  ENVIRONMENTAL PROTECTION AGENCY
In the Matter of                )

XYZ Corporation,                )    Docket No.

      Respondent                )



        AGREEMENT TO INSTITUTE  FACT-FINDING PROCEDURES


A. General Provisions

  1.     Purpose

  2.     Definitions

B. Guidelines for Conduct of Neutral  Fact-finding

  1.     Scope and Applicability

  2.     Jurisdiction of Neutral Fact-finder

  3.     Selection of Neutral Fact-finder

  4.     Information Regarding  Dispute

  5.     Determination of Neutral Fact-finder

  6.     Confidentiality

  7.     Appeals Procedures

  8.     Administrative Fees, Expenses, and Neutral  Fact-finder's Fee

  9.     Miscellaneous Provisions

-------
                             -2-
A.  GENERAL PROVISIONS

1.   Purpose

   This agreement contains the procedures to be followed
   for disputes which arise over 	 [state issue(s)].
2.   Definitions

   Terms not defined in this section have the meaning given by
                      [state applicable statute(s) and section(s)].
   All time deadlines in these alternative dispute resolution (ADR)
   procedures are specified in calendar days.  Except when
   otherwise specified:

   (a) "Act" means [state applicable statute(s) and citation in
       U.S. Code].

   (b) "NAO" means any neutral administrative organization
       selected by the parties to administer the requirements of
       the ADR procedures.

   (c) "Neutral Fact-finder" means any person selected in accordance
       with and governed by the provisions of these ADR procedures.

   (d) "Party" means EPA and the XYZ Corporation.


B.   GUIDELINES FOR CONDUCT OF NEUTRAL FACT-FINDING

1.   Scope and Applicability

   The ADR procedures established by this document are
   for disputes arising over 	 [state issue(s)].

2.   Jurisdiction of Neutral Fact-finder

   In accordance with the ADR procedures set forth in this
   document, the Neutral Fact-finder is authorized to issue
   determinations of fact regarding disputes over [state
   	 issue(s)], and any other issues
   authorized by the parties.

3- Selection of Neutral Fact-finder

   The Neutral Fact-finder will be chosen by the parties in
   the following manner.

   (a) The parties shall agree upon a neutral adminis-
       trative organization (NAO) to provide services to the
       parties as specified in these ADR procedures.

-------
                             -3-
       The  parties  shall  jointly request  the  NAO  to  provide
       them with a  list of  three to  five  (3-5)  potential  Neutral
       Fact-finders.   Either  party may make recommendations
       to the NAO of  qualified individuals.   Within  ten (10)
       days after the receipt of the list of  potential  Neutral
       Fact-finders,  the  parties shall numerically rank the
       listed individuals in  order of preference  and simultane-
       ously exchange such  rankings.  The individuals with
       the  three (3)  lowest combined total scores shall be
       selected as  finalists.  Within ten (10)  days  after such
       selection, the parties shall  arrange to  meet  with and
       interview the  finalists.  Within ten  (10)  days after
       such meetings, the parties shall rank  the  finalists in
       order of preference  and exchange rankings. The  individual
       with the lowest combined total score shall be selected
       as the Neutral Fact-finder.

   (b)  The  NAO shall  give notice of  the appointment  of  the
       Neutral Fact-finder  to each of the parties.  A signed
       acceptance by  the  Neutral Fact-finder  shall be filed
       with the NAO prior to  the initiation of  fact-finding
       proceedings.

   (c)  If the Neutral Fact-finder should resign,  die, withdraw,
       or be disqualified,  unable, or refuse  to perform the
       duties of the  office,  the NAO may, on  proof satisfactory
       to it, declare the office vacant.   Vacancies  shall be
       filled in accordance with the applicable provisions
       of this section, and the dispute shall be  reinitiated,
       unless the parties agree otherwise.

4.    Information Regarding Dispute

   (a)  Within ten (10) days after the selection of the  Neutral
       Fact-finder, basic source material shall be jointly
       submitted to the Neutral Fact-finder by  the parties.
       Such basic source material shall consist of:

       1) an agreed upon statement of the precise nature of
          the dispute,

       2) the position of each party and the  rationale for it,

       3) all information and documents which support each -
          party's position, and

       4) 	 [describe additional material].

   (b)  Thereafter,  for a period of   	^_ days,  the Neutral
       Fact-finder  shall conduct an  investigation of the issues
       in dispute.   As part of such  investigation, the Neutral
       Fact-finder  may interview witnesses,  request  additional

-------
                             -4-
       documents, reque.st additional information by written
       questions, and generally use all means at his or her
       disposal to gather the facts relevant to the disputes as
       he or she determines.  The Neutral Fact-finder shall be
       the sole determiner of the relevancy of information.
       Conformity to formal rules of evidence shall not be
       necessary.

5.    Determination of Neutral Factfinder

   (a) The Neutral Fact-finder shall render a determination
       within  	  days of the time limitation specified
       in Section B. 4~Tb) above,  unless:

           (1)  Both parties agree in writing to an extension;
                Cor

           (2)  The Neutral Fact-finder determines that an
                extension of the  time limit is necessary.]

   (b) The determination of the Neutral Fact-finder shall be
       signed and in writing.  It shall contain a full statement
       of the basis and rationale for the Neutral Fact-finder's
       determination.

   (c) If the parties settle their dispute prior to the deter-
       mination of the Neutral Fact-finder, the Neutral Fact-finder
       shall cease all further activities in regard to the
       dispute upon receipt of joint notice of such settlement
       from the parties.

   (d) The parties shall accept as legal delivery of the deter-
       mination the placing of a  true copy of the decision in
       the mail by the Neutral Fact-finder, addressed to the
       parties' last known addresses or their attorneys, or by
       personal service.

   (e) After the Neutral Fact-finder forwards his or her deter-
       mination to the parties, he or she shall return all
       dispute-specific information provided by the parties
       (including any copies) and destroy notes concerning
       this "matter.

6.    Confidentiality

   (a) The determination of the Neutral Fact-finder, and all
       of the actions taken pursuant to these ADR procedures,
       shall be confidential and shall be entitled to the
       same privileges that apply generally to settlement
       negotiations.

-------
                            -5-
   (b)  The Neutral  Fact-finder  shall  treat  the  subject  matter
       of all submitted information as  confidential,  and
       shall refrain from disclosing  any trade  secret or
       confidential business information disclosed  as such
       by the parties.   [If XYZ has previously  formally claimed
       information  as confidential business information (CBI),
       XYZ shall specifically exclude the information from
       such CBI classification  for the  limited  purpose  of
       review by the Neutral Fact-finder.]

   (c)  No determination of the  Neutral  Fact-finder  shall  be
       admissible as evidence of any  issue  of fact  or law in any
       proceeding brought under any provision of [state statute]
       or any other provision of law.

7.    Appeals Procedures

   (a)  Any party may appeal the determination of the Neutral
       Fact-finder  within thirty days of notification of
       such determination.  Any such  appeal shall be made to
       the [Chief Judicial Officer, U.S. Environmental  Protec-
       tion Agency, or district court judge].

   (b)  The determination of the Neutral Fact-finder shall be
       binding and conclusive,  and shall not be overturned
       unless achieved through fraud, misrepresentation,
       other misconduct by the Neutral Fact-finder  or by any
       of the parties, or mutual mistake of fact.  The  [admin-
       istrative law judge or federal district  court judge]
       shall not have jurisdiction to review the determination
       unless there is a verified complaint with supporting
       affidavits filed by one of the parties attesting to
       specific instances of such fraud, misrepresentation,
       other misconduct, or mutual mistake of fact.

8.    Administrative Fees, Expenses, and Neutral Fact-finder's Fee

   (a)  The fees and expenses of the Neutral Fact-finder,  and
       of the NAO,  shall be borne equally by the parties.
       The parties may employ additional neutral organizations
       to administer these ADR procedures as mutually deemed
       necessary, with the fees and expenses of such organizations
       borne equally by the parties.

   (b)  The NAO shall prescribe an Administrative Fee Schedule
       and a Refund Schedule.  The schedules in effect  at the time
       of the joint request for fact-finding shall  be applicable.
       The filing fee, if required, shall be advanced by the
       parties to the NAO as part of the joint  request  for
       fact-finding.  If a matter is settled, a refund  shall
       be made in accordance with the Refund Schedule.

-------
                             -6-
   (c) Expenses'of providing information to the Neutral Fact-finder
       shall be borne by the party producing such information.

   (d) The per diem fee for the Neutral Fact-finder shall be
       agreed upon by the parties and the NAO prior to the
       commencement of any activities by the Neutral Fact-finder.
       Arrangements for compensation of the Neutral Fact-finder
       shall be made by the NAO.

9.    Miscellaneous Provisions

   (a) Before the selection of the Neutral Fact-finder, all oral
       or written communications  from the parties for the Neutral
       Fact-finder's consideration shall be directed to the NAO
       for eventual transmittal to the Neutral Fact-finder.

   (b) All papers connected with  the fact-finding shall be served
       on the opposing party either by personal service or United
       States mail, First Class.

   (c) The Neutral Fact-finder shall be disqualified from acting
       on behalf of either party, and his or her determination
       pursuant to these ADR procedures shall be inadmissible
       for all purposes, in any other dispute involving the
       parties.

   (d) Any notification or communication between the parties,
       or with and by the Neutral Fact-finder shall be confidential
       and entitled to the same privileges that apply generally
       to settlement negotiations.

-------
SE.1-3

-------
I 5W2 1 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
 V^"^/                WASHINGTON. D.C. 20460
 '«i •MI*''
                              APR I  3 ;:3
MEMORANDUM
SUBJECT:  Process for Conducting Pre-Referral settlement
          Negotiations on Civil Judicial Enforcement Cases
FROM:  /^Thomas L. Adams, Jr.
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Regional Administrators
          Deputy Regional Administrators
          Regional Counsels
          Associate Enforcement Counsels
          HQ Compliance Office Directors


     This memorandum transmits to you an agreement between EPA
and the Department of Justice on an authoritative process for
conducting pre-referral settlement negotiations of non-Superfund
civil  judicial enforcement cases.  A separate process, reflecting
the same basic concepts but  recognizing the unique features of
Superfund, is being developed jointly by OECM, OWPE and the
Department of Justice.

     This agreement addressess one of the judicial enforcement
streamlining initiatives  identified by EPArs newly-formed
Enforcement Management Council at recent meetings in Easton,
MD.  The major objective  of  this initiative is to promote
efficient and expeditious resolution of civil enforcement cases
on appropriate terms.  The mechanism developed for doing this
is the attached set of protocols, which establish a process for
providing * legional office  with pre-authorization to negotiate
settlement with a potential  defendant on behalf  of the United
States before resorting to the full-scale referral/litigation
process.  Typically/ a Region will have the option of deciding
whether to invoke this procedure for a given  case or  to  proceed
immediately to the referral  process.

-------
       * UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                       WASHINGTON. DC 20460
 '*«*•"•                       MAR-9 1968
 Honorable Roger  J.  Marzulla
 Acting Assistant Attorney General
 Land  and Natural Resources Division
 U.S.  Department  of  Justice
 Washington,  D.C. 20530
                                                           tiCk 0«
 Dear  Roger:

      This  letter  requests your concurrence  in the enclosed
 "Process for  Conducting Pre-Referral Settlement Negotiations"
 which EPA  and the Department of Justice will employ as part of
 our joint  efforts to  streamline the United  States1 civil judicial
 environmental enforcement program.

      This  initiative  is intended to build on successes we have
 seen  in pilot projects using pre-referral settlement negotiations.
 More  specifically, the primary intent of establishing in a
 formal manner these joint procedures is:

      1.  "  to  expedite the resolution of civil enforcement cases  '
 on satisfactory terms which support the public interest, and

      2.    to  allow the United States to accomplish this objective
 in a  resource-efficient manner.

      To these ends, the procedures established here identify
 appropriate milestones and timetables for conducting pre-referral
 settlement negotiations which are reasonable management targets
 in straightforward environmental enforcement cases.V  The more
 routine the case (i.e., no complicated factual issue's or unusual
 terms of settlement), the more likely the government will be
 able  to apply this framework for expeditious, efficient case
 resolution.
*J This process does not apply to  Superfund  cases.  Pre-referral
   negotiations procedures, taking into  account specific statutory
   requirements, will be developed separately.  EPA and the
   Department have agreed to evaluate  the  potential for adapting
   these procedures to the Superfund context.

-------
                              -2-
     Please note that Regional Counsels will receive workload
credit for a case which a Region has opened for negotiation
with a mini-lit report under these protocols, even if EPA has
not formally referred the case with a full-scale lit report to
DOJ for filing.  Regional Counsels, however, are responsible
for having their docket clerks make appropriate case entries on
EPA's Enforcement DOCKET system in the "Cases Opened" category.
These cases would move to the "Cases Initiated" category once
the Region forwards to DOJ a full lit report or settlement
document foe filing.

     Naturally, as an Agency we will have to pay close attention
to implementation of this process to ensure that it is successful
in achieving settlements on appropriate terms more expeditiously.
Thanks in advance for your cooperation as we move forward to
implement these procedures.

Attachment

c'c:  Jim Barnes, EPA HQ
     Roger Harzulla, DOJ
     David Buente, DOJ
     Jerry Bryan, EPA HQ
     Tom Gallagher, EPA-NEIC
     Sally Mansbach, EPA HQ

-------
                               -2-


     The guidance  identifies  the areas which a Region must
 address  in a mini-lit  report  to  initiate the pre-referral
 negotiation process.   All participating offices will need to
 work together to strike an appropriate balance in deciding how
 ir,jch detail this information  should cover to facilitate informed
 review or quick filing if negotiations break down, yet still
 allow for productive negotiations to commence quickly.  In
 most cases. Regional submission of a draft consent.decree based
 upon available program-specific models is likely to produce
 easier, quicker approval of proposed settlement terms and final
 consent decrees.

     It will remain important  for representatives of all
 participating offices to maintain continuous, open lines of
 communication to permit these  procedures to attain their
 objectives.  Offices still will work out their respective roles
 on a case-by-case basis, although this guidance sets out norms
 to help make these determinations.  Furthermore, the appropriate
 Assistant Section. Chief at DOJ will be responsible for working
 out the extent of U.S. Attorney involvement in pre-referral
 negotiation activities consistent with these procedures and
 time lines.  In any event, it  remains crucial for EPA and the
 Department to monitor the use  of these procedures diligently to
 affirm that they indeed result in a more effective,  efficient
 enforcement effort.  We nevertheless understand that because we
 have pressed to institute these new procedures quickly, both
 EPA and the Department will need additional time to modify
 computer systems to track adequately adherence to these protocols.

     Thank you for the Department's support of our mutual work
 in this area.   Please indicate your approval of this process
 in the signature blank below and return a copy of your signed
 approval to me, or give me a call if you have any
questions.

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

Enclosure

I concur in the enclosed "Process  for Conducting Pre-Referral
Negotiations.*
Roger J. Marzalla                           (Date)
Acting Assistant Attorney General
Land and Natural Resources  Division
U.S. Department of Justice

-------
              PROCESS FOR CONDUCTING PRE-REFERRAL
                     SETTLEMENT NEGOTIATION


     Should a Region wish to use this process, the RA or his/her
     delegate will  initiate the process as is done presently for
     referrals by sending simultaneously to OECM, the HQ Prograrr.
     Compliance Office and DOJ a mini-lit report/case summary
     (typically 5-10 pages) which summarizes:

     a.   defendant and its enforcement history
     b.   summary of violation(s) at issue or cause of action
          (including known environmental impact)
     c.   summary of available evidence
     d.   noteworthy legal and equitable defenses
     e.   significant contacts with defendant (by EPA and/or the
          State)
     f.   any legal or other significant action by the State,
          local agencies, or citizen groups
     g.   proposed  terms of settlement—present view of bottom
          line, (including up-front and stipulated penalties,
          scope of  relief, compliance schedule and any releases
          of liability) supporting rationale, and penalty
          calculation in accordance with the penalty policies
     h.   legal, policy or other issues/strategic considerations
          of primary significance to the government or bearing
          on appropriate terms of settlement or the conduct of
          litigation
     i.   milestones for negotiation and filing, covering all
          parties to the lawsuit
     j.   potential for criminal prosecution or investigation
     k.   what participation the Region requests from HQ and
          DOJ in negotiations beyond what these procedures call
          for.

     A proposed draft consent decree to use to open negotiations
     must accompany the mini-lit report.  EPA's computer DOCKET
     system will begin tracking these cases once the Region sends
     its mini-lit report to HQ and
I/ As an alternative  to  filing a mini-lit  report at  the  start
   of this process and a  full lit  report later on  if  negotiations
   do not reach a timely  settlement, a Region may  choose  instead
   to file a full lit report at the start  of the process, and
   follow that with a simple update if pre-referral  negotiations
   do not croduce a settlement.

-------
                               -2-


 II.   DOJ,  OECM and  the  Program office will  provide  comments on
      the proposed case,  their  interest in oarticipating because
      of  national  issues,  terms of settlement,  further contact
      point,  and negotiation/litigation strategy  to  the Region
      within  21 days.2/ of  receipt.   Participating offices should
      initially conve"y or  subsequently confirm  their comments
      in  writing,  if necessary,  comments will  also  address
      whether unique circumstances in  a case indicate that the
      proposed pre-referral  settlement negotiation process is
      not appropriate for  the case.  HQ Offices will coordinate
      during  their review  and wherever possible,  OECM will
      consolidate the comments  into a  coordinated response.  A
      simultaneous discussion among all litigation team members
      may be  particularly  helpful to identify and resolve
      outstanding issues.  Upon response, the Region will have
      authority to negotiate a  settlement consistent with
      pre-approved terms.

      a.   The region will keep HQ  and DOJ apprised of changes in
      the course of negotiations  to the extent  there is a desire
      to  deviate from key  pre-approved terms (e.g. bottom-line
     .penalty,  scope of relief, compliance schedule and
      requirements, releases of liability) and  will circulate to
      the HQ  and DOJ contacts for clearance  successive re-drafts
      of  the  decree before forwarding  these  redrafts to opposing
      counsel,  consistent with  present practice for post-filing
      negotiations.  HQ and  DOJ contacts will have a seven-day
      target,  but sooner if  possible,  for responding to re-drafts
      in  which  the Region  has clearly  identified  changes from
      prior versions.  Regions  should  also keep HQ and DOJ
      generally informed of  the status of ongoing negotiations.

      b.   If  settlement in  principle  is not reached within
      90  days  of the latter  of  DOJ/HQ  responses to the mini-lit
      report,  the Region will,  within  30 days,  submit a full lit
      report  to DOJ (copy  to OECM and  HQ program  office), unless
      otherwise agreed.  The Regional  Counsel,  in consultation
      with the  appropriate Regional  Division Director, may
      invoke  a  30-day extension to the 90-day period in exceptional
      cases upon consultation with the appropriate OECM Associate
      Enforcement counsel.   Moreover,  at any point in this
      90-day  period, the Regional Counsel, in consultation with
      the appropriate Regional  Division Director, may "remove" a
      cast from this process for  the purpose of placing it on  a
      filing  track.  In such a  situation, the case will be
      handled  as a normal  referral and the Region will submit
      the full  litigation  report.
2/ All time periods are  in  calendar days

-------
                              -3-
     c.   DOJ will have a management target  of  filing the case
     within 45 days of receipt of a complete lit  report unless
     new issues emerge based upon more complete case development
     or unless the case is settled in principle before that
     deadline.

     d.   If settlement in principle is reached,  the Region  will
     within 20 days submit a final draft consent  decree to HQ
     and DOJ for review.  HQ/DOJ will review and  comment to  the
     Region within 15 days of receipt.  Within  45 days of
     HQ/DOJ response (unless otherwise agreed), the Region will
     submit a signed consent decree with cover  letter explaining
     the rationale supporting the settlement to HQ (copy to
     DOJ) for approval.

III. EPA HQ will, within 21 days from receipt of  a signed
     consent decree with supporting documentation/rationale,
     act on (approve or disapprove) civil settlements which  are
     within preapproved terms as initially set  forth or as
     modified over the course of negotiations.

IV.  Simultaneous with submission to EPA HQ, Regions will send a
     copy of the consent decree to DOJ to initiate a simultaneous
     review.  DOJ will have a management target of 21 days from
     receipt of a signed consent decree from EPA HQ to act on
     (lodge or disapprove) civil settlements which are within
     pre-approved terms as initially set forth  or modified over
     the course of negotiations.

V.   DOJ will have a management target of 45 days from the date
     of lodging to move a court for entry of a  consent decree,
     assuming no significant public comment.  If 45 days cannot
     be met because of significant public comment, DOJ and EPA
     will agree on a process and timetable for  response.

A flow chart of the proposed time lines is attached to assist
the reader.  The procedures set out in this document are intended
solely for the guidance of government personnel.   They are not
intended and may not be relied upon to create any rights,
substantive or procedural, enforceable by any party in litigation
with the United states.  The United States reserves the  right
to act at variance with these procedures and to change them at
any time tilth out public notice.

Attachment

-------
                                      PRE-REPERRAL SETTLEMENT NEGOTIATIONS TIME LINE
                                                                                         	>DAY 186***



Mini-Lit
Report to
•OBCM
•DOJ
•HQ Prog
Ofc.




Full
*• 30 Days Litigation
p[ Rpt. to
if DOJ and HQ
SI
I
Comment O[
By HO and N[
21 days DOJ To 90 days*
Regions
SI
K
P|»*
I
R(
El
M
Cf Final CD
Hi 20 Draft CD 1 15 HQ/DOJ 45 Submit to
days To Hp/DOjIdavs Resp. davs HQ t DOJ
Case
45 davs Filed






HQ C.D
21 AppV. 21 Lodfje
days to DOJ davs w/CT
I—

 The Regional Counsel,  in consultation with  the appropriate Regional Division Director, may invoke a 30-day extension
  to this 90-day  period  in exceptional  cases  upon  consultation with the appropriate Associate Enforcement counsel

••SIP - Settlement  in  principle

•^These total  times do not account for  the time it takes to transmit  reports or final settlement documents between
  offices.  The total  times  also may be extended by 30 days where an  extension to the negotiating period is invoked.
->DAY  278
      ***

-------
SE.1-4

-------
        '-'MTED STATES ENVIRONMENTAL PROTECTION AGENCY
                      WASHINGTON. D.C. 20460              '\~ '
                   Mtf 22BB5
                                                    Om. i (»l ivt,*.; ».:%

                                                       MONIIOftlV.

 MEMORANDUM
 SUBJECT:    Enforcement Settlement  Negotiations
                                 -
 PROM:       Richard H.  Mays*
            Senior Enforcemeft Counsel     /  f

 TO:         Regional Counsels
            «•


      During the past year,  a  number of  Regions  have  submitted
 settlements for OECM approval that  had  been  communicated  to and
 tentatively agreed upon with  a defendant  without  Headquarters
 knowledge,  involvement or approval. In some of these  instances^
'defendants  were told that the Region was  willing  to  settle for
 no penalty, where a penalty was clearly in keeping with Agency
 policy.

     A copy of  all draft settlement agreements  should  be
 transmitted by  the Regional Counsel to  the appropriate Associate
 Enforcement Counsel for review before  it  is  presented  to  the
 defendant.   This policy has been set forth in two memoranda by
 the  Assistant Administrator for Enforcement  and Compliance
 Monitoring. See "Implementation of Direct Referrals for  Civil.
 Cases Beginning December 1, 1983,"  and  "Headquarters Review and
 Tracking  of Civil Referrals.*

     The  basis  for this policy is the  need for  the Agency to
 speak with  one  voice which  reflects a  national  as well as
 Regional  perspective.   Tbtis purpose is  frustrated if individual
 staff members or Regional offices unilaterally  establish  an
 Agency negotiation settlement position  which may  be  contrary
 to Agency policy or positions taken in  other casess,  OECM
 review ensures  consistency  of Agency positions  in all  settlements.
 Failure to  follow that policy could also  lead to  potentially
 embarrassing changes of position in a  case,  since no enforcement
 settlement  can  be final until the Assistant  Administrator for
 Enforcement and Compliance  Monitoring  has signed  it.

-------
                               -2-
     -A primary  purpose  of OECM  review  is  to ensure that Agency
 policies  and  guidelines  are  being  followed,  it is not our
 purpose or  desire  to  substitute our judgment for that of the
 Region or to  "nitpick"  the Region's product when it follows
 Agency policy.  OECM  will approve  an Agency settlement position
 or  draft  decree that  falls within  existing, broad policy
 boundaries.   In the absence  of existing policy on a particular
 issue,  OECM will approve a position that will promote — or
 not hinder — the Agency's enforcement efforts in other cases.

     The  vast majority of Regional recommendations conform to
 Agency  guidance and are  approved.  Nevertheless, in the recent
 past a  number of Regional settlement positions that had already
 been communicated to  and tentatively agreed upon with the
 defendant have been presented to our office, placing OECM and
 the Region in a potentially  embarrassing position.  These cases
 are appearing with increasing frequency, and it is clear that
 they can  interfere with  the  effectiveness of the Agency's
 enforcement effort, and  create inconsistent results and
 precedents.

     Consequently, OECM will not assign any weight to Regional
 recommendations that  Headquarters should approve a settlement
 position made without prior  authorization because it already
had been communicated to the defendant.  If such a proposed
 settlement contravenes Agency policy,  if  it would establish
 bad precedent for future cases, or if  it would produce results
 inconsistent with those  obtained in previously-approved
 settlements, it will  be  returned to the Region for further
 negotiations.


cc: Courtney M. Price, Assistant Administrator, OECM
    Deputy Regional Administrators
    Associate Enforcement Counsels
    Regional Water Program Division Directors
    Regional Waste Program Division Directors
    Regional Air Program Division Directors
    Headquarters Program Compliance Office Directors
    David Buente, Department of Justice
    Linda Fisher, Office of  the Administrator
    LaJuana Wilcher,  Office  of the Deputy Administrator

-------
SE.1-5

-------
  .,l   V,



* A
        UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
   **t                WASHINGTON. D.C. 20460              /"j\^ -4b\U


                                                        SŁ. \-s

                               161964

                                                          Off ICt Of
                                                        ENFORCEMfNTAND
                                                       COMPLIANCE MOMTOHIN&
MEMORANDUM
SUBJECT:  Policy Against "No Action" Assurances
FROM:     Courtney M. Price
          Assistant Administrator for Enforcement
            and Compliance Monitoring

TO:       Assistant Administrators
          Regional Administrators
          General Counsel
          Inspector General


     This memorandum reaffirms EPA policy against giving
definitive assurances (written or oral) outside the context of
a formal enforcement proceeding that EPA will not proceed with
an enforcement response for a specific individual violation of
an environmental protection statute, regulation, or other
legal requirement.

     'No action" promises may erode the credibility of EPA's
enforcement program by creating real or perceived inequities
in the Agency's treatment of the regulated community.  This
credibility is vital as a continuing incentive for regulated
parties to comply with environmental protection requirements.

     In addition, any commitment not to enforce a legal
requirement against a particular regulated party may severely
hamper later enforcement efforts against that party, who may
claim good-faith reliance oh that assurance, or against other
parties who claim to be similarly situated.

     This policy against definitive no action promises to
parties outside the Agency applies in all contexts, including
assurances requested:

     0  both prior to and after a violation has been committed;

     0  on the basis that a State or local government is
        responding to the violation;

-------
      *  on the basis that revisions to the underlying legal
         requirement are being considered;

      e  on the basis that the Agency has determined  that  the
         party  is  not liable  or has  a valid defense;

      0  on the basis that the violation already has  been
         corrected (or that a party  has promised that it will
         correct the violation); or

      0  on the basis that the violation is not of  sufficient
         priority  to merit Agency action.
                      '*- > *
      The Agency particularly must avoid no action  promises
relating either to  violations of judicial  orders,  for which a
court  has  independent enforcement authority/ or to potential
criminal violations/  for  which prosecutorial discretion rests
with  the United States  Attorney General.

     As  a  general rule/ exceptions  to  this policy  are warranted
only

      0   where  expressly provided by  applicable statute or
         regulation  (e.g.,  certain upset or bypass  situations)

      0   in extremely unusual  cases  in  which a no action
         assurance is clearly  neccessary to serve the  public
         interest  (e.g./ to allow action to avoid extreme risks
         to public health  or  safety/  or  to  obtain important
         information  for research purposes)  and which  no other
        mechanism can address  adequately.

Of course/ any exceptions which EPA  grants must be in an area
in which EPA has discretion  not to act  under applicable law.

     This policy  in  no  way is  intended  to  constrain  the way in
which  EPA discusses  and coordinates  enforcement plans with
state  cr local enforcement authorities  consistent with normal
working  relationships.  To the extent  that  a statement of EPA's
enforcement intent  is necessary to help support or conclude an
effective  state enforcement  effort/  EPA can employ language
such as  the following:

     •EPA encourages State action to resolve violations of
the 	 Act and supports  the  actions which   (State)
is takina  to address the  violations  at  issue.  To  the extent
that the State action does not satisfactorily resolve the
violations, EFA may  pursue its own  enforcement action.
n

-------
     I am requesting that any definitive written or oral no
action commitment receive the advance concurrence of my office.
This was a difficult decision to reach in light of the valid
concerns raised in comments on this policy statement; neverthe-
less/ we concluded that Headquarters concurrence is important
because the precedential implications of providing no action
commitments can extend beyond a single Region*  We will attempt
to consult with the relevant program office and respond to any
formal request for concurrence within 10 working days from the
date we receive the request.  Naturally, emergency situations
can be handled orally on an expedited basis.

     All instances in which an EPA official gives a no action
promise must be documented in the appropriate case file.  The
documentation must include an explanation of the reasons
justifying the no action assurance.

     Finally, this policy against no action assurances does not
preclude EPA from fully discussing internally the prosecutorial
merit of individual cases or from exercising the discretion it
has under applicable law to decide when and how to respond or
not respond to a given violation, based on the Agency's normal
enforcement priorities.

cc:  Associate Enforcement Counsels
     OECM Office Directors
     Program Compliance Office Directors
     Regional Enforcement Contacts

-------
SE.2

-------
SE.2-1

-------

        3 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                        WASHINGTON. D.C. 20460
  F»   ,«^
MEMORANDUM

SUBJECT:  Multi-Media  Settlements-^ef Enforcement Claims
FROM:     James M. Strocfc. _/
          Assistant Administrator'

TO:       Regional Administrators, Regions  I - X
          Regional Counsel,  Regions  I - X.
          Associate Enforcement Counsel
          Program Compliance Office  Directors

.A.  PURPOSE

     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.

B.  DISCUSSION

     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»  1  Similarly, a Clean Water Act enforcement
settlemea&joay expressly settle EPA  claims under some  or all
provisio«B»f the Clean Water  Act.   A settlement which extends to
potentiaSKgWl enforcement claims under any statute(s)  outside of
the progfiHemedium under which the case was brought, e.g. . a CWA
release-nira  CERCLA case, or a release in a CERCLA case under all
      1 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 win
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
administ«nag* by EF*t.-  Multi-media settlements should not grant
releasesaaKfcBedVint broad terms such as "all statutes
     2  l^nmilti-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

C.  PROCEDURES

     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.
                                  -•s.-'" •*. •   *.
     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  ?p^;administrative enforcement cases which include multi-
media re-jMMoa, the Regions similarly should obtain the
concurrenefrof' 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
 given.

      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. o. .  in the case of  a
 CERCLA  settlement, the Ten  Point Settlement Analysis) to all
 other OECM. Associates  who are  responsible  for any statutes
 includeA^^tlie'- release with a request for  written concurrence
 within  $HPĄS«   Each  Associate should in turn  consult with, and,
 if  partaHSCandard procedure,  obtain  the concurrence of,  his/her
 HeadquajSjBfe program counterpart on the settlement.  The lead
 AssociatS^SSd his/her  staff should  coordinate all OECM comments
 or  requests  for;a-iditional  information from the Region to  help
 avojLd presenting the Region with conflicting comments or
 requests.

      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.

 D.  DISCLAIMER

     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
.procedures.

     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
       Justice

-------
SE.2-2

-------
                                                    . 2-2.
            UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

                       WASHINGTON O.C  20460
         FEB 25
MEMORANDUM
SUBJECT:  Interim Policy on the Inclusion ot Pollution Prevention
          and Recycling Provisions in Enforcement Settlements
FROM:     Janes M. Stfoc>
          Assistant Ada*nisti

TO:       Regional Administrators
          Assistant Administrators
          General Counsel

     This memorandum transmits the final interim policy on the
use of pollution prevention and recycling conditions in Agency
consent orders and decrees (see Attachment).  It reflects your
extensive comments on the draft version distributed on
September 25, 1990, as well as the subsequent work of the
Pollution Prevention/Settlement Policy Workgroup.

     This interim policy is part of the Agency's overall strategy
to make pollution prevention a major component of all Agency
programs.  It encourages the use of pollution prevention and
recycling conditions in enforcement settlements, either as
injunctive relief or as "supplemental environmental projects'"
incidental to the correction of the violation itself.  When a
pollution prevention condition is considered as a supplemental
project, this interim policy should be used in conjunction with
the recently-issued Policy on the Use of Supplemental Enforcement
Prelects in EPA Settlements  (February 12, 1991).

     This interim policy is effective immediately and should be
used whenever a pollution prevention condition is being
considered as part of a consent order or decree.  Each national
media compliance program may decide whether to develop its own
more specific pollution prevention settlement guidance or
continue to use this general guidance.  The Agency plans to
develop final guidance in FY 1993, after gaining further
experience in negotiating pollution prevention settlement
conditions.

-------
                             -2-

     I am confident that this interim policy win help the Agency
secure the additional protection of human health and the
environment which pollution prevention offers.  Any questions you
or your staff may have regarding its' implementation should be
addressed—to Peter Rosenberg, the Workgroup Chairperson (Office
of Enforcement, 382-7550).

Attachment

cc: Deputy Administrator
    Associate Deputy Administrator
    Deputy Regional Administrators
    Regional Counsels
    Regional Program Division Directors
    Program Compliance Directors
    Associate Enforcement Counsels
    OE Office Directors

-------
      INTERIM  EPA  POLICY  ON  TjiE INCLUSION OF  POLLUTION PREVENTION
         AND RECYCLING  PROVISIONS  IN  ENFORCEMENT SETTLEMENTS

   I.  Purjose

      This document provides Agency enforcement personnel with a
generic  interim policy and  guidelines  for  including  pollution
prevention and recycling provisions  in administrative or
judicial settlement agreements.   It  encourages pollution
prevention and recycling both  as  a means of  returning to
compliance and as supplemental environmental projects by offering
several  incentives while preserving  effective deterrence and
accountability for compliance  and environmental results.

 II.  Background

      The Agency defines  pollution prevention as the  use of
procedures, practices, or processes  that reduce or eliminate the
generation of pollutants and wastes  at the source.   Pollution
prevention encompasses both the concepts of  volume reduction and
toxicity reduction. /I   Within the manufacturing sector, examples
of pollution prevention  include such activities as input
substitution or modification,  product  reformulation, process
modification, improved housekeeping, and on-site closed-loop
recycling.  The Agency's "hierarchy" of environmental protection
practices consists of pollution prevention,  followed by
traditional recycling, treatment  and control, respectively. /2

    The  Office of Enforcement's Pollution Prevention Action
Elan  (June 30, 1989), states that a  strong enforcement program
can promote pollution prevention  goals by enhancing  the desire of
the regulated community  to  reduce its  potential liabilities and
resulting costs of resolving noncvapliance.  An emphasis on
preventing pollution at  the source can help  reduce or. eliminate

I/ See the forthcoming Pollution  Prevention  Policy Guidance.
especially pps. 3-6, for a  full discussion of the considerations
underlying the Agency's  definition of  pollution prevention. Both
the Guidance and th« Pollution Prevention Act of 1990
(P.L. 101 - 508) exclude "end  of  pipe* recycling from the formal
definition of pollution  prevention.

2/ Although non-closed loop (i.e., "end-of-pip«") recycling
occupies *&• second tier of the "hierarchy"  behind pollution
prevention, it will, because of its environmental benefit, be
included within the scope of this interim policy.' All elements
of this  policy will apply to such recycling  to the same extent as
use and  production substitution activities which constitute the
formal definition of pollution prevention.

-------
 root causes of some violations and thereby increase the prospects
 for continuous compliance in the future. /3

      In acfdition to this "indirect" incentive for pursuing
 pollution prevention, the Action Plan recognized that pollution
 prevention could be directly achieved by initiating
 enforcement actions against individual noncompliers. The Agency
 is constrained from requiring (i.e., imposing unilaterally)
 pollution prevention activities in the absence of statutory
 regulatory, or permit language. Until the Agency commences an
 enforcement action, respondents are generally free to choose  how
 they will comply with Federal environmental requirements.
 However,  once a civil or administrative action has been
 initiated, the specific means of returning to compliance are
 subject to mutual agreement between the Agency and the
 respondent. 4/  The settlement process can be used to identify
 and implement pollution prevention activities consistent with the
 Agency's  overall enforcement approach.

      The  Office of Enforcement chaired a workgroup,  which
 included  representation by  the Program Compliance Offices  and
 Regions III,  IV,  and vili,  to develop an interim policy on the
 use of  pollution prevention conditions in enforcement
 settlements.   In addition,  OE and the Programs will  receive
 funding from  the Office of  Pollution Prevention for  technical
 support to develop and  evaluate pollution prevention proposals  in
 settlements in FY 1991-2 and to evaluate their utility for
 promoting long-term compliance and for  permanently reducing the
 level of  pollutants or  toxic discharges into  the environment.

 III. Statement of Interim Policy

     It shall  be  a  policy of  the  Environmental  Protection  Agency
 to  favor  pollution  prevention and recycling as  a means of
 achieving  and  maintaining statutory and regulatory compliance and
of correcting  outstanding violations when negotiating enforcement
settlements.   While the use of  pollution prevention  conditions  is
not mandatory  (for  either a program/Region to propose or for  a
defendant/respondent to accept),  Agency negotiators  are strongly
encoraged  to try  to incorporate pollution prevention conditions
 in single  end  multi-media settlements when feasible.   The  policy
 is applicable.to  both civil  and criminal enforcement settlements
 involving private entities.  Federal facilities  or municipalities.

 3/ Office  of•Enforcement Pollution  Prevention Action Plan, page 2

V Note that some pollution prevention-related activities, e.g.,
   environmental  auditing, can  be sought.as injunctive relief in
   appropriate circumstances.   See,  Final EPA Policy on the
   Inclusion of Environmental Auditing  Provisions in Enforcement
   Settlements fGM-521

-------
     Among  the  types  of  situations which  favor the use of
pollution prevention  conditions  in enforcement settlements are:

a.  recur*ing  patterns of violations which are unlikely to be
    corrected  by additional  "add  on" controls or improved
    operations and maintenance, and elimination or substitution
    offers the best prospects for the 'permanent return to
    compliance;

b.  proposed solutions which do not create environmental problems
    in other media (i.e., have no negative cross-media impacts);

c.  effluent emissions or discharges for which technically
    and economically feasible pollution prevention options
    have been  identified;
                                                        •
d~  violations which involve one  or more pollutants listed on the
    target list  of 17  chemicals the Agency will emphasize as
    part of  the  implementation of its Pollution Prevention
    Strategy (see appendix A for  list of chemicals).

     Pollution  prevention settlement conditions can either be
specific activities which correct the violation or activities
which will  be undertaken in addition to thosa necessary to
correct the violation.

     The interim policy should be implemented in concert with the
Agency's new  Pollution Prevention Guidance and Pollution
Prevention  Strategy,  as well as  Office of Enforcement policy
documents,  including  the EPA Policy on the Inclusion of
Environmental Auditing Provisions in Enforcement Settlements (GM-
52); A Framework for  Statute-Specific Approaches to Penalty
Assessments;  Implementing  EPA/a Policy on Civil Penalties (GM—
22,), and the newly issued  Supplemental Environmental Projects
Policy (February 12,  1991), which amends  the "alternative
payments" section of  GM-22; the  Office of Enforcement's Pollution
Prevention  Action Plan (6/30/89); and the Manual on, Monitoring
and Enforcing Administrative and Judicial -Order^ (2/14/90). /5

A. Pollution  Prevention as  a Means of Correcting the Violation

     By dilfin.ition, a use/source reduction or recycling activity
which '"•pgnrn?' 'tnc original" violation will be media and facility
specificv^MftieTi conducting  settlement negotiations, the Agency
shall consider  whether it is appropriate  (e.g., technically and
economically  feasible) to correct the violations) through
implementation  of source reduction or recycling activities.

5/ These documents are available through  the Office of
Enforcement General Enforcement  General Policy Compendium
and/or the  Enforcement Docket Retrieval System (EDRS).

-------
 Examples include compliance With permit requirements by switchi-g
 from a high to a lower toxic solvent which reduces excessive
 emissions or discharges or by recycling effluent.  /6

      Pollution prevention conditions may be proposed by either
 the Agency or the respondent.  Inclusion of any condition rests
 upon the outcome of mutual negotiations between the two sides.

 B.  Pollution Prevention Conditions "Incidental" to thft
    Correction of the Violation

      During negotiations to resolve the violation,  the Agency
 also may consider as settlement conditions supplemental pollution
 prevention projects in addition to the  specific actions or
 injunctive relief needed to correct the violation.   Potential
 examples include phasing out a pollutant within a  specific period
 of  time  or a commitment by a facility to change production
 technology at more than one facility.

      Pollution prevention settlement conditions which do not
 by  themselves correct the violation will usually be  negotiated
 as  "supplemental environmental projects" and, as such,  are
 subject  to the criteria described  in the recently-issued policy
 on  the use of supplemental projects which amends part of the
 Aqenevwide Framework for Civil Penalties (GM-22) /7.   The
 decision to consider,  accept,  or reject such projects rests
 exclusively with the Agency.

 IV.  Specific Elements of the Interim Pollution  Prevention Policy

A. Timelines for Implementing Pollution Prevention Conditions

     EPA's  enforcement policy calls for the "expeditious"
 return of  the violator to compliance. /8  As a general  rule,


6/ A firm  could theoretically return to compliance by reducing
the scope  of operations,  i.e.,  by  producing less and,  therefore,
reducing its discharge or emissions.  Although this  may return
a facility  to compliance,  it—is not "pollution prevention" within
the Agency's definition nor the scope of this interim policy.
         • Jjf
7/ Th« fcaMLrJ»gupplenental environmental prolect* replaces the
tern "alternative payments* used in GM-22.  Th« Agency has
recently issued a new policy on the us* of th«s* projects,
Guidelines  for Evaluating Supplemental  Environngntal  Proieets.
which replaces the section on "alternative payments*  on pps. 23-
 27 of GM-22.   It provides detailed guidance on  the  "scope" of
eligible supplemental projects,  including, ones which are related
to pollution prevention.  Also see section IV B2.  below.

8/ Civil Penalty Policy Framework  (GM-22),  page 13

-------
there shall be no significant ("significant" to be defined by
each program) extension of the "normal" tine period for returning
to compliance.  Under no circumstances will a respondent be
granted additional tine to correct the violation in exchange for
his conduct of a supplemental environmental project, (see IV B 2,
below).  For example, a facility which exceeds its effluent limit
would have to return to compliance within the "normal" time
period the NPDES program estimates for facilities of that size
and type.  This time period would not be extended if, as part of
the overall settlement, the respondent also agreed to establish a
sludge recycling system.

     If a pollution prevention activity is presented as the means
of correcting the violation, however, the Agency settlement team
has some additional flexibility in negotiating an implementation
schedule, given that pollution prevention alternatives sometimes
add an element of complexity to a facility-specific compliance
strategy, especially if it involves new or innovative technology.

     The length of time which is deemed to be "expeditious" is
ultimately a "best judgment" decision on the part of the EPA
negotiators.  It should be based upon their assessment of the
ecological and public health-related risks and benefits involved
in providing the additional time to return to compliance.

     While Federal negotiators should consider the following
factors in deciding whether to use innovative pollution
prevention technology as injunctive relief at any time, they
become even more relevant when deciding whether to extend the
"normal" timeline for resolving a violation.  If a decision is
made to extend the timeline, the Federal negotiators should also
establish interim milestones and controls to assure the adequate
protection of public health and the environment while the
pollution prevention relief is being implemented, (cf. Section C,
below):

1. Seriousness of the Violation

     Both the aggregate amount and toxicity of excess emissions
or discharges affect the decision whether to extend the
compliance timeline.  Some violations (e.g., those which meet
"imminent1*and substantial" endangeraent definitions) must be
correoted'-frrf quickly aa possible, even when that involves
foregoing a pollution prevention approach in favor of traditional
treatment technology.  Even when the violation has a much less
potentially adverse impact. Federal negotiators should
consider whether the risk allows a longer tiaeframe .

2. Aggregate Gain in "Extra* Pollution Prevention

     Schedules should be extended only where there is an
important net permanent reduction in the overall amount or

-------
 toxicity of the pollution as. a result of a pollution prevention
 project which requires a longer timeline to implement than would
 "end-of-pipe" controls. (Note:  This consideration is appropriate
 only when a longer compliance timeline is at issue since',  "all
 other things being equal," the Agency would prefer a pollution
 prevention approach to traditional treatment and/or disposal.)

 3.  Reliability/Availability of the
      The pollution prevention technology being used to  implement
 the  injunctive relief  should (ideally)  have been  successfully
 applied or tested at other facilities.   While  not intended  to
 discourage the use of  innovative  prevention or reduction
 technologies,  the more "experimental" or "untried" the
 technology,  the more rigorous Federal negotiators should be about
 extending the  "normal" compliance timeline.  The  technology
 should  also avoid the  cross-transfer of pollutants.

 4 . Applicability  ot  the Technology

      The Federal  negotiators  should be  more willing  to  extend the
 compliance timeline  if the pollution prevention technology  is
 applicable to  other  facilities, so that,  if successful, the
 lessons  learned can  be disseminated industry-vide.

 5. Compliance-related  Considerations

   .  The pollution prevention approach  offers  the best  prospects
 for a permanent return to  compliance.

 B. Penalty Assessments

 1 . General Considerations

     Under EPA's  general framework for  assessing  civil  penalties
 (GM-22)  and  its program-specific  applications, most:  formal
enforcement  actions  are concluded with  a  penalty.  The  two
elements  of  the penalty calculation are the gravity  of  the*
violation and  the economic benefit of nonconpliancet  The former
can be adjusted upward or  downward depending several factors.
The latter sets the.penalty~*f"loor." /9
     The. wAJVJnqnega of a respondent to correct the violation
via a DO 1 lift ion prevention project can be one of the assessment
factors u««d to ad^^Mt the "gravity" component of the Penalty.
The defendant/respondent's willingness to comply with permit
requirements through pollution prevention activities can be
seen as a "unique factor"  (e.g.,  public policy

9/ See OE's Guidance on Calculating the Economic Benefit of
Noncoopliance for a Civil Penalty Assessment, (GM-33)
10/ GM-22 pps. 3-4                             :'

-------
considerations) which may warrant an adjustment of the'gravity-
based penalty factor consistent with program-specific penalty
policies-

     Calculation of the economic benefit of noncompliance may
have particular consequences for the inclusion of pollution
prevention conditions in settlements.  For example, two of the
variables used by the BEN Model to calculate the penalty are
the time expected to elapse from the date of che violation until
the date of compliance (i.e., the estimated future date at which
the facility would be expected to return to full compliance)
and the expected cost of returning to compliance, /ll.  This
calculation could create a disincentive for a respondent to
correct the violation with  pollution prevention technology
(i.e., the longer the facility is expected to be out of
compliance and the higher the cost of returning to compliance,
the larger the economic benefit of noncompliance and, ultimately,
the larger the penalty).

     In order to eliminate this possible disincentive, the
penalty amount should be calculated using the costs and
timeframes associated with both the pollution prevention approach
and the conventional way of correcting the violation.  The final
penalty will be the smaller of the two calculations, so long as
the Federal negotiators have decided to allow the "longer"
timeframe for returning to compliance.  However, the settlement
agreement should also provide for stipulated penalties in the
event the violation is Qfii corrected or exceeds its compliance
schedule.
                                               »
     Several other criteria currently contained in GM-22 will
continue to apply to pollution prevention projects.  For example,
a minimum cash penalty shall always be collected (subject to
program-specific guidance), regardless of the value of the
project, and it generally should not be less than the economic
benefit of noncompllance.

2.  Supplemental Environmental prpje}c,ti3

     When settling an enforcement action, the Agency also may
seek additional relief in the form of activities which remediate
the advo^eV health or environmental consequences of the original
violationEE? The size of the final assessed penalty may reflect
the commitment of the defendant/respondent to undertake these
"supplemental environmental projects".

     As noted previously, the Agency's recently issued Policy on
the Use of Supplemental Environmental Projects, which amends and
supersedes GM-22's discussion on "alternative payments,"
identifies pollution prevention projects as one of five general

ll/ GM-22, pps. 6-10

-------
 categories of projects eligible for consideration. /12.  In
 order to be part of the consent order or decree, a proposed
 supplemental pollution prevention project must meet all of the
 criteria discussed in the policy, including those which relate to
 the "scope" of the projects, the amount of penalty reduction,  and
 oversight requirements.

      One important criterion involves the "nexus" between the
 violation and the supplemental project.   Nexus," which is defined
 as  "an appropriate...relationship between the nature of the
 violation and the environmental benefits to be derived from the
 type of supplemental  environmental project," helps assure that
 the supplemental  project furthers the Agency's statutory mandate
 to  clean up the environment and deter violations of the law. 713

      The policy also  states that, while studies are generally not
 eligible mitigation projects,  this prohibition will be modified
 slightly only for pollution prevention studies. 14/  The policy
 specifically exempt pollution  prevention projects from the "sound
 business practices" limitation which  are in effect for the four
 other categories  of supplemental environmental projects./IS

      Federal negotiators  who are considering the adoption of
 supplemental pollution  prevention projects should refer
 specifically to the Policy  on  the Use of Supplemental
 Environmental  Prelects  to make sure that the proposed pollution
 prevention  project meets  all applicable  criteria.

 C. Tracking And Assessing Compliance  With the Terms of the
   Settlement
          <
      The Agency places  a  premium on compliance with the terms  of
 its settlements and several  documents exist which outline
 procedures  for enforcing  final orders and decrees,  which may
 range  from  modification of  the order  to  stipulated penalties and

 12/ The  five categories cover  pollution  prevention,  pollution
reduction,  environmental  restoration,  environmental auditing,  and
public awareness.

 13/ Policy^  a- 1.  The  extended discussion of "nexus* and example
of supplemental projects  which meet the  "nexus* requirement are
on pps.  3 -HI.

 14/ Policy..p. 9

 15/ ŁoJLiŁY,.pps.  8-9

-------
motions to enforce the order- and contempt of Court.

     A more difficult situation arises when the respondent —
despite"his best "good faith efforts" — fails to successfully
implement a pollution prevention activity which is required to
correct the violation (e.g., is the injunctive relief).
Ultimately, the respondent must be responsible for full
compliance.  If the pollution prevention approach does not work.
he will be required to return to compliance through traditional
means.

   .  In order to make sure that the violation is corrected (as
well as minimize any additional liabilities which nay accrue to
the defendant/respondent) the consent order or deerea will state
that any pollution prevention project which ig used to
achieve compliance with a legal standard nuafc hav« a "fall-back"
schedule requiring the use of an proven technology aqrreed to by
all parties to the settlement and which vill be implemented, if
necessary, by a tine certain.   The settlement agreement also
should establish a systematic series of short term milestones so
that preliminary "warning signs* can be triggered promptly and
issues raised.  If the Agency decides that the "innovative"
pollution prevention approach will not succeed, the "traditional"
remedy must be implemented according to the set schedule. Under
these circumstances, as long as the "fall-back* ttraditionall
remedy is implemented on schedule, the defendant/respondent vill
only have to pay an additional penalty equal to the economic
benefit of the further delay in compliance, offset by the actual
expenditures incurred as a result of the unsuccessful effort to
comply through pollution prevention.  If the actual expenditures
on pollution prevention equal or exceed the incremental economic
benefit of noncompliance using conventional controls, there would
be no additional penalty.

D. Deleyations and Level of Concurrence

     Settlement conditions which involve more than one program
or Region (e.g., a multi-media or multi-facility case) usually
require additional oversight, and the estimated amount of time
and resources required for_effective oversight is one criteria
which the Agency vill use'to determine whether to include the
project in. the settlement agreement.  The respondent should
shoulder 410 much of the direct, costs as feasible,  (e.g., pay for

16/ The respondent's failure to carry out a pollution prevention
activity which is a supplemental project shall be dealt with
through procedures outlined in CM-22  and the Supplemental
Environmental Projects Policy  (e.g., reimposition of the full
civil penalty and/or the assessment of stipulated penalties
contained in the settlement once the Government determines that
the conditions have not been fulfilled).

-------
                                10

 an independent auditor to monitor the status  of  the project and
 submit periodic reports,  including a  final  one which evaluates
 the success or failure of the project).

      Each Region should develop its own  coordination procedures
 for negotiating and overseeing a  nulti-media  pollution prevention
 condition which affects only that Region (i.e.,  applies only to
 the specific facility or  other facilities within the Region).

      The  extent of  coordination/concurrence required for a
 pollution prevention settlement which involves more than one
 Region will vary according to the nature and  complexity of the
 proposal.   The negotiation team should at a minimum notify and
 coordinate with other affected Regions about  pollution prevention
 conditions which would have an impact on facilities in those
 Regions (e.g.  an agreement for the respondent to conduct*
 environmental  audits;  or  an agreement for solvent substitution at
 other facilities not in violation).
                                                     »
      However,  the negotiation team would have to receive
 the concurrence of  all affected Regions  if  the proposed pollution
 prevention condition involved significant oversight resources or
 activities (e.g., if it required  major construction or process
 changes).   For this type  of situation, the  settlement team must
 notify all affected Regions that  it is considering  the inclusion
 of such conditions  as  part of a proposed settlement prior to the
 completion of  the negotiations.   These Regions will then have the
 opportunity to comment on the substance  and recommend changes to
 the scope  of the proposal.   Each  entity  will  have to concur with
 the pollution  prevention  condition and agree  to  provide the
 necessary  oversight in order for  it to be included  in the
 settlement agreement.   The Programs and  Regions  must also agree  .
on their respective tracking and  oversight  responsibilities
 before lodging the  consent order  or decree.

      The Headquarters  compliance  programs and the Office of
 Enforcement will be available to  help Regions coordinate this
concurrence process, and  to help  the  parties  reach  a consensus on
oversight  roles and responsibilities,  where necessary.
Concurrence by the  Headquarters program  office and  the Office of
 Enforcement will be mandatory only where it is already required
 by existing delegations or for supplemental projects as described
V. Organisational' Issues

A. Copies of  Settlements.

     The Regio&s IshoulJd send copies
of settlements with pollution
   ;  *ftlV 4%W^AWM9 ^»t*W%**** «V*M* *»Wf^**V9 ^**  *»^» wT«^^«^««» — — —— ^^	—
prevention conditions to "the" respective national compliance
officer (consent 'order) or Associate Enforcement Counsel (consent
decree) for  insertion to the Enforcement Docfcet Retrieval System

-------
                                11

 (EDRS).   In addition, the Region should enter a brief descriptive
 summary of the settlement (1-2 pages) into the Pollution
 Prevention Information Clearinghouse (PPIC, 1-800-424-9346)
 enforcement settlement file which is being established. This will
 enable all the Programs and Regions to have "real time"
 information about pollution prevention settlements which have
 been executed, and will enable the Office of Enforcement and the
 programs  to conduct an overall assessment of the impact of
 pollution prevention conditions in Agency settlements as part of
 the process of developing a final settlement policy in FY 1993.

 B. Media-Specific Policies

     The  media programs and Regions have begun to implement their
 own pollution prevention strategies.  Since they are still
 gaining experience in identifying and applying source reduction
 technologies to enforcement situations, and developing the
 technology and resources to track and evaluate these conditions,
 this interim policy adopts a phased approach that encourages,
 but does  not require, them to try to incorporate pollution
 prevention conditions on a case-by-case basis where they enhance
 the prospects for long-term compliance and pollution reduction.

     Each national program manager may decide whether to develop
 its own specific pollution prevention guidance (consistent with
 this interim guidance) or continue to use the general interim
 guidance.  Program-specific guidance should discuss when to
 include pollution prevention conditions in settlements, and
describe  the categories of violations for which pollution
 prevention "fixes" are most encouraged and the specific types of
 source reduction or recycling activities considered appropriate
 for that  program.  The National Program Manager may also adopt
additional reporting or concurrence requirements beyond those
described in this interim policy.  The Programs can develop
specific  policies on their own schedule, utilizing this general
 interim policy until they do so.

-------
                                     INDUSTRIAL  TOXICS PROJECT
                                                 17 TARGET CHEMICALS
                                                   1988 tRI Reporting Year
                                                         (in Pounds)

Chemical MMM •
BENZENE
CADMIUM * COMPOUNDS
CARBON TinUCMLOMOC
CHLOROFORM
CHROMIUM * COMPOUNDS
CYANIDE ft COMPOUNDS
OCHLOROMCTHANC
lŁAO * COMPOUNDS
MERCURY * COMPOUNDS
METHYL ETHYL KETONE
METHYL MOBUTVL KETONE

NICKEL 4 COMPOUNDS
IZnUCHLOROeTMYLEME
IOUIENE
I.I.I.TRICHLOROCTHANE
TRICHUMIOETHVLENE
XYLENES

UAPKKyctoT"
V visas
:'. JHM96M)
iijSMxno*
4.IS9C'2
747.000*
523.600*
asijoss *•'•*.
4I#.600°
504.100*
2.2 16.000 e>''2
1.026 C"'5
462.000*
205.300*
e 1 2
100.000 "
497.700 *
6.300.000 *
723.700 *
200.000 b
6.572.000 M

Import*
1966
(taOMfte)
956.800 b
5.512 e'2
IM.OOO *
27.000 b
912.700 C*U
26.600 *4
25.000*
374.600 "2
760 C-1'2
20.000 "
20.000 "
C 12
320.000 ' '
1 19.000 b
866.600 b
22.000 b
13.000 "
225.000 b>/

ttuatti
•1
FacNM*
453
166
64
166
1.662
355
1.525
1.277
43
2.264
933

1.253
660
3.606
3.516
666
3.167
R«toa»
loAk
26.117.9!
119.4
3.663.12
22.974. IJ
1. 181.41
1.961.21
126.796.21
2.567.70
25.62
127.675.7;
30.523.69

539.66
32.277.37,
73.752.712
70.420.901
49.071.464
55.866.584

•. Synttetc Organic ChamicaJs. USHC. 1969. Pubkcaton 02219
b. Monrovia* Chemical Product Synopsis. Manruvrito Chemical Products C
-------
                                1

               Supplemental Environmental

A.   Introduction

     In settlement of environmental enforcement cases, the United
States will insist upon terms which require defendants to achieve
and maintain compliance with Federal environmental laws and
regulations.  In certain instances, additional relief in the form
of projects remediating the adverse public health or environment-
al consequences of the violations at issue may be included in the
settlement to offset the effects of the particular violation
which prompted the suit.  As part of the settlement, the size of
the final assessed penalty may reflect  the commitment of the
defendant/respondent to undertake environmentally beneficial
expenditures ("Supplemental Environmental Projects").

     Even when such conditions serve as a basis for considering a
Supplemental Environmental Project, the Agency's penalty policies
will still require the assessment of a substantial monetary
penalty according to criteria described in A Framework for
Statute-Specific Approaches to Penalty Assessments: Implementing
EPA'S Policy on civil Penalties (GM-22), generally at a level
which captures the defendant/respondent's economic benefit of
noncompliance plus some appreciable portion of the gravity
component of the penalty.  Each administrative settlement in
which a "horizontal" Supplement       -onmental Project or
substitute performance is propose-   •. t« below) must be approved
by the Assistant Administrator for Enforcement, and, where
required by the Agency's delegations policy, the media Assistant
Administrator.  Judicial settlements, including any of the
projects described herein, will continue to require the approval
of the Assistant Administrator for Enforcement and also be
approved by the Assistant Attorney General for the Environment
and Natural Resources Division.

     EPA will expand its approach to Supplemental Environmental
Projects while also maintaining a nexus (relationship) between
the original violation and the supplemental project.  EPA may
approve a supplemental project so long as that project furthers
the Agency's statutory mandates to clean up the environment and
deter violations of the lav.1  Accordingly,  supplemental  projects
     1  A supplemental project cannot be used to resolve
violations at a facility other than the facility or facilities
which are the subject of the enforcement action.  This would run
counter to deterrence objectives, since it would effectively give
a company a penalty  "break" for violations at one facility  for
undertaking what amounts to legally required, compliance efforts
at another facility.  Such a scenario would  operate to reward
recalcitrance, poor-management practices, and non-compliance.

-------
may be considered if:  (1)  violations  are corrected through
actions to  ensure future compliance;  (2) deterrence objectives
are served  by  payment  of a substantial monetary  penalty  as
discussed above;  and  (3) there  is  an  appropriate "nexus" or
relationship between the nature of the violation and the
environmental  benefits to  be derived  from the supplemental
project.

     All supplemental  projects  must improve the  injured
environment or reduce  the  total risk  burden posed to public
health or the  environment  by the identified violations.  The five
categories  of  permissible  supplemental activities are pollution
prevention, pollution  reduction, environmental restoration,
environmental  auditing projects, and  public awareness projects
which are directly related to addressing compliance problems
within the  industry within which the  violation took place.  EPA
negotiators should make it clear to a defendant/respondent
interested  in  proposing a  supplemental project that the  Agency is
looking only for  these types of projects (cf. section F, below).
                                                     t
     Under  no.  circumstances will a defendant/respondent  be given
additional  time to correct the  violation and return to compliance
in exchange for the conduct of  a supplemental project.


B.   Categories of Supplemental Environmental Projects

     Five categories of projects will be considered as potential
Supplemental Environmental  Projec-       -~t to meeting  the
additional  criteria described in .      _..g sections.

     1.   Pollution Prevention  Projects

     Consistent with the Agency.'s.  forthcoming Pollution
Prevention  Policy Statement and Pollution Prevention Strategy, a
pollution prevention project substantially reduces  or prevents
the generation or creation of pollutants through  use reduction
(i.e., by changing industrial processes, or by substituting
different fuels or materials) or through application of  closed-
loop processes.   A project_.w.hich substantially reduces the
discharge of generated pollutants  through innovative recycling
technologies may  be considered  a pollution prevention project if
the pollutants are kept out of  the environment in perpetuity.

     2.   Pollution Reduction Projects

     A pollution  reduction project is defined as  a project which
goes substantially beyond  compliance  with discharge limitations
to further  reduce the  amount of pollution that would otherwise be
discharged  into the environment.   Examples include a project that
reduces the discharge  of pollutants through more effective end-
of-pipe or  stack  removal technologies; through improved  operation

-------
and maintenance; or recycling of residuals at the end of the
pipe.1

     Sometimes an acceptable pollution reduction project may
encompass an "accelerated compliance project".  For instance,
assuming there is a statutory or regulatory schedule for
pollution phaseout or reduction (or is likely to be proposed in
the foreseeable future, e.g., an upcoming rulemaking), if a
defendant/respondent proposes to complete a phaseout or reduction
at least 24 months ahead of time, and such proposal for
accelerated compliance can be demonstrated to result in
significant pollution reduction (i.e., one can objectively
quantify a substantial amount of pollution reduction due to the
accelerated compliance) then such a proposal may proceed to be
evaluated according to the rest ••' -he appropriateness qriteria
below.  In addition, if the de   .ant/respondent substitutes
another substance for the one ~eing phased out, he has the burden
to demonstrate that the substance is non-polluting, otherwise no
supplemental environmental project will be allowed and, indeed,
additional liability may accrue.

      3.   Projects Remediating Adverse Public Health or
          Environmental Consequences (Environmental Restoration
          Projects)

     An environmental restoration project is defined as a project
that  not only repairs the damage done to the environment because
of the violation, but which goes beyond repair to enhance the
environment in the vicinity of the violating facility.

      4.   Environmental Auditing Projects

      Environmental Auditing that represents general good business
practices are not acceptable supplemental projects under this
policy (cf. Section E).'  However,  such a  project  may  be
considered by the Agency if the defendant/respondent undertakes
additional auditing practices, designed to seek corrections to
     '  where the obligation to reduce the pollution is already
effective, or is subject to an "as soon as practicable"
or comparable standard, a proposal to further reduce
pollution would not fulfill the definition of a pollution
reduction project, and would not be appropriate.


     '  It should be noted that the Agency has the authority to
require an environmental audit as an element of injunctive
relief when it deems it appropriate given ,the fact pattern
surrounding the violation subject to the usual limits on"the
scope of injunctive relief.

-------
existing management and/or environmental practices whose
deficiencies appear to be contributing to recurring or potential
violations.  These other potential violations may encompass not
only the-violating facility, but other facilities owned and
operated by the defendant/respondent, in order to identify, and
correct as necessary, management or environmental practices that
could lead to recurring or future violations of the type which
are the basis for the enforcement action.'

     Audit projects which fall within the scope of this policy
can be justified as furthering the Agency's legitimate goal of
encouraging compliance with and avoiding, as well as detecting,
violation of federal environmental laws and regulations.  Such
audits will not, however, be approved as a supplemental project
in order to deal with similar, obvious violations at other
facilities.

     5 m   Enforcement~Related Environmental Puhllc Awareness
          Projects

     These projects are defined as publications, broadcastsr
or seminars which underscore for the regulated community the
importance of complying with environmental laws or disseminate
technical information about the means of complying with
environmental laws.  Permissible public awareness projects may-
included sponsoring industry-wide seminars directly related to
correcting widespread or prevalent violations within an industry,
e.g., a media campaign funded by the violator to discourage fuel
switching and tampering with automobile pollution control equip-
ment or one which calls for the defendant/respondent to organize
a conference or sponsor a series of public service announcements
describing how violations were corrected at a facility through
the use of innovative technology and how similar facilities could
also implement these production changes.

     Public Awareness Projects directly serve Agency deterrence
objectives and contribute indirectly to Agency enforcement
efforts. Though they are not subject to the nexus requirement
applicable to other supplemental environmental projects, they
must be related to the type-of violations which are/were the
subject of the underlying lawsuit.  Defendants/respondents who
fund or implement a public awareness project must also agree to
publicly state in a prominent manner that the project was
undertaken as part of the settlement of a lawsuit brought by the
Agency or a State.  These projects will be closely scrutinized to
ensure that they fulfill the legitimate objectives of this policy
in all respects.
     *   Of course, this requirement is subject to the
qualifications of  footnote 1.

-------
     6.   Projects Not Allowed as Supplemental Projects

     Several types of projects, which have been proposed in the
past, would no longer be approveable Supplemental Environmental
Projects.  Examples of projects that would not be eligible
include:

          1.   general educational or environmental awareness-
               raising projects (e.g., sponsoring public seminars
               about, or inviting local schools to tour, the
               environmental controls at a facility; promoting
               recycling in a community);     ,  •  *•

          2.   contribution to research at a college or
               university concerning the environmental area of
               noncompliance or concerning any other area of
               environmental study;

          3.   a project unrelated to the enforcement action, but
               otherwise beneficial to the community e.g.,
               contribute to local charity).


C.   "Nexus" (Relationship) of Supplemental Environmental Project
     to the Violation

     The categories of Supplemental Environmental Projects
described above  (except for Public Awareness Projects) may be
considered if there is an appropriate "nexus" or relationship
between the nature of the violation and the environmental
benefits to be derived from the type of supplemental project.
For example, the "nexus" between the violation and an
environmental restoration project exists when it remediates
injury caused by the same pollutant at the same facility giving
rise to the violation.  Such projects must further the Agency's
mission as defined by appropriate statutory mandates, including
the purpose sections of the various statutes under which EPA
operates. The Agency will evaluate whether the required "nexus"
between the pollutant discharge violation and the project exists.

     1.   Requirements for Remediation Projects

Examples of circumstances presenting an appropriate nexus
include:

     a.   A project requiring the purchase of wetlands which then
          act to purge pollutants unlawfully discharged in
          receiving waters. In this example, EPA will evaluate
          whether the required "nexus" between the pollutant
          discharge violations and the wetlands to be purchased
          can be established.  EPA will evaluate the nexus
          between the project and the violation in terms of both

-------
          geography and  the pollution  treatment benefits of the
          wetlands.

     b.   A project which calls  for the acquisition and
       — preservation of wetlands in  the immediate vicinity of
          wetlands injured by unlawful discharges, in order to
          replace the environmental services lost by reason of
          such injury.

      c.  A "restoration" project, such as a stream sediment
          characterization or remediation program to determine
          the extent and nature  of pollution caused by the
          violation and  to formulate and implement a plan for
          remediating sediment near the facility.  Such a stream
          sediment characterizati:-   • restoration project, if
          obtainable as  injuncti    _ief pursuant to the
          statutory provisions ox cne  Clean Hater Act in the
          particular case, would not be approveable as a
          supplemental project.

     2.   Nexus for Pollution Prevention/Pollution Reduction/
          Environmental  Restoration/Environmental Auditing
          Pro jects

     The "nexus" for pollution prevention, pollution reduction,
environmental restoration and environmental auditing projects may
either be vertical or horizontal, as described below.

     a.   Vertical "Nexus*

     A "vertical" nexus  exists when the supplemental project
operates to reduce pollutant loadings  to a given environmental
medium to offset earlier excess  loadings of the same pollutant in
the same medium which were created Jay-the violation in question.
Even if the violations are corrected by reducing pollutant
loadings to the levels required  by law, further reductions may be
warranted in order, to alleviate  the risk to the environment or
public health caused by  past excess loadings.  Typically, such
projects follow a violation back into  th* manufacturing process
to address the root cause of_the pollution. Such reductions may
be obtained from the source responsible for the violation or, in
appropriate cases, may be obtained fro» another source, either
upstream, up gradient or upwind  of the responsible source.

     For example, if pollutants  were discharged in violation of
the Clean Water Act from a facility at a certain point along a
river, an acceptable pollution reduction project would be to
reduce discharges of that same pollutant at an upstream facility
on the same river.  Another classic example of a "vertical"
pollution prevention activity is the alteration of a production
process at a facility which handles a  portion of the
manufacturing process antecedent to that which caused the

-------
violation of the regulatory requirement in a way that yields
reductions or total elimination of the residual pollutant
discharges to the environmental media assaulted by the violation.
Both of -these examples present the necessary nexus between the
violation and the supplemental project.


     b. Horizontal "Nexus"

     A "horizontal" nexus exists when the supplemental project
involves either (a) relief for different media at a given
facility or b) relief for the same medium at different
facilities.  The nexus between supplemental projects in this
category and the violation must be carefully scrutinized.  The
nexus will be met only if the supplemental project would reduce
the overall public health or environmental risk posed by'the
facility responsible for the violation or enhances the prospects
ror reducing or eliminating the likelihood of future violations
substantially similar to those which are the basis for the
enforcement action.  Approval of such projects is appropriate
only where the terns of the settlement insure that the
defendant/respondent will be subject to required injunctive
relief prescribed by the compliance and deterrence policies
stated in the various Acts and their implementing regulations.
In those circumstances, the Agency believes the required nexus to
the statutory goals has been met.

     Following are examples of a.        j projects demonstrating
a "horizontal" nexus to the violation:

1.   Violations of the Resource Conservation and Recovery Act
     (RCRA) or the Clean Water Act may have exposed the
     neighboring community to increased health risks because of
     drinking water contamination.  In addition to correcting
     these violations, it may be appropriate to reduce toxic air
     emissions from the same facility in order to compensate for
     the excess health risk to the community which resulted from
     the RCRA or CWA violations.

2.   A supplemental project-is proposed which reduces pollutant
     discharges at a defendant/respondent's other facilities
     within the same air quality basin or water shed as at the
     facility which violated legal requirements applicable to
     releases of the same pollutant.  In this case, the overall
     supplemental project would be designed to reduce the overall
     health or environmental risk posed by related operations to
     the environment or to the health of residents in the same
     geographic vicinity by reducing pollutant discharges to the
     air basin or watershed and to compensate for past excess
     discharges.

-------
3.   A supplemental project i"s proposed which reduces pollutant
     discharges at a defendant/respondent's other  (non-
     violating) facility(ies).  Such a project would be
     apprpveable where the violating and non-violating facilities
     are engaged in the same production activities and use the
     same production processes, where appreciable risks of
     violations and legal requirements applicable to releases
     of that same pollutant substantially similar to those at
     the violating facility are posed by the non-violating
     facility(ies), and where the defendant/respondent can
     establish that significant economies of scale would be
     achieved by incorporating pollution prevention process
     changes at both the violating and non-violating facilities.
     Alternatively, the settlement could call for the defendant/
     respondent to substitute input chemicals across all such
     facilities (e.g., replace higher toxic solvents with* lower
     toxic solvents at all paint manufacturing plants) or to
     reduce the emissions loadings of particular emissions at all
     such facilities as part of a NESHAPS settlement..  Such
     projects would, therefore, reduce the overall health or
     environmental risk posed by such operations to the
     environment or to the health of residents in the same
     geographic vicinity.

4.   In settlement of a Toxic Substances Control Act (TSCA)
     PMN (premanufacture notification) violation for
     manufacturing a polymer without providing formal advance
     notice at a facility, the defendant/respondent could
     establish a closed loop recycling system to reduce the
     amount of that facility's product manufacturing waste which
     must be sent to a RCRA Subtitle C landfill.  Operating the
     facility in violation of T?"% created a rrsk of unwarranted
     health or environmental i.-._  .    If TSCA penalty and
     injunction requirements have oeen met, then the supplemental
     project could be justified on the grounds that it would
     compensate for this unwarranted risk by reducing the overall
     health or environmental risk presented by the facility.

     After the project category and "nexus" criteria have been
     met, a potential supplemental project must also meet the
     criteria described in the following sections, below. Most of
     the conditions below applied in the past, but some are new.
     All of these conditions must be met before a supplemental
     project may be accepted.


D.   Status of the Enforcement Action/Compliance History of
     Defendant/Respondent

     Any defendant/respondent against whom the Agency has-taken
an enforcement action may propose to undertake a supplemental
project at any time prior to resolution of the action, although

-------
the Agency should consider both the status of the litigation/
administrative action and the resources that have been committed
to it beTore deciding whether to accept it.  In addition, the
respondent's enforcement .history and capability to successfully
complete the project must be examined during evaluation of a
supplemental project proposal.

     The Agency negotiators must also consider whether the
defendant/respondent has the technical and economic resources
needed to successfully implement the supplemental project.  In
addition, a respondent who is a repeat offender may be a less
appropriate respondent from which to receive and evaluate a
supplemental project proposal than a.first time violator.

                                                        •
E*   Main Beneficiary of a Supplemental Environmental Project

     The Federal Government's sole interest in considering
supplemental projects is to ameliorate the adverse public health
and/or environmental impacts of violations.  Projects are not
intended to reward the defendant/respondent for undertaking
activities which are obviously in his economic self-interest
(e.g., update or modernize a plant to become more competitive).
Therefore, as a general rule, these projects will usually not be
approved when they represent a "sound business practice" , i.e.,
capital expenditures or management improvements for which the
Federal negotiators may reasonably conclude that the regulated
entity, rather than the public, is likely to receive the substan-
tial share of the benefits which accrue from it.

     The only exception to the prohibition against acceptance of
a supplemental project which represents a "sound business
practice" is for a pollution prevention,project.  Although a
pollution prevention project can be viewed as a "sound business
practice" since (by definition) it is designed both to make
production more efficient and reduce the likelihood of
noncompliance, it also has the advantage of potentially providing
significant long-term environmental and health benefits to the
public.  Therefore, the "sound business practice" limitation will
be waived only, for pollution prevention projects if the Federal  .
negotiators decide, after due consideration and upon a clear
demonstration by the defendant/respondent as to what the public
health and/or environmental benefits would be, that those
benefits are so substantial that the public interest would be
best served by providing additional incentives to undertake the
project.


F.   Extent to Which the Final Assessed Penalty can Reflect a
     Supplemental Environmental Project

     Although supplemental projects may directly fulfill EPA's

-------
                                10

goal of protecting  and restoring  the  environment,  there  is an
important countervailing enforcement  goal  that penalties
should have the strongest possible deterrent effect upon the
regulated, community.   Moreover, the Agency's penalty policies
require the assessment of a  substantial monetary penalty
according to criteria  described in "Implementing EPA's Policy on
Civil Penalties"  (GM-22),  generally at a level which captures the
defendant/respondent's economic benefit* of noncompliance plus
some appreciable  portion of  the gravity component  of the
penalty.*

     In addition, 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.   EPA  should calculate the net
present after tax value of the supplemental project at the time
that the assessed penalty is being calculated.  If a supplemental
project is approved, a portion of the gravity component of the
penalty may be mitigated by  an amount up to the net present
after-tax cost of the  supplemental project, depending on the
level of environmental benefits to the public.


G.   Supplemental Environmental Projects for Studies

     Supplemental Environmental Projects for studies will not be
allowed without an accompanying commitment to implement the
results.  First,  little or no environmental benefit may result in
the absence of implementation.  Second, it is also quite possible
that this type of project is one  which the violator could
reasonably be expected to do as a 'sound business practice".

     Pollution prevention, pollution  reduction and environmental
restoration studies, as well as environmental audits,  are defined
narrowly for purposes  of meeting  Supplemental Environmental
Project policy guidelines.   They  will only, be eligible as
supplemental projects  if they are a part of an Agency-approved
set of actions to reduce,  prevent, or ameliorate the effects of
pollution at the  respondent's facility (e.g., a comprehensive
     *   Where a violation is found which did not confer a
significant economic benefit, e.g. a failure to notify, the
settlement must still include payment of a penalty which at least
captures a portion of the proposed gravity component.


     *  If  a defendant/respondent can establish through use of
documents and affidavits sworn under penalty of perjury that it
cannot afford to pay the civil penalty derived from use of the
appropriate civil penalty policy, the Agency will consider
entering into an "ability to pay settlement" for less than the
economic benefit of non-compliance.

-------
                                11

waste minimization or emissions reduction program).  The amount
attributable to a supplemental project may include the costs of
necessary studies.  Nonetheless, a respondent's offer to conduct
a study, without an accompanying commitment to implement the
results, will not be eligible for penalty reduction.  In
considering the applicability of a proposed study, the Agency
negotiators will consider the likelihood of success, i.e.,
substantial pollution reduction or prevention, in making a
determination.

     While studies are not by themselves eligible supplemental
environmental projects, to encourage pollution prevention, EPA
will make a limited exception to this general approach for
pollution prevention studies.  Such <^:dies will be eligible for
a penalty offset when they are n-*          Tency-approved set of
pollution prevention activitis              y and are designed to
correct the violation (e.g., a	..	,  ..asibility study, waste
minimization opportunity assessment, or waste reduction audit).
                                                    f
     The size of the penalty offset may include the costs of the
studies.  The commitment to conduct the study also must be
tangible (e.g., the project completed on schedule, etc.).  The
U.S. must have the authority to review the completed study to
decide whether it is technologically and/or economically feasible
to implement the results.  Should the U.S. decide that the
results can be implemented but the defendant/ respondent is
unwilling to do so, the "offset" for the pollution prevention
study will be rescinded and the final assessed penalty must be
paid in full (cf. Section J. on payment assurance).


H.   Substitute Performance of Supplemental Environmental
     Projects

     A supplemental environmental project which meets the other
criteria of this policy may consist in part or whole of
substitute performance by an entity or entities other than the
violator.  Such a substitute must bear a reasonable geographical
or media-specific relationship to the underlying violation.  This
substitute performance must.be assured through agreements which
are enforceable by EPA, and may consist of agreements for
emissions limits, process design or input changes, natural
resource preservation or conservation easements, or other means
of achieving compliance with the terms of the proposed
supplemental environmental project.  In the event a violator
proposes acceptable substitute performance/ EPA will credit the
violator with an amount up to the net after tax cost of the
project as if it were being performed by the violator.  The
violator, will, however, remain responsible for the performance
of the project or the payment of the penalty offset if substitute
performance is not completed.

-------
                                12

 I.   Level  of  Concurrence

     There  may be  practical  problems  in  administering cross-
 media and/or cross-regional  projects.  Staff allocations for
 oversight requirements  will  necessarily  increase, as will the
 level of resources needed  for  tracking purposes since tracking a
 supplemental project  is more complex  than tracking whether a
 payment is  made.   In  addition, the  likelihood of new issues
 emerging due to noncompliance  with  the conditions of the project
 is significant.

     The extent of coordination/concurrence for a supplemental
 project which  involved  more  than one Region will vary according
 to the nature  and  complexity of the proposal.  All affected
 Regions must be notified about a supplemental project: which would
 have only a modest impact  on facilities  in those Regions "(e.g., a
 commitment  to  undertake an environmental audit at all of the
 defendant/respondent's  facilities across the country).  However,
 all affected Regions  would have to concur in a proposed
 supplemental project  which would involve significant oversight
 resources or activities (e.g., a pollution prevention activity
 which required major  construction or process changes).  Also, all
 affected EPA parties  must  be consulted on their respective
oversight responsibilities.  As stated previously, judicial
 settlements, including  any of  the projects described herein, will
continue to require the approval of the Assistant Administrator
 for Enforcement and also be  approved by the Assistant Attorney
General for the Environment  and N-t-ral Resources Division.

     Each proposed administrative settlement which has a
 "horizontal" nexus to the  violation or which involves substitute
 performance also must be approved by the Assistant Administrator
 for Enforcement and,  where required by the Agency's delegations
 policy, the media  Assistant  Administrator.


J.   Oversight/Tracking

     Supplemental  Environmental Projects may require third-party
 oversight.  In such cases,-these oversight rosts should be borne
 by the respondent,  and  it  must agree as a part of the settlement
 to pay  for an independent,  third-party  auditor to monitor the
 status of the  supplemental project.  The auditor will be required
 by the settlement  to  submit  specific periodic reports, including
 a final report evaluating  the  success or failure of the
 supplemental project, and  the  degree to which the project
 satisfied these guidelines.  All reports must be submitted to
 EPA.  Upon  request, EPA may  provide copies of the reports, or
 copies of portions of the  reports,  to the respondent.  The timing
 and amount  of  reports released to the defendant/respondent* shall
 be at EPA's sole discretion.

-------
                                13

     Obviously, a certain aaount of government oversight will be
required to monitor compliance with the terms of an agreement
that contains a supplemental project.  "Horizontal" pollution
preventiori""or pollution reduction supplemental projects which
involve more than one Region (e.g., production changes at riore
than one facility) may require additional oversight, and the
estimated amount of time and resources required for effective
oversight is another criteria which the negotiators should use to
determine whether to include the project in the settlement
agreement.

     The consent order or decree shall specify overall timeliness
and milestones to be net in implementing the supplemental
project. If the defendant/respondent does not comply
satisfactorily with the terms of the supplemental project, he
shall be liable for the amount by which the assessed penalty was
reduced (with applicable interest).  The consent order or decree
should contain a mechanism for assuring prompt payment, e.g.,
through stipulated penalties consistent with the other, sections
of this policy or, if appropriate, the posting of a bond (in the
amount by which the assessed penalty was reduced) to be forfeited
if the supplemental project is not fully implemented.


K.   Documenting Approval Of Supplemental Environmental Project
    . Proposals

     In all cases where supplemental projects are approved as
part of the settlement, the case file should contain
documentation showing that each of the appropriateness criteria
listed above have been met in that particular case.  A copy of
the evaluation and approval document shall be sent to the Office
of Enforcement and the National Compliance Officer concurrent
with the approval of the Regional Administrator, or other
authorized approving official, and to the Assistant Attorney
General for the Environment and Natural Resources Division.
L.   Coverage of this Policy

     This document revises"ahd supercedes  the appropriate
sections of the Agency's general civil penalty  policy  (GM-22),
and constitutes Agency policy relating to  supplemental environ-
mental projects.  Media-specific penalty policies will be revised
as soon as possible to be consistent with  it.   During this
interim period, in the event of any conflict between this general
policy and a media-specific policy, this policy is controlling.

-------
  5
              Attachment B



UNfTED STATES ENVIRONMENTAL PROTECTION AGENCY

           WASHINGTON. D.C. 20460
MEMORANDUM
SUBJECT:  Creation of an Agency Workgroup on Multi-media
          Enforcement
FROM:     James M.
          Assistant Jdornistrator

TO:       Deputy Regional Administrators
          Headquarters  Compliance Office  Directors
          OE Headquarters Managers
          Regional Counsels


        In Fiscal Year 1990,  the Agency set a  new course  for
Enforcement in the Enforcement Four Year  Strategic  Plan.   Several
elements of that plan call for a more holistic,  multi-media
approach to enforcement.  This included better targeting of
enforcement resources on geographic areas,  pollutants, industries
or companies of concern, innovative enforcement  settlement
conditions which address broader environmental management and
pollution prevention  concerns and systematic  screening of cases,
employing new, integrated databases.  This direction was given
increased impetus by  the Administrator's  stated  goal that 25%  of
enforcement activities  include multi-media elements. Despite  the
broad  consensus that  EPA needs to adopt more  of  a multi-media
perspective in its actions,  our management systems  are ill-
suited to acknowledging the  full benefits of  these  efforts.

     The Deputy Administrator has directed the Office of
Enforcement to lead an  agency-wide  workgroup  to  address
implementation issues in the Agency's multi-media/cross-program
enforcement approaches. The workgroup will play a  vital role  in
helping tta agency realize the vision set forth  in  the
Enforcement Four Year Strategic Plan and  the  Administrator's goal
that 25% of our  enforcement  activities have multi-media  elements.
The  workgroup recommendations will  be reviewed with the
Enforcement Management  Council.  On an ongoing basis, the
workgroup will also  serve to maintain an  awareness  of the
progress of  the'Regions and  share  results.
                                                            p; ;•? 3 j._ , r

-------
I.  Mission

1-  The workgroup will begin  immediately to develop
recommendations  for  implementation beginning next fiscal year, or
sooner if appropriate, definitions, accountability, resource
allocation and systems improvements to further foster multi-
media enforcement.   Issues that should be addressed include:

 o   ;::iould we revise the definition of the Administrator's
     multi-media goal so that it drives us in the right
     direction?  What changes or clarifications are needed?
                      • * •                      .. f
 o   How should  we further define the role of- States in
     meeting the goal?
                                                         •
 o   What barriers must be eliminated to achieve the goal?

 o   How can we  usefully assess how close we are to meeting the
     goal?

 o   How can we  recognize and reward success?

 o   Do we have  sufficient funding and resource
     incentives  for  conducting multi-media inspections?
     what funding incentives  night be needed to foster
     more multi-media enforcement action?

 o   How can we  credit Regions for different types of
     cases,  (e.g. "weighted beans" not necessarily in a
     workload sense  but in the sense of public accounting)?

The workgroup will review regional -transition plans submitted at
the end of February, and work closely with Regions throughout the
year to identify both implementation and record-keeping issues
they are encountering in trying to portray their progress.  Ideas
and approaches should be shared with other Regions.

2-  In discharging its responsibility, the workgroup will review
the end-of-year  progress reports from each Region on how well
they did In  implementing the  multi-media goal of the Agency.

3-  The workgroup will establish criteria and a process for
recognizing  and  rewarding exemplary Regional multi-media activity
based upon the end of year progress reports.

4-  The workgroup will help design a means of evaluating regional
implementation of the case screening guidance and make
recommendations  for  ensuring  that: 1) the process is
accomplishing its purpose without adverse impact on regional
enforcement  operations, and 2)  it focuses multi-media attention
on appropriate violations and sources.

-------
II.  Composition


Headquarters
              Chair      Office of Compliance Analysis and
                         Program Operations  (3) representatives
                         on budget, accountability and planning

                         National Enforcement Investigations
                          Center

                         Associate Enforcement Counsels (2 Branch
                          Chiefs)

                         Office of Policy, Planning and •
                          Evaluation (Program Evaluation
                          Division)
                                                    *
                         Office of Water Enforcement and Permits

                         office of Waste Programs Enforcement

                         Office of Compliance Monitoring

                         Stationary Source Air Compliance
                          Division
Regions
     We will seek representative Branch Chiefs from Regional
     Counsel, Air, Water, Waste, Toxics, Management, and
     Environment Service Divisions, and are proposing this mix
     with representatives from all Regions.  Individuals will be
     selected in consultation with our Lead Region, Region I, and
     with the approval of Regional Management.

-------
SE.2-3

-------
           UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
''-- /                     WASHINGTON. D.C. :o460
                                                       Gn-Sl
 MEMORANDUM

 SUBJECT:  Final EPA Policy on the Inclusion of Environmental
           Auditing Provisions in Enforcement Settlements

 FROM:     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, FTS 475-8777,
 E-Mail box 2261, LE-130A • Thank you for your consideration of
 this important matter.

 Attachments

-------
                              -2-

Addresseess

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

-------
THE POLICIES AND PROCEDURES ESTABLISHED IN THIS DOCUMENT ARE
INTENDED SOLELY AS GUIDANCE FOR 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
THEM AT ANY TIME WITHOUT PUBLIC NOTICE.

-------
     EPA POLICY ON THE INCLUSION OF ENVIRONMENTAL AUDITING
             PROVISIONS IN ENFORCEMENT SETTLEMENTS
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
terms of any settlement.  This document supplements the "Guidance
for Drafting Judicial Consent Decrees."_!_/

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.^/
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
future."3/

     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 time instead of
       reacting to crises.

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

-------
                            .   -2-

 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  may, 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:

        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."^/

     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.8/

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

-------
                              -3-

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 9/ 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:

     1.  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 ndncompliance also be
remedied.ll/

     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) internal
communications and control systems; and (9) hazard identifica-
tion and risk assessment.12/

     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 staff ing. 1_3/  Both types of audits
should b« sought where both current noncompliance and shortcomings
in a party's environmental management practices need to be
addressed.14/

     In cases where EPA negotiators determine that an acceptable
settlement should include an audit provision, the attached
model provisions 15/ 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

-------
                               -4-

the Agency's published policy  on auditing.   Those  elements
include:

      ' 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.

      8 Adequate team staffing and auditor training.

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

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

      0 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
       audits.16/

     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, ~ne 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.ljB/  Other recent.
Agency settlements, also successful, have entailed full disclosure
of the auditor's report of findings regarding noncompliance,

-------
                              -5-

and even access to the company records which the auditors
examined.19/  Audit settlements that require either self-
cert ificaTTon 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.20/

     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 terras 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:

     8 Use of an independent third-party auditor not affiliated
         with the audited entity;
     8 Adherence to detailed audit protocols; and
     0 More extensive Agency role in identifying corrective
       action.23/

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.^4/  Notwithstanding such statutory
authority. Agency negotiators should expressly reserve 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 may 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

-------
                               -6-

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 wher. calculating
the dollar amount of a civil penalty.^Ł/  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 wnere 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

-------
                              -7-

business information (CBI).  Auditing provisions should indicate
that EPA will treat such information in the same manner that
all other CBI is treated. 3_1/  Where appropriate, negotiators
may consider defining in advance which categories of audit
information will qualify for CBI treatment .32_/  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
negotiation.

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 Legal 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, auditing 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. ^4_/  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 document, "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. '
Attachments

-------
                                -8-

                            FOOTNOTES

 1.  EPA General Enforcement Policy No. GM-17, October  19,  1983.

 2.  51 Fed. Reg. 25004  (1986).

 3.  51 Fed. Reg. 25007  (1986).

 4.  See "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 3, 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.

-------
                               -9-

20.  See,  e.g.,  United States v. Georgia Pacific Corp., Attachment
     B, p. 2; Attachment D, §B.3; and Attachment F, §§6(1) and 9.

21.  See,  e.g.,  Attachment 0.

22.  See,  e.g.,  Potlatch Corp.,  Attachment 3, p. 1; and Attach-
     ment C.

23.  See Attachment F.

24.  See,  e.g.,  CAA §114, CWA §308, RCRA §3007, CERCLA §103,
     the Toxic 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, 1983).

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

29..  See Attachment C, §A.3; Attachment D, §B; Attachment E,
     §CT3; 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, 1983^

31.  See "Guidance for Drafting Judicial Consent Decrees," at 23
     (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.

-------
                              -10-

                     SUMMARY OF ATTACHMENTS

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

ATTACHMENT B:  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 F;  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.]

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
audit.]

-------

Wednesday
July 9, 1986
Part IV

Environmental
Protection Agency
Environmental Auditing Policy Statement;
Notice

-------
25004
Federal Register / Vol. 51. No. 131  / Wednesday. July 9. 1986 /  Notices
•NVIRONMENTAL PROTECTION
  -'NCY

,     E-fRL-304«-«l

Environmental Auditing Policy
Statement

AGENCY: Environmental Protection
Agency (EPA).
ACTION: Final policy statement.

SUMMARY: It is EPA policy to encourage
the use of environmental auditing by
regulated entities to help achieve and
r.j.ntam compliance with
environmental laws and regulations, as
well as to help identify and correct
unregulated environmental hazards.
ZPA first published this policy as
'.-.tenm guidance on November 8.1985
 :0 FR 46504). Based on comments
received regarding the interim guidance.
v.e Agency is issuing today's final
policy statement with only minor
changes.
  This final policy statement
specifically:
  .• Encourages regulated entities to
i-*velop. implement and upgrade
•>r.vi:cr.rnental auditing programs:
  • Drscusses when the Agency may or
- iv not request audit reports:
    "xplains how EPA's inspection and
    ..-cement activities may respond to
regulated entities' efforts to assure
o; — pliance through auditing:
  • Endorses environmental auditing at
.V'leral facilities:
  • Encourages state and local
-.v.Tcn.T.ental auditing initiatives: and
  • Outlines elements of effective audit
-•-•;rams.
  Environmental auditing includes a
v.i.-iety ofcompliar.ee assessment
:-:':hmques which go beyond those
'.- yj!!y required and are used to identify
 •ct.ai ar.d potential environmental
:-.:b!ams. Effective environmtntal
v:d:ting can lead to higher levels of
. •. orall compliance and reduced risk to
 •..man health and the environment EPA
-. -.dorses the practice of environmental
 -..ijif.r.g and supports its accelerated
  ;- by regulated entities to help meet
the joals of federal, state and local
••-viror.T.ental requirements. However.
••••> existence of an auditing program
...-•*» not create any defense to. or
 . -e.-wise iirr.it. the responsibility of any
 • juiated entity to comply with
  ,:r!:cable regulatory requirements.
   5r::es are encouraged to adopt these
     -ilar and equally effective policies
     der to advance the use of
  r.-'.-.ror.mental auditing on a consistent.
  ".ationwide basis.
  SATES: This final policy statement is
  elective July 9.1986.
                    FOR FURTHER INFORMATION CONTACT:
                    Leonard Fleckenstein. Office of Policy.
                      Planning and Evaluation. (202) 382-
                      2726;
                          or
                    Cheryl Wasserman. Office of
                      Enforcement and Compliance
                      Monitoring. (202) 382-'550.
                    SUPPLEMENTARY INFORMATION:

                    ENVIRONMENTAL AUDITING
                    POLICY STATEMENT
                    I. Preamble
                      On November 8. 1985 EPA published
                    an Environmental Auditing Policy
                    Statement, effective as interim guidance.
                    and solicited written comments until
                    January 7.1986.
                      Thirteen commenters submitted
                    written comments. Eight were from
                    private industry. Two commenters
                    represented industry trade associations.
                    One federal agency, one consulting firm
                    and one  law firm also submitted
                    comments.
                      Twelve commenters addressed EPA
                    requests for audit reports. Three
                    comments per subject were received
                    regarding inspections, enforcement
                    response and elements of effective
                    environmental auditing. One commenter
                    addressed audit provisions as remedies
                    in enforcement actions, one addressed
                    environmental auditing at federal
                    facilities, and one addressed the
                    relationship of the policy statement to
                    state or local regulatory agencies.
                    Comments generally supported both the
                    concept  of a policy statement ar.d the
                    interim guidance, but raised specific
                    concerns with respect, to  particular
                    language and policy issues in sections of
                    the guidance.
                    General Comments
                      Three commenters found the interim
                    guidance to be constructive, balanced
                    and effective  at encouraging more and
                    better environmental auditing.
                      Another commenter. while
                    considering the  policy on the whole to
                    be constrjctive. feit '.hat  r.ew and
                    identifiable auditing "incentives" should
                    be offered by EPA. Based on earlier
                    comments received from industry. EPA
                    believes most companies would not
                    support or participate in  an "incentives-
                    based" environmental auditing program
                    with EPA. Moreover, general promises
                    to forgo inspections cr reduce
                    enforcement responses :n exchange for
                    companies' adoption cf environmental
                    auditing programs—the  incentives"
                    most frequently menticned in this
                    context—are fraught w.;h legal and
                    policy obstacles.
                      Several commer.tj.-s expressed
                     concern that states or localities might
use the interim guidance to require
auditing. The Agency disagrees that the
policy statement opens the way for
states and localities to require auditing.
No EPA policy can grant states or
localities any more (or less) authority
than they already possess. EPA believes
that the interim guidance effectively
encourages voluntcry auditing. In fact.
Section U.S. of the policy states:
"because audit quality depends to a
large  degree on genuine management
commitment to the program and its
objectives, auditing should remain a
voluntary program."
  Another commenter suggested that
EPA should not expect an audit to
identify all potential problem areas or
conclude that a problem identified in an
audit  reflects normal operations and
.procedures. EPA agrees that an audit
report should clearly reflect these
realities and should be written to point
out the audit's limitations. However.
since  EPA will not routinely request
audit  reports, the Agency does not
believe these concerns raise issues
which reed to be addressed in the.
policy statement.
  A second concern expressed by the
same  commenter was that EPA should
acknowledge that environmental audits
are only part of a successful
environmental management program
and thus should not be expected to
cover every environmental issue or
solve all problems. EPA agrees and
accordingly has amended the statement
of purpose which appears at the end  of
this preamble.
   Yet another commenter thought EPA
should focus on environmental
performance results (compliance or nen-
ccmpliance). not en the processes or
vehicles  used to achieve those results. In
general. EPA agrees with this statement
and will  continue to focus on
environmental results. However. EPA
also believes that such results can be
improved through Agency efforts to
identify and encourage effective
environmental management practices.
and will continue to encourage such
 practices in non-regulatory ways.
   A final general comment
 recommended that EPA should sponsor
 seminars for small businesses en how to
 start  auditing programs. EPA agrees  that
 such  seminars would be useful.
 However, since audit semma.-s already
 are available from several private sec::r
 organizations. EPA does not beiieve .t
 should intervene in that market, with the
 possible exception of seminars for
 government agencies, especially t'ederal
 agencies, for which EPA has a bread
 mandate under Executive Order ;:CS3 to

-------
                   Federal Register /  Vol.  51. No.  131 / Wednesday. July 9. 1986 / Notices
                                                                    25005
provide technical assistance for
environmental compliance.

Requests far Reports
  EPA received 12 comments regarding
Agency requests for environmental audit
reports, far more than on any other topic
in the policy statement. One commenter
felt that EPA struck an appropriate
balance between respecting the need for
self-evaluation with some measure of
privacy, and allowing the Agency
enough flexibility of inquiry to
accomplish future statutory missions.
However, most commenters expressed
concern that the interim guidance did
not go far enough to assuage corporate
fears that EPA will use audit reports for
environmental compliance "witch
hunts." Several commenters suggested
additional specific assurances regarding
the circumstances under which EPA will
request such reports.
  One commenter recommended that
EPA request audit reports only "when
the Agency can show the information it
needs to perform its statutory mission
cannot be obtained from the monitoring.
compliance or other data that is
otherwise reportable and/or accessible
to EPA. or where the Government deems
an audit report material to • criminal
investigation." EPA accepts this
recommendation in part. The Agency
believes it would not be in the best
interest of human health and the
environment to commit to making a
"showing" of a compelling information
need before ever requesting an audit
report. While EPA may normally be
willing to do so. the Agency cannot rule
out in advance all circumstances in
which such a  showing may not be
possible. However, it would be helpful
to further clarify that  a request for an
audit report or a portion of a report
normally will be made when needed
inf01 ration is not available by
alternative means. Therefore. EPA has
revised Section ULA^ paragraph two
and added the ports*: "and usually
made where the inloraation needed
cannot be obtained from monitoring.
reporting or other data otherwise
available to the Agency."
  Another commenter suggested that
(except in the case of criminal
investigations) EPA should liwt
requests for audit documents to specific
questions. By including the phrase "or
relevant portions of a report" in Section
I1I.A.. EPA meant to emphasize it would
not request an entire  audit document
when only a relevant portion would
suffice. Likewise. EPA fully intends  not
to request even a portion of a report if
needed information or data can be
otherwise obtained. To further clarify
this point EPA has added the phrase.
"most likely focused on particular
information needs rather than the entire
report" to the second sentence of
paragraph two. Section III-A.
Incorporating the two comments above,
the first two sentences in paragraph two
of final Section III.A. now read: "EPA's
authority to request an audit report, or
relevant portions thereof, will be
exercised on a case-by-case basis where
the Agency determines it is needed to
accomplish a statutory mission or the
Government deems it to be material to a
criminal investigation. EPA expects such
requests to be limited, most likely
focused on particular information needs
rather than the entire report, and usually
made where the information needed
cannot be obtained from monitoring.
reporting or other data otherwise
available to the Agency."
  Other commenters recommended that
EPA not request audit reports under any
circumstances, that requests be
"restricted to only those legally
required." that requests be limited to
criminal investigations, or that requests
be made only when EPA has reason to
believe "that the audit programs or
reports are being used to conceal
evidence of environmental non-
compliance or otherwise being used in
bad faith." EPA appreciates concerns
underlying all of these comments and
has considered each carefully. However.
the Agency believes that these
recommendations do not strike the
appropriate balance between retaining
the flexibility to accomplish EPA's
statutory missions in future, unforeseen
circumstances, and acknowledging
regulated entities' need to self-evaluate
environmental performance with some
measure of privacy. Indeed, based on
prime informal comments, the small
number of formal comments received.
and  the even smaller number of advene
comments. EPA believes the final policy
statement should remain largely
unchanged from the interim version.

Elements of Effective Environmental
Auditing
   Three commenters expressed
concerns regarding the seven general
elements EPA outlined in  the Appendix
to the interim guidance.
   One commenter noted that were EPA
to further expand or more fully detail
such elements, programs not specifically
fulfilling each element would then be
judged inadequate. EPA agrees that
presenting highly specific and
prescriptive auditing elements could be
counter-productive by not taking into
account numerous factors which vary
extensively from one organization to
another, but which may still result in
effective auditing programs.
Accordingly, EPA does not plan to
expand or more fully detail these
auditing elements.
  Another commenter asserted that
states and localities should be cautioned
not to consider EPA's auditing elements
as mandatory steps. The Agency is fuiK
aware of this concern and in the Lntenrr
guidance noted its strong opinion that
"regulatory agencies should not attempt
to prescribe the precise form and
structure of regulated entities'
environmental management or auditing
programs."  While EPA cannot require
state or local regulators to adopt this or
similar policies, the Agency docs
strongly encourage them to do so. both
in the interim and final policies.
  A final commenter thought the
Appendix too specifically prescribed
what should and what should not be
included in  an auditing program. Other
commenters. on the other hand viewed
the elements described as very general
in nature. EPA agrees with these other
commenters. The elements are in no
way binding. Moreover. EPA believes
that most mature, effective
environmental auditing programs do
incorporate each of these general
elements in some form, and considers
them useful yardsticks for those
considering adopting or upgrading audit
programs. For these reasons EPA has
not revised the Appendix in today's
final policy statement.

Other Comments
   Other significant comments addressed
EPA inspection priorities for. and
enforcement responses to. organizations
with environmental auditing programs.
   One commenter. stressing that  audit
programs are internal management
tools, took exception to the phrase in the
second paragraph of section III.B.I. of
the interim  guidance which states that
environmental audits can 'complement
regulatory oversight. By using the word
'complement' in this context. EPA does
not intend to imply that audit reports
must  be obtained by the Agency in order
to supplement regulatory inspections.
'Complement' u used in a broad sense
of being in  addition to inspections and
providing something (i.e. self-
assessment) which otherwise would be
lacking. To clarify this point EPA has
added the phrase "by providing self-
assessment to assure compliance" after
"environmental audits may complement
inspections" in this paragraph.
   The same commenter also expressed
concern that, as EPA sets inspection
priorities, a company having an audit
program could appear to be s 'poor
performer'  due to complete and accurst.
reporting when measured against a

-------
23006
Federal  Register / Vol.  51.  No. 131  / Wednesday. July 9.  1985 /  Notices
 company which reports something less
 than required by law. EPA agrees that it
 • tiportant to  communicate this fact to
    icy and state personnel and will do
 *.,. However, the Agency does not
 believe a change in the policy statement
 is necessary.
   A further comment suggested EPA
 should comrr.it  to lake auditing
 programs into account when assessing
 a!! enforcement actions. However, in
 order to maintain enforcement flexibility
 •jnder varied circumstances, the Agency
 cannot promise reduced enforcement
 responses to violations at all audited
 facilities when  oiher factors may be
 overriding. Therefore the policy
 statement continues to state that EPA
 rr.ny exercise its decretion to consider
 Auditing programs as evidence of honest
 ind genuine efforts to assure
 ^mpliance. which would then be taken
 ..-.:o account in  fashioning enforcement
 responses to violations.
  A final commentcr suggested the
 phrase "expeditiously correct
 rnvironmenial problems" not be used in
 the eifurcement context since it implied
 EPA would use  an entity's record of
i.or-pcting nonregulated matters when
•r. aluatir.g regulatory violations. EPA
did not intend for such an inference to
he made. F.PA intended the term
    ironmental problems" to refer to the
    rlying circumstances which
c: iiniually lead  up to the violations. To
i.l.infy this point. EPA is revising the
first two sentences of the paragraph to
•Ahir.h th:s comment refers by changing
">."••. :rormental  problems" to "violations
ar.J underlying  environmental
pr.-V.pTis" in the first sentence and to
 •-.deriving environmental problems" in
I rip second sentence.
  In j separate  development EPA is
pn:?arir!3 .in update of its January 1984
r'-idercl Fcc::'.:!:es Compliance Strategy.
-.\htch is -pferenced in section III. C. of
•he audi'.'.r.j policy. The Strategy should
re crr.pieted and available on request
:'.-m EPA's Office of Federal Activities
:.i:rr >l\s year.
  ??A "hanks dl! commenters for
.-"•r-i:n'-:p.s :o :he Novembers. 1985
- ulir.iV.or1.. Today's notice is being
 • -.ued to r.t'orm regulated entities and
"-c 2i:h!ic cf EPA's final policy toward
••••v.-r-rrer.tal auditing. This policy was
  ". t'lnced to help (a) encourage
.- :..!a!ed entities to institutionalize
 •••"wtive.audit practices as one means  of
 •".proving compliance and sound
 -.-. ironmental management, and (b)
. :de internal EPA actions directly
    
-------
                    Federal Register  /  Vol. 51. No.  131 / Wednesday. July 9. 1966  /  Notices
                                                                        2500-
performance of the facility lies with top
management, which therefore has a
strong incentive to use reasonable
means, such as environmental auditing.
to secure reliable information of facility
compliance status.
  EPA does not intend to dictate or
interfere with the environmental
management practices of private or
public organizations. Nor does EPA
intend to mandate auditing (though in
certain instances EPA may seek to
include provisions for environmental
auditing as part of settlement
agreements, as noted below). Because
environmental auditing systems have
been widely adopted on a voluntary-
basis in the past, and because audit
quality depends to a large degree  upon
genuine management commitment to the
program ana its objectives, auditing
should remain a voluntary activity.
III. EPA Policy on Specific
Environmental Auditing Issues
A. Agency Requests for Audit Reports
  EPA has broad statutory authority to
request relevant information on the
environmental compliance status  of
regulated entities. However. EPA
believes routine Agency requests  for
audit reports3 could inhibit auditing in
the long run. decreasing both the
quantity and quality of audits
conducted. Therefore, as a matter of
policy. EPA will not routinely request
environmental audit reports.
  EPA's authority to request an audit
report, or relevant portions thereof, will
be exercised on a case-by-case basis
where the Agency determines it is
needed  to accomplish a statutory
mission, or where the Government
deems it to be material to a criminal
investigation. EPA expects such
requests to be limited, most likely
focused on particular information needs
rather than the entire report, and usually
made where the information needed
cannot be obtained from monitoring.
reporting or other data otherwise
available to the Agency Examples
would likely include situations where:
audits are conducted under consent
decrees or other settlement agreements:
a company has placed its management
practices at issue by tailing ;hem as a
defense: or state of mind or intent are a
relevant element of inquiry, such as
during a criminal investigation. This list
  ' An "environmental audit repor" n i written
report wr.ich cand:dly and thorough!) prescnti
(:nd:nss from a review, conducted ai pan of an
environmental audit a> described in fiction II.A., of
facility environmental performance and practices.
An audit report la not a lubititute for compliance
monnonng reports or other reports or records  which
may be required by EPA or other regulatory
agenciei.
is illustrative rather than exhaustive.
since there doubtless will be other
situations, not subject to prediction, in
which audit reports rather than
information may be required.
  EPA acknowledges regulated entities'
need to self-evaluate environmental
performance with some measure of
privacy and encourages such activity.
However, audit reports may not shield
monitoring, compliance, or other
information that would otherwise be
reportable and/or accessible to EPA.
even if there is no explicit 'requirement
to generate that data.4 Thus, this polic;,
does not alter regulated entities' existing
or future obligations to monitor, record
or report information required  under
environmental statutes, regulations or
permits, or to allow EPA access to that
information. Nor does this policy alter
EPA's authority to request and receive
any  relevant information—including tha'
contained in audit reports—under
various environmental statutes (e.g..
Clean Water Act section 308. Clean Air
Act sections 114 and 208) or in other
administrative or judicial proceedings
  Regulated entities also should be
aware that certain audit findings may by
law  have to be reported to government
agencies. However, in addition to any
such requirements. EPA encourages
regulated entities to notify appropriate
State or Federal officials of findings
which suggest significant environmental
or public health risks, even when not
specifically required to do so.

B. EPA Response to Environmentcl
Auditing

1. General Policy

  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
environmental management practices.
Indeed, a credible enforcement program
provides a strong incentive for regulated
entities to audit.
  Regulatory agencies have an
obligation to assess source compliance
status independently and cannot
eliminate inspections for particular firms
or classes of firms. Although
environmental audits may complement
inspections by providing self-
assessment to assure compliance, they
are in no way  a substitute for regulatory
oversight. Moreover, certain statutes
(e.g.  RCRA! and Agency policies
establish minimum facility inspection
frequencies to which EPA will adhere
  However. EPA will continue to
address environmental problems on :<
priority basis and will consequent!.
inspect facilities with poor
environmental records  and practicr--
more frequently. Since  effective
environmental auditing helps
management identify and promp:
correct actual or potential probien:-
audited facilities' environment*!
performance should improve Thi..-
while EPA inspections  of se!f-ajdi f .
facilities will continue, to the e\u -.. :
compliance performance is cor.? ct ••
in setting inspection priorities, fa:.:.
with a  good compliance history rr. j\ : •
subject to fewer inspections
  In fashioning enforcement respon?*-
to violations. EPA policy is :o take in:.
account, on a case-by-case baas,  :hi-
honest and genuine effort? rf reiviicti
entities to avoid and promptly ccrrcr1
violations and underlying envircrmr:"
problems. When reoulated er.::t:e? !..-
reasonable precautions to avr:tj
noncompliance. expecr.ionsiy co"-. ••
underlying environment! problem?
discovered through audits or other
means, and implement  measures to
prevent their recurrence. EPA may .
exercise its discretion to consider such
actions as honest and at.-.ui.-.e efforts'
assure compliance. Sjch. considerate-
applies particularly when a recuiat^:
entity promptly reports violations c:
compliance data which c'.herv.-;se w---
not required to he recorded cr rep.-r'i :
to EPA.

2. Audit Provision? as Remedies :r.
Enforcement Actions

  EPA may propose environment.::
auditing provision? ;.-. consent decre-?
and in  other se'.'.Ierr.ent negotiations
where  auditing co.:d provide b re-r.-vc;.
for identified problems  and re-j-ce the
likelihood of similar problems recur::.-.:
in the future.4 Er.v-.ror.rr.ental audit-.rtj
provisions are most !.*e!y to  be
proposed in settlement  negotiations
where:
  • A  pattern of violations can be
attributed, at least  in part, to the
absence or poor funct.ontr.g of an
environmental management system: or
  • The type or nature  of violations
indicates a likelihood that similar
noncompliance problems may exist  'j:
occur elsewhere in the  fac;:.i\  or at
other facilities operated by the resj-lats-
entity.
  • See. for siamoie. 'Duties 10 Report or Duclose
Information on 'nt Environmental Aspects of
Business Act:vit». Environmental Law Institute
report to EPA. finai report. September 1965.
  * EPA is developing auii^cp for ^st *M Aaenc;
negotiators in structure inprcunaif er.viror.mer.-.
audit provisions for consent zecrtes and oir.er
settlement negotiations

-------
 250J8
Federal  Register /-Vol. 51. No.  131 /  Wednesday, July 9. 1986  /  Notices
   Through this consent decree approach
   '  other means. EPA may consider
     •-encourage effective auditing by
 K..     owned sewage treatment works
 II'G. ..a|. POTWs often have
 rorr.pliance problems related to
 •ipe.-H-.ion and maintenance procedures
 •A^'ch can be addressed effectively
 •r.vjii^h the use of environmental
 r;Li:-;r;2. Under its National Municipal
 I'-iLcx EPA already is requiring many
 POTU's ;o develop composite correction
 'j;.!ns to identify and correct compliance
 pro'nlrms.

 C. Environmental Auditing at Federal
 r-;c:,'i!;es
   EPA encourages all federal agencies
 -nb]ect to environmental laws and
 •°>nlatiop.s to institute environmental
  Citing systems to help ensure the
 • Jequacy of internal systems to achieve.
 -:.imtam and monitor compliance.
 F'..".v;ronmental auditing at  federal
 r.tuilities can  be an effective supplement
 to EPA and state inspections. Such
 federal facility environmental audit
 proi^rans should be structured to
 promptly identify environmental
 problems and expenditiously develop
•icrhedules for remedial action.
  To the extent feasible. EPA will
  ivide technical assistance to help
      1 agencies design and initiate
      .ograms. Where appropriate. EPA
 Aili enter into agreements  with other
 ij'rncies to clarify the respective  roles.
 •.•^pons'.biluies and commitments of
• •.i'-.h agency in conducting  and
 r->?ondir.i; to federal facility
'•••.\ ror.rr.ental audits.
  vV;;h rrspect to inspections of self-
•r:::;'.ed facilities (see section III.B.I
 i'we) and requests for audit reports
 .--'e section III.A above). EPA generally
 v.;'.! respond to environmental audits by
 > inral facilities in the same manner as
 :; Jo::s for other regulated entities, in
 V.**pir.-j with the spirit and intent of
 ~. \*cu:ive Order 12088 and tht EPA
 ."•".'ere/ Fcc:lU:es Camplianc* Strategy
 January1984. update forthcoming in
 Lite 1986). Federal agencies should.
 however, be aware that the Freedom of
 '..-.formation Act will govern any
 disclosure of audit reports  or audit-
 janerared information requested  from
 '"•• -J^ral asonr.ies by the public.
  '.Vhen federal agencies discover
 •^r.ificant violations through an
 -•nv.ronmental audit. EPA encourages
 •h-*m to subm:t the related  audit findings
 o.J remedial action plans  expeditiously
 :o ;he applicable EPA regional office
 X   'sponsibie state agencies, where
      .nate) even when not specifically
  quired to do so. EPA will review the
 audit findings and action plans and
 
-------
                    Federal Register / Vol.  51.  No. 131  / Wednesday. July 9. 1986 / Notices
                                                                         23009
  An effective environmental auditing
system will likely include the following
general elements:
  I. Explicit top management support for
environmental auditing and
commitment to follow-up on audit
findings. Management support may be
demonstrated by a written policy
articulating upper management support
for the auditing program,  and for
compliance with all pertinent
requirements, including corporate
policies and  permit requirements as well
as federal, state and local statutes and
regulations.
  Management support for the auditing
program also should be demonstrated
by an explicit written commitment to
follow-up on audit findings to correct
identified problems and prevent their
recurrence.
  II. An environmental auditing function
independent of audited activit:es. The
status or organizational locus of
environmental auditors should be
sufficient to ensure objective and
unobstructed inquiry, observation and
testing. Auditor objectivity should net
be impaired  by personal relationships.
financial or other conflicts of interest.
interference with free inquiry or
judgment, or fear of potential
retribution.
  III. Adequate team staffing and
auditor training. Environmental auditors
should possess or have ready access  to
the knowledge, skills, and discipline?
needed to accomplish audit objectives
Each individual auditor should comply
with the company's professional
standards of conduct. Auditors, whether
full-time or part-time, should maintain
their technical and analytical
competence  through continuing
education and training.
  IV. Explicit audit program obied:\'es.
scope, resources and frequency. At a
minimum, audit objectives should
include assessing compliance with
applicable environmental laws and
evaluating the adequacy of internal
compliance policin. procedures and
personnel training programs to ensure
continued compliance.
   Audits should be based on a process
•••'uiv.1. provides auditors: all corporate
policies, permits, and federal, state, and
local regulations pertinent to the facility:
and checklists or protocols addressing
specific features that should be
evaluated by auditors.
  Explicit written audit procedures
generally should be used for planning
audits, establishing audit scope.
examining and evaluating audit findings.
communicating audit results, and
following-up.
  V. A process which collects, analyzes.
interprets and documents information
sufficient to achieve audit objectives.
Information should be collected before
and during an onsite visit regarding
environmental compliance)/).
environmental management
effectiveness^), and other matters (J|
related to audit objectives and scope.
This information should be sufficient.
reliable, relevant and useful to provide a
sound basis for audit findings and
recommendations.
  a. Sufficient information is factual.
adequate and convincing so th?.t a
prudent, informed  person would be
likely to reach the  same conclusions as
the auditor.
  b. Reliable information is the best
attainable through use of appropriate
audit techniques.
  c. Relevcr.t information supports audit
findings and recommendations and is
consistent with the objectives for the
audit.
  d.  Useful information helps the
organization meet its goals.
  The audit process should include a
periodic review of the reliability ar.d
integrity of this information and the
means used to identify, measure.
classify and report it. Audit procedures.
including the testing and sampling
techniques employed, should be selec'.ec
in advance, to the  extent practical, and
expanded or altered if circumstances
warrant. The process of collecting.
analyzing, interpreting, and
documenting information should provide
reasonable assurance that audit
objectivity is maintained and audit goals
are met.
  VI. A process which includes specific
procedures to promptly prepare candid.
clear and appropriate written reports on
audit findings, corrective actions, and
schedules for implementation.
Procedures should be in place to ensure
that such information is communicated
to managers, including  facility  and
corporate management, who can
evaluate the information and ensure
correction of identified problems.
Procedures also should be in place for
determining what  internal findings are
reportable to state or federal agencies.
  VII. A process which includes qua:::v
assurance procedures to assure the
accuracy and thoroughness of
environmental audits. Quality assurance
may be accomplished through
supervision, independent internal
reviews,  external reviews, or a
combination of these approaches.

Footnotes to Appendix
  (71 A comprehensive assessment of
compliance with federal environments!
regulations requires an analysis of faciii(>
performance against numerous
environmental statutes and irv.piemcntinc
regulations. These statues mcl-cr
Resource Conservation and Recovery Ar
Federal Water Pollution Conirol Act
Clean Air Act
Hazardous Materials Transportation Ac;
Toxic Substances Coniro! Act
Comprehensive Environment.*! Res?ur.s<.
  Compensation and Lability Act
Safe Drinking Water A*.:
Federal Insecticide. Funcicice and
  Rodenncide Act
Marine Protection. Research .mil Suncsunr.i--
  Act
I'ramum Mill Tailings RaJ jl:iv: Conir. '. A. •
  In addition, state ar.ci loc^l anvcrr.mi--.- .!.••
likely to hive their own environment;  ;uu-
Many states have been dtlrtaitu Ou:nrr:--.
administer federal programs  Mar. inrV
governments' building, fire s
codes also have environmental rpq-j.rfr.r-- •
relevant to an audit eval.ut;cr
  (2) An environmental auri.: cciuld ai> -.\.
beyond the type of ccmpiunce asses = -:i -•
normally conducted dur.r.g rejuU:"\
inspections, for example, by evai.a' -.•:
policies and pracfces rpgard',i-j; .:' «:.»••-
t^ey are part of tne en\;:cr.rr.eir.... v> «•(•—   •
tne  operating and na:ntt-nar-.:.<> pi-jrei:.  •:••
Specifically, audits car, evaluate t.-.r f\>.-- •
\\hir.h systems or proced-rrs:
  1. Develop organization*' er.\ i.-unmtn•.-.'.
policies which: a. implement rp'ju'.o'.or;.
requirements: b. provide tr.ar.jser.rr.i
guidance for environmental hu.*.;:-< -• i
specifically addressed  in rec-'.^1 •• ?
  2. Train and motivate fac'.!::> re-«r;.  .-' ••
work in an envtronmentaliy-oCC!-p:.:':>;i
manner and to understand ani .::-.?.•-  « •-
government regulations and the  PT:  ••. <•
environmental policy:
  3. Communicate relevant crv.  •?----.
developments expeciiiuusK to '..-.	 -.-..
other personnel:
  4  Communicate effectives  A  •-
government and the public reg*:~.-. ;••.-  .-
environmental incidents:
  5. Require third parties wr>r>:r; •"•'• w •-
on behalf of the organization to .', .• *• .'?
environmental procedures.

-------
25(nO	Federal Register /  Vol.  51. No. 131 /  Wednesday,  [uly 9.  1986  / Notices
  ». Make proficient personnel available «(
    me» to carry out environmental'
       illy emergency) procedures):
        irporate environmental protection
 -.i>j   .men operating procedure* .
  4. Apply besi management practice* and
 •Pfrati-.g procedures. including "good
  ••isrkeepma,"  lechmques:
  •' Institute p:e\er.!ive and corrective
 • •• v-.Tunr.H systems  (o minimize actual and
 ••' •••:i;:l envirnnmentdi harm:
  :n '.'niize best dvaiiable process and
  i-.V'i! ter.hnolosies:
  ' '.  C'5i! most-effective «dr-.pi:ng and
 •.::•.•:• rrvj techniques, lest methodi.
   .-^kt-^ping systems or reporting protocols
  • •• -"rf "•.mimum lesnl requircmerts):
  '.1  Ev.ii-i lie causes  behind any serious
 ,-\ ir::irrrr.t
-------
                                                     Attach-ent 3

                                                 Revised 10/17/86

                    A REPRESENTATIVE SAMPLE OF

       ENVIRONMENTAL AUDITING SETTLEMENTS ACHIEVED TO DATE*

REGION II:

Crompton and Knowles Corporation, Consent Agreement and Final
Order (CAFO), II TSCA-PCB-82-0108, 1/28/86.  Compliance audit
of 28 facilities, covering TSCA PCB requirements, with certifica-
tion of compliance.  EPA attorney:  Randye Stein, FTS 264-8157.

REGION V:

BASF Wyandotte Corporation, CAFO, TSCA-V-C-410, 4/25/86.
In settlement of a premanufacture notification action under TSCA,
BASF agreed to conduct an audit (actually called a "review") of
all chemicals subject to TSCA §5 inventory requirements that
are produced, imported or used by 13 BASF facilities.  BASF also
agreed to certify that (1) all chemicals manufactured by or
imported/purchased from its parent or an affiliate company are
listed on the TSCA Chemical Substances Inventory? and (2) to the
best of its knowledge, all chemicals purchased from unrelated
parties are listed on the TSCA inventory.  EPA attorney:  Art
Smith, FTS 886-4253.

Chemical Waste Management, Inc. (Vickery, Ohio facility), CAFO,
TSCA-V-C-307, RCRA-V-85R-019, 4/5/85.  Management audit covering
all RCRA and TSCA requirements.  Audit also addresses personnel
training, spill response, operations and maintenance, interim
stabilization, and quality control and assurance.  EPA attorneys:
Rodger Field, FTS 886-6726; Michael Walker, FTS 475-8697.

Detroit Metropolitan (Wayne County Airport), CAFO, TSCA-V-C-468,
7/30/86.PCB compliance audit of all facilities with certification
of compliance and submission of inventory of each facility which
specifies general location and quantity of all PCBs and PCB items
subject to the requirements of 40 CFR Part 761.  EPA attorney:
Dorothy Attermayer, FTS 886-6776.

Michigan Department of Mental Health, CAFO, TSCA-V-C-231, 1/4/85.
PCB compliance audit of all facilities, with certification of
compliance.  EPA attorney:  Michael Walker, FTS 475-8697.

Michigan Department of Corrections, CAFO, TSCA-V-C-187,  10/9/83.
PCB compliance audit of all facilities, with certification of
compliance.  EPA attorney:  Michael Walker, FTS 475-8697.

Owens-Corning Fiberglas Corporation, CAFO, TSCA-V-C-101, 6/8/84.
PCB compliance audit of 63 facilities, with certification of
compliance.  EPA attorney:  Michael Walker, FTS 475-3697.

* Note:  Some of the settlements identified herein may not fall
  within the strict definition of "environmental auditing" but
  contain requirements sufficiently similar to auditing to
  warrant their inclusion.

-------
                               -2-

Potlatch Corporation, CAFO, TSCA-V-C-137, 8/31/83.  PCB compliance
audit of all facilities, with certification of compliance.  EPA
attorney:  David Sims, FTS 353-2094.

Ren Plastics, an operating unit of Ciba-Geigy Corp. (E. Lansing,
Michigan), CAFO, TSCA-V-C-411, 2/12/86.  CAFO requires review of
the chemicals manufactured by Ciba-Geigy plants with certification
that all chemicals are on the TSCA inventory.  Respondent also
agreed to conduct an environmental seminar for plant personnel
with a section on TSCA compliance; respondent intends to continue
refining its employee training program.  EPA attorney:  Dorothy
Attermeyer, FTS 886-6776.

REGION VI:

USA v. Georgia-Pacific Corporation, Nos. 84-457-B and 85-136-B
(D.LA.,  entered 2/6/86).Clean Air Act Consent Decree requires
implementation of compliance plan produced by presettlement
audit, covering CAA National Emissions Standard for vinyl chloride.
EPA attorney:  Elliott Gilberg,  FTS 382-2864.

REGION IX:

Chemical Waste Management,  Inc.  (Kettleman Hills, California
facility), CAFO, RCRA-0984-0037,  TSCA-09-84-0009, 11/7/85.
Management audit covering all RCRA and TSCA requirements.   Audit
also addresses personnel training, spill response, operations and
maintenance,  interim stabilization, and quality control and
assurance.  EPA attorneys:   Bill Wick, FTS 454-8039; Keith Onsdorff,
FTS 382-3072.

REGION X:

Allstate Insurance Company, CAFO,  X83-09-09-2614, 5/25/84.   PCB
audit of 140 buildings nationwide, formulation of PCB inspection
plan and guidelines to be distributed to facility managers,  and
follow-up training conferences and review of program implementation.
EPA attorneyi  Ted Rogowski,  FTS 399-1185.

Bonneville Power Administration,  Memorandum of Agreement with
EPA,2/20/85.MOA provides for:   (1) training of personnel
conducting TSCA inspections,  CERCLA preliminary assessments, and
sit*» investigations; (2) conduct of environmental audits covering
TSCA PCB requirements; (3)  testing and evaluation of facilities
to determine status of compliance with TSCA and to assess threatened
or actual release of "hazardous substances" as defined by CERCLA;
and (4)  remedial actions to be taken based upon risk assessment
that utilizes criteria and information in the National Contingency
Plan.  EPA attorney:  Ted Rogowski, FTS 399-1185.

-------
                               -3-

Chem Security Systems, Inc. (Arlington, OR), CAFOs, TSCA 1085-
07-42-2615P, 12/26/85; and RCRA 1085-06-08-3008P, 12/2/85.
Four compliance audits (performed quarterly over a one-year period),
covering all RCRA requirements and PCB requirements under TSCA.
EPA attorney:  Barbara Lither, FTS 399-1222.

Crown Zellerbach Corporation, CAFO, X83-06-08-2614, 11/30/83.
Settlement provides for refinement of existing corporate-wide
compliance program for TSCA PCB requirements, including certification
of compliance.  EPA attorney:  Ted Rogowski, FTS 399-1185.

Roseburg Lumber Company, CAFO, X83-05-02-2614, 1/10/85.  Settlement
provides for development of a training program and manual describing
PCB compliance requirements and procedures; and a program to bring
12 facilities into full compliance with TSCA PCB requirements
within one year of settlement.  EPA attorney:  Ted Rogowski,
FTS 399-1185.   *

Washington State University, CAFO, X83-05-02-2614, 5/30/84.
Settlement provides for development of guidance manual for employees
regarding proper handling of PCBs, followed by training sessions
to ensure employees' familiarity with PCB compliance procedures.
EPA attorney:  Ted Rogowski, FTS 399-1185.

HEADQUARTERS:

American Petrofina Company of Texas, Nos. 1217 and 1293, 9/5/85.
Consolidated Clean Air Act Settlement Agreement requires institu-
tion of annual visitation program by Respondent to verify the
existence of proper unleaded gasoline handling procedures at all
branded gasoline retail outlets.  EPA attorneys:  Rich Kozlowski,
FTS 382-2633; Rich Ackerman, FTS 382-4410.

Ashland Oil, Inc. (Catlettsburg, KY refinery), No. 	
(E.D. Kentucky, entered 	).  Clean Water Act consent
decree requires the performance of a "Wastewater Treatment System
Engineering Study" by an independent party and the implementation
of those recommendations agreed upon by the parties.  Settlement
also mandate* the commencement of a "Best Management Practices
Study" in order to minimize potential significant releases;
includes the development of a toxicity testing and control plan
and establishes a stipulated penalty schedule for daily and
monthly violations of effluent limits contained in Defendant's
NPDES permit.  EPA attorney:  Joseph Moran, FTS 475-8185.

BASF Systems Corporation, CAFO, TSCA-85-H-04, 5/28/86.
Environmental management audit and development of procedures for
handling chemical substances imported from BASF's German parent
corporation.  BASF will pay a stipulated penalty of $10,000 per
"safe" chemical not listed on the TSCA Chemical Inventory.  EPA
will apply the TSCA PMN penalty policy to violations for unregis-
tered "bad" chemicals discovered in the "review" process.  EPA
attorney:  Michael Walker, FTS 475-8697.

-------
                                -4-

Chapman Chem. Co., et al., FIFRA 529, et a^., Filed  9/30/85.
The industry parties to the settlement agreement agreed  to  imple-
ment and participate in a voluntary Consumer Awareness Program
to provide users of treated wood products with use,  handling,
and precautionary information.  The focus of the program is a
Consumer Information Sheet which contains language approved by
the Agency.  Industry agreed to conduct an audit of  the program
within a year after settlement and to submit the results of
the audit to EPA within 30 days of its completion.   EPA attorney:
Cara Jablon, FTS 382-2940.

Chemical Waste Management, Inc. (Emelle, Alabama facility), CAFO,
TSCA-84-H-03, 12/19/84.Management audit covering all RCRA and
TSCA requirements.  Audit also addresses personnel training,
spill response, operations and maintenance,  interim stabilization,
and quality control and assurance.  EPA attorneys:  Keith Onsdorff,
FTS 382-3072; Alex Varela, FTS 475-8690; Arthur Ray,  FTS 382-3050.
                                                     *
Conoco Inc. and Kayo Oil Company,  CAA (21D-449,  520, 596,  709,
and 710,8/31/83,Settlement Agreement requires  (or confirms):
(1) revision of Conoco's Jobber Franchise Agreement  to include
provision for unleaded gasoline sampling on a quarterly basis at
each Conoco Jobber retail outlet;  (2) all drivers of Conoco
company cars to certify that no tampering has occurred which
would allow the introduction of leaded gasoline into a vehicle
requiring unleaded gasoline; (3) posting of public information
notices designed to inform Kayo customers of problems related to
fuel switching; and (4) training to inform Kayo employees of
EPA unleaded fuels regulations.  EPA attorneys:   Rich Kozlowski,
FTS 382-2633; Rich Ackerman, FTS 382-4410.

Department of Defense,  Federal Facility Compliance Agreement,
12/30/83.Agreement covers all DoD facilities where PCBs are
stored for disposal; establishes compliance plan designed to
achieve and maintain compliance with all applicable PCB storage
and disposal requirements.  EPA attorney:  Deeohn Ferris,
FTS 475-8690.

Diamond Shamrock Corporation,  CAFO,  TSCA-85-H-03, 7/15/85.
Compliance audit of 43 facilities, covering all TSCA requirements.
EPA attorneys:  Deeohn Ferris, FTS 475-8690; Bob Pittman, FTS
475-8690.

General Electric Co. (Waterford, NY facility), No. 84-CV-681
(N.D.N.Y.,entered	).  Clean Water Act consent decree
requires the implementation of an engineering study  to insure
compliance with Defendant's N/SPDES permit.   Settlement also
requires monthly progress reports to be submitted to EPA with
provisions for stipulated civil penalties for discharge violations.
EPA attorney:  Joseph Moran, FTS 475-8185.

-------
                               -5-

Mac Oil Company d/b/a Circle Oil, No. FOSD-1908, 5/21/85.  Clean
Air Act Settlement Agreement requires:  (1) institution of an
unleaded gasoline sampling and testing program at all facilities
receiving unleaded gasoline from Respondent; (2) inspections of
the gasoline pumps at all facilities to which Respondent delivers
gasoline to determine compliance with nozzle, label and warning
sign requirements; and (3) maintenance of a company unleaded
gasoline policy that informs all employees, agents and common
carriers of gasoline handling and compartment labeling procedures.
EPA attorney:  Dean Uhler, FTS 382-2947.

National Convenience Stores, Inc. d/b/a Stop 'n Go, Nos.  FOSD-1140
and FOSD-1404,8/16/84.Consolidated Settlement Agreement requires:
(1) institution of a program for compliance with EPA unleaded fuels
regulations at all retail gasoline outlets that Respondent operates
under any name, including periodic verification that nozzle require-
ments are met; and (2) submission to EPA of a Certificate of Compliance.
EPA attorney:  Rich Kozlowski, FTS 382-2633.

Phillips Petroleum Company, Consolidated Clean Air Act Settlement
Agreement,3/11/85.Settlement requires Phillips to:  (1) estab-
lish, implement and maintain a program for unleaded gasoline
quality assurance among its branded marketers and retailers;
(2) conduct a threephase program of sampling unleaded gasoline at
all branded retail outlets in the United States; (3) conduct annual
inspections of ten percent of its branded retail outlets in the
United States for compliance with EPA unleaded gasoline regula-
tions; (4) at the time of contract renewal, review with its
marketers and retailers their contractual obligations pertaining
to the sale, handling, and distribution of unleaded gasoline; and
(5) conduct a review of its Unleaded Gasoline Quality Assurance
Program after the first year of operation and submit a written
report to EPA assessing the program's effectiveness in improving
the quality of unleaded gasoline and reducing the potential or
actual number of violations of the regulatory limits for lead.
EPA attorney: Rich Kozlowski, FTS 382-2633.

R.I. Marketing, Inc., No. FOSD-1611, 10/5/84.  Clean Air Act
Settlement Agreement requires institution of a fuel switching
preventative action program, at each of approximately 200 retail
outlets,  designed to prevent leaded gasoline from being introduced
into vehicles requiring unleaded fuel.  EPA attorney:  Rich
Kozlowski, FTS 382-2633.

Savoca's Service Center, Inc., No. FOSD-2101, 10/17/85. Clean Air
Act Settlement Agreement requires institution of a fuel switching
preventative action program, at all retail outlets, designed to
prevent leaded gasoline from being introduced into vehicles
requiring unleaded fuel.  EPA attorney:  Rich Kozlowski,  FTS
382-2633.

-------
                               -6-

Union Carbide Corporation, CAFO, TSCA-85-H-06, 2/26/86.  Settlement
provides for development of a training program emphasizing ore-
manufacture notification requirements under TSCA, followed by
a test program to monitor responses for compliance with TSCA.
EPA attorney:  Alex Varela, FTS 475-8690.

United American Fuels, Inc., No. FOSD-1578, 12/18/84.  Clean Air
Act Settlement Agreement requires implementation of a fuel additive
quality control and testing program.  EPA attorney:  Rich Kozlowski,
FTS 382-2633.

USA v. Parma, Ohio, No. C-85-208, (N.D. Ohio, February 28,  1985).
Clean Air Act Consent.Judgment requires Defendant to:  (1)  replace
catalytic converters that had been removed illegally; (2) inspect
(periodically for two years) all city vehicles for tampering with
emission controls; (3) tune-up and test (periodically for two
years) all city vehicles for emissions; (4) report all tampering
found to EPA and take appropriate remedial measures;  (5)  train
mechanics in compliance with EPA standards; (6)  distribute  pamph-
lets discussing tampering and fuel switching to all households in
Parma, Ohio; and (7) display for one year posters cautioning
against tampering and fuel switching.   EPA attorney:   Debra
Rosenberg,  FTS 382-2649.

USA v. State of Maine, No. 84-C152-B (D. Maine,  November 19,  1985).
Clean Air Act Consent Decree requires  State to (1) inspect  all
Maine Forest Service vehicles for tampering with emission control
devices,  and correct deficiencies; (2)  inspect each gasoline
fueling facility owned or operated by the Maine Department  of
Conservation for compliance with label, notice and nozzle size
requirements, and correct deficiencies; (3) publicize to Maine
Forest Service personnel and the public the importance of comply-
ing with mobile source requirements; and (4) implement fully the
catalytic converter and inlet restrictor inspection program
mandated by State law, and audit at least 90 percent of licensed
inspection facilities to verify compliance.  EPA attorney:
Richard Friedman, FTS 382-2940.

Note:  The settlements identified herein relating to mobile source
enforcement under the Clean Air Act are representative of approxi-
mately 200 such settlements that have been achieved to date.

-------
     A Note Concerning Application of the Model Provisions

     Attachments C-G represent model provisions for the
incorporation of environmental auditing requirements within
enforcement settlements.  These models are based upon medium-
specific settlements and necessarily reflect the circumstances
surrounding those settlements.  Accordingly, Agency negotiators
should not hesitate to alter them as necessary to meet the
needs of a particular case.  An attempt has been made to
fashion the models in such a manner that they can be used
in any enforcement settlement; however, some language has
been retained which applies to only one or two EPA programs.
Even where specific language is found to be inapposite, the
general headings under which such language is found should
provide helpful guidance to Agency personnel in identifying
the categories of issues which a particular type of auditing
settlement should address.

-------
                                                   Attachment C


   MODEL ENVIRONMENTAL COMPLIANCE AUDIT PROVISION FOR CONSENT
                     DECREES OR AGREEMENTS
  A.I.  Defendant/Respondent shall, within sixty days after
the effective date of this Decree/Agreement [and where a contin-
uing audit requirement is appropriate, add:  and not less often
than annually thereafter for a five-year period], audit the
status of [applicable statutory] compliance at the [site of
facility(ies)] and take prompt remedial action against all
violations found.

  A.2.  Defendant/Respondent .shall, within sixty days after
completion of the compliance audit required by paragraph 1,
submit to EPA's [name of EPA office overseeing compliance with
Decree/Agreement] a certification that, to the best of its
knowledge, Defendant/Respondent is in compliance with all
[applicable statutory and regulatory] requirements or has
developed a schedule for achieving compliance subject to EPA
approval.

  A.3.  Nothing in this Decree/Agreement shall preclude EPA
from instituting enforcement actions against Defendant/Respon-
dent for any violations of [applicable statutory and regulatory]
requirements which are not cited within the Complaint giving
rise to this Decree/Agreement.

-------
                                                   Attachment D
   MODEL ENVIRONMENTAL MANAGEMENT AUDIT PROVISION FOR CONSENT
                     DECREES OR AGREEMENTS

  B.I.   Defendant/Respondent shall propose to EPA's  [name of
EPA office overseeing compliance with Decree/Agreement] by
written submittal to [name of Agency contact] within thirty  (30)
days of the effective date of this Decree/Agreement, the scope
of work for the services of a [third party or internal] auditor
who shall be expert in environmental auditing, environmental
management systems and [applicable statutory program(s)] management
operations.  Such auditor shall be independent of and in no way
responsible to production management.  This scope of work and
auditor shall be agreed upon by EPA and Defendant/Respondent in
writing, prior to the auditor's commencing the performance of
the professional services more fully set forth below.  The
auditor will be retained and the scope of work will be designed
to review and make recommendations regarding the improvement of
Defendant's/Respondent's environmental compliance and management
policies, practices, and systems at the [site of facility(ies)]
and in the Defendant's/Respondent's corporate offices having
responsibility Cor supervision of compliance activities at such
facility(ies).

     2.   Within one hundred twenty (120) days after agreement
upon the scope of work and the auditor, the auditor shall
submit a written Environmental Audit Report to the Defendant/
Respondent.  This Report shall:

          a.  Identify and describe the existing facility
environmental management operations and the corporate offices
responsible for overall company-wide environmental compliance
and management syst-ems, policies and prevailing practices as
they affect [applicable statutory and regulatory] compliance
at the [site of facility(ies)].

          b.  Evaluate such operations and systems, practices
and policies and identify and describe fully the perceived
weaknesses in such operations and systems, practices and policies
by comparing them, to the extent practicable, to:

               i.  their ability to promote compliance with
[applicable statutory and regulatory] requirements;

              ii.  the existing practices, programs and policies
of other [applicable industry] corporations operating within
the continental United States, including consideration of the
available literature and consultant's experience pertinent to
regulatory compliance programs, practices and policies currently
operative in the [applicable industry]  in the continental
United States;

             iii.  the history of [facility]  operations in terms
of the facility's(ies') compliance programs,  compliance record

-------
                            -2-

 and  environmental management  practices  over  the  previous  five
 years  [or  longer if  necessary or  relevant].

         The  auditor  shall  apply its  expertise  and  judgment
 to the  foregoing information, using  such  factors as  the auditor
 believes to  be  relevant and appropriate,  which factors shall
 be stated  in the report.

           c.  Based  on the evaluation required in  paragraphs
 2.a. and b.  above, the auditor shall identify and  describe
 fully with supporting rationales  the perceived areas, if any,
 where Defendant's/Respondent's environmental management systems,
 practices  and policies may be improved as they affect the
 [facility(ies)] regarding  [applicable statutory]  compliance
 obligations, listing specific options for any improvements at
 the  [facility{ies)]   in the following areas:

                i.  environmental  compliance program management
 operation, staffing, education and experience reguirements.

              ii.  compliance management budget,  lines of authority
 to Defendant's/Respondent's corporate offices responsible for
 overall company-wide environmental compliance and management
 systems, policies,  and practices,  and relationship to the
 operating  facility(ies)  manager.

             iii.  personnel  training for individual employee
compliance obligations and [applicable medium-specific
 activities].

              iv.  Operations and  Maintenance (O&M) procedures for
 [applicable medium-specific pollution control]  equipment.

               v.  evaluation of  [applicable industry] operations
and pollution control equipment in terms of adequacy of
design and compatibility with [applicable medium-specific
substances] being passed through such equipment.

              vi.  quality and thoroughness of implementation of
 all waste and wastewater [or other pollutant source]  analysis
 plans for both  incoming and outgoing waste [or other pollutant]
 streams, whether directly discharged, emitted, released to the
 ambient environment, or conveyed off-site in bulk shipments.

             vii.  preparation of  Quality Assurance and
 Quality Control programs for  sampling and analysis and
 for environmental testing procedures, including [facility(ies)]
 laboratories and contract laboratories for [facility(ies)].

            viii.  preparation of  records needed  to provide the
 [facility(ies)] management with an adequate data  base to accurately
 determine  compliance with all applicable statutory and regulatory
 requirements, with particular attention to waste  (or other

-------
                            -3-

pollutant] generation (including quantity and chemical composi-
tion), movements, treatment, and ultimate disposition by location
of waste  [or other pollutant] source, handling points and final
disposition.  This evaluation shall encompass proposals for
state-of-the-art data management systems providing timely
access to all of the above records to be maintained by an
onsite computer.

              ix.  preparation of self-monitoring reports required
to be filed with the State and EPA.

               x.  preparation and review of Incident Reports
evaluating causes of [applicable medium-specific pollution
control] equipment malfunctions, improper [applicable medium-
specific substances] handling, or breakdowns, with specific
recommendations for corrective steps and preventive O&M, along
with procedures for reporting these recommendations to corporate
headquarters.

     3.  Within 30 days after Defendant's/Respondent's receipt
of the Audit Report, Defendant/Respondent shall submit to EPA
that portion of the Audit Report which contains the recommenda-
tions of the auditor, together with a report of Defendant's/
Respondent's good faith evaluation of each option it has selected
for adoption and the reasons for rejecting other options.  The
report by Defendant/Respondent shall set forth the specific
actions the company shall take and a schedule, not to exceed
sixty (60) days [or longer if necessary] from the date that EPA
receives and evaluates the schedule, for implementation of the
recommendations adopted by Defendant/Respondent.

     4.  Any failure by Defendant/Respondent to meet the schedule
for implementing the audit program set forth in this Decree/
Agreement shall result in stipulated penalties of [$	)  (in
addition to whatever sanctions the court/ALJ may impose for
contempt), payable by Defendant/Respondent to the U.S. Treasury,
for each day such schedule is not met.

  B.  Nothing in this Decree/Agreement shall preclude EPA from
instituting enforcement actions against Defendant/Respondent
for any violations of [applicable statutory and regulatory]
requirements which are not cited within the Complaint giving
rise to this Decree/Agreement.

-------
                                                    Attachment  E
 MODEL ENVIRONMENTAL COMPLIANCE AND MANAGEMENT AUDIT PROVISION
               FOR CONSENT DECREES AND AGREEMENTS


  C.I.  Defendant/Respondent shall conduct environmental
audits of its  facility(ies) [of appropriate frequency and
duration] in accordance with the Audit Workplan attached hereto
as Exhibit B [company specific; not included].  The first such
audit shall commence on or about three months from the effective
date of this Decree/Agreement.  Each of the audits shall be
completed in accordance with the schedule set forth in the
Audit Workplan.

    2.  The performance standard of each such audit is to
complete a detailed and professional investigation as set forth
in the Audit Workplan of the facility's recordkeeping practices
and environmental management operations during the [applicable
period].  In accordance with the Audit Workplan,  the following
audit reports  shall be prepared and submitted, with copies of
supporting documentation, to EPA within thirty days following
the initiation of each such audit:

        a.  A  report on all [pollutants] whose locations (as
reported in the facility records) differ from their observed
physical location or whose physical locations cannot be corrob-
orated by existing records kept at the facility.

        b.  A  report of all quantity variations (of 10% or more
by volume or weight, or any variation in piece count) between
[pollutants] received and [pollutants] disposed of at the
facility.

        c.  A  report on Defendant's/Respondent's activities at
the facility in terms of whether or not they comply with the
procedures required under the [Pollutant] Analysis Plan for
[pollutant] acceptance.  Defendant/Respondent shall include
with this report the results of a minimum of three laboratory
(including Defendant's/Respondent's laboratory) analyses of
blind standards (i.e., pre-analyzed samples whose concentrations
are unknown to the laboratories participating in the audit) to
be provided by the audit team to evaluate Defendant's/Respondent's
ability to quantify representative hazardous constituents in
various media.

        d.  A  report of any observed deviations from Defendant's/
Respondent's written operating procedures, including documentation
on any untimely response to the repair and/or replacement of
deteriorating  or malfunctioning [pollutant] containers, structures,
or equipment.

-------
                              -2-

        e.  Recommendations as to potential significant improve-
ments and/or modifications which should be made to Defendant's/
Respondent's operating procedures to achieve compliance with
(applicable statutory and regulatory] requirements.

    3.  Nothing in this Decree/Agreement shall preclude EPA
from instituting enforcement actions against Defendant/Respondent
for any violations of [applicable statutory and regulatory]
requirements which are not cited within the Complaint giving
rise to this Decree/Agreement.

-------
                                                       Attachment ?


     MODEL ENVIRONMENTAL COMPLIANCE AND MANAGEMENT AUDIT PROVISION
                  FOR CONSENT DECREES AND AGREEMENTS*

                          TABLE OF CONTENTS

                                                       Page
  I.   PRELIMINARY STATEMENT

            Purposes of Consent Decree/Agreement	   1

 II.   DEFINITIONS	   1

III.   GENERAL AUDIT PROCEDURES

            Preliminary Matters

                 Scope of Work	   6

                 Establishment of Trust	   6

                 Selection of Audit Firm	   7

            Audit Seminar	   7

            Observation of EPA Protocols	   7

            Review of Work Plan	   7

            Facilities to be Audited	   8

 IV.    FACILITY COMPLIANCE AUDITS

            Records  to be Examined	   9

                 Records Relevant to Compliance
                  with RCRA	   9

                 Records Relevant to Compliance
                  with TSCA	   9

                 Records to be Examined by the
                  Audit Firm	   9

            Access to Documents	   10
    *  This  provision is  only  appropriate  for  a  party with  an  exten-
      sive  history of noncompliance.   It  requires  a high level  of
      Agency oversight.   As an internally developed document  that
      has not been subjected  to the  negotiation process, the  provi-
      sion  is more susceptible than  other model provisions to the
      give  and take of negotiation.   While the  provision only
      addresses requirements  under RCRA and TSCA,  audit provisions
      under other statutes may be  crafted by  using as  a framework
      the headings contained  in this provision.

-------
                     TABLE  OF  CONTENTS  (Continued)


                                                        Page

             Tentative  Observance  of  CBI  Claims	   11

             Preservation of Records	   11

             Examination  of Groundwater Monitoring
               Information	   11

             Audit Schedule/Agency Access to
               Defendant' s  Facilities	   11


             Facility Audit Reports	   11

             Correction of  Violations/Submission  of
               Compliance Plans	   12

   V.    PENALTIES AND CORRECTIVE ACTION

             For Missed Audit  Deadlines	   12

             For Violations of RCRA/TSCA

                  Payment of Penalties	   12

                  Unlisted  Violations	   13

                  Uncorrected  or New
                    Violations	   13

  VI.    RESERVATION OF  RIGHTS

             Reservation  of States' and Local Govern-
               ments' Right to Inspect	13
             Reservation of Agency's  Right
               to Relief	   14

 VII.    MANAGEMENT SYSTEMS AUDIT

           •  Corporate Management Systems  Report	   14

             Corporate Management Report and  Plan	   14

/III.    MISCELLANEOUS TERMS

             Submission of Reports	   14

             Effective Date of Decree/Agreement	   15

                                    ii

-------
                   TABLE OF CONTENTS  (Continued)

                                                     Page

          Notice	   15

          Modification	   15

          Dispute Resolution	   15

          Continuing Jurisdiction of  the District
            Court/Administrative Law  Judge	   15


          Relation to RCRA Permitting Process	   15

          Violations Not Covered by RCRA or TSCA....   16

          Continuing Audit Requirement	   16


DEFENDANT'S/RESPONDENT'S FACILITIES	  Appendix 1

PENALTY SCHEDULE	  Appendix 2

CORPORATE MANAGEMENT SYSTEMS REPORT
PROTOCOL	 	  Appendix 3
                                111

-------
                                                       Attachment ?


     MODEL ENVIRONMENTAL COMPLIANCE AND MANAGEMENT AUDIT- PROVISION
                  FOR CONSENT DECREES AND AGREEMENTS*

                          TABLE OF CONTENTS

                                                       Paqe
  I.    PRELIMINARY STATEMENT

            Purposes of Consent Decree/Agreement	   1

 II.    DEFINITIONS	   1

III.    GENERAL AUDIT PROCEDURES

            Preliminary Matters

                 Scope of Work	   6

                 Establishment of Trust	   6

                 Selection of Audit Firm	   7

            Audit Seminar	   7

            Observation of EPA Protocols	   7

            Review of Work Plan	   7

            Facilities to be Audited	   8

 IV.    FACILITY COMPLIANCE AUDITS

            Records to be Examined	   9

                 Records Relevant to Compliance
                   with RCRA	   9

                 Records Relevant to Compliance
                   with TSCA	   9

                 Records to be Examined by the
                   Audit Firm	   9

            Access to Documents	  10
    * This provision is only appropriate for a party with an exten-
      sive history of noncompliance.   It requires  a high level of
      Agency oversight.  Based on a draft settlement document, the
      provision reflects a pro-Agency bias and thus is  more suscep-
      tible than other model provisions to the give and take of
      the negotiation process.  While the provision only addresses
      requirements under RCRA and TSCA, audit provisions under
      other statutes may be crafted by using as a  framework the
      headings contained in this provision.

-------
                    TABLE OF CONTENTS (Continued)


                                                       Page

            Public Access to Records	  10

            Assertion of Confidential Business
              Information Claims	  10

            Tentative Observance of CBI Claims	  11

            Preservation of Records	  11

            Examination of Groundwater Monitoring
              Information	  11

            Audit Schedule/Agency Access to
              Defendant's Facilities	  11

            Facility Audit Reports	  11

            Correction of Violations/Submission of
              Compliance Plans	  12

  V.   PENALTIES AND CORRECTIVE ACTION

            For Missed Audit Deadlines	  12

            For Violations of RCRA/TSCA

                 Payment of Penalties	  12

                 Unlisted Violations	  13

                 Uncorrected or New
                   Violations	  13

 VI.   RESERVATION OF RIGHTS

           'Reservation of States' and Local Govern-
              ments ' Right to Inspect	13

            Reservation of Agency's Right
              to Relief	  14

VII.   MANAGEMENT SYSTEMS AUDIT

            Corporate Management Systems Report	  14

            Corporate Management Report and Plan	  14
                                   ii

-------
                      TABLE OF CONTENTS (Continued)

                                                        Page
VIII.   MISCELLANEOUS TERMS

             Submission of Reports	  14

             Effective Date of Decree/Agreement	  15

             Notice	  15

             Modification	.	  15

             Dispute Resolution	  15

             Continuing Jurisdiction of the District
               Court/Administrative Law Judge	  15

             Relation to RCRA Permitting Process	  15

             Violations Not Covered by RCRA or TSCA....  16

             Continuing Audit Requirement	  16


   DEFENDANT ' S/RESPONDENT ' S FACILITIES	  Appendix 1

   PENALTY SCHEDULE	  Appendix 2

   CORPORATE MANAGEMENT SYSTEMS REPORT
   PROTOCOL	  Appendix 3
                                   111

-------
     1.  Purposes of Consent Decree/Agreement.  In order to
achieve th« mutual goal of ensuring full compliance with applicable
environmental laws, regulations, and permits by Defendant's/
Respondent's active facilities in an efficient and coordinated
manner, Defendant/Respondent and EPA hereby enter into a Consent
Decree/Agreement under which:

         (1) independent auditors to be retained by EPA and
         paid for by Defendant/Respondent shall, subject to EPA
         oversight, audit each facility and report to both
         parties on their assessment of Defendant's/Respondent's
         compliance with RCRA and TSCA and their implementing
         permits, rules and regulations;

         (2) the independent auditors shall perform an analysis
         of Defendant's/Respondent's environmental management
         systems, practices and policies, as they affect inter-
         facility and intra-facility transactions (as defined
         in Paragraphs 5(11) and 5(12) of this Decree/Agreement);

         (3) Defendant/Respondent shall pay penalties for
         violations of the aforementioned statutes, permits,
         rules and regulations according to the Penalty Schedule
         set forth as Appendix 2 to this Decree/Agreement; and

        .(4)  EPA shall accept the penalties provided in Appendix
         2 as full and complete settlement and satisfaction of
         any of its civil claims for violations detected by
         the audit firm (with certain exceptions as set forth
         in Paragraphs 23, 24, and 25 of this Decree/Agreement).


                      TERMS OP SETTLEMENT
                          DEFINITIONS

     5.   Whenever the following terms are used in this Decree/
     Agr««m»nt, the definitions specified herein shall apply:

          (1)  Compliance Report and Plant  A document to be
          submitted by Defendant/Respond«nt to EPA, pursuant to
          Paragraph 19 of this Decree/Agreement, which:

               (a)  describes in full detail every corr4ctive
                    action taken in response to a Facility
                    Audit Report;

               (b)  in the case of violations which are not
                    corrected within 60 days of submittal of
                    the Facility Audit Report, describes every
                    action to be taken in response to any

-------
                    -2-

          violations or findings in the Facility
          Audit Report; and

     (c)   certifies under oath the accuracy of
          information contained in the Compliance
          Report and Plan.

(2)   Confidential Business  Information (CBI)

     (a)   Information/Documents Determined Not to Be
          Entitled to CBI Protection.   It is agreed
          between the parties  that portions of docu-
          ments containing  the following  information
          shall not be eligible for CBI treatment:

         (i)   The fact that any chemical  waste was
              disposed of at any Defendant/Respondent
              facility.

        (ii)   The location  of  disposal of any chemical
              waste at any  Defendant/Respondent facility.

       (iii)   Any information  contained or referred
              to in any manifest for any  chemical
              waste disposed of at any Defendant/
              Respondent facility.

        (iv)   The identity  and quantif     •-•• -hemical
              waste disposed of at any       ...-.-c./Respcndent
              facility.

         (v)   Any monitoring data or analysis of
              monitoring data  pertaining  to disposal
              activities at any Defendant/Respondent
              facility,  including monitoring data
              from any well, whether or not installed
              pursuant to 40 C.F.R.  Part  265,  Subpart
              F,  or 40 C.F.R.  Part 254, Subpart F
              (RCRA Groundwater Monitoring Requirements).

        (iv)   Any permit applications  submitted to
              EPA or to any state pursuant to federal
              or state statute or regulation.

       (vii)   Any information  regarding planned im-
              provements in the treatment,  storage  or
              disposal of chemical wastes at any
              Defendant/Respondent facility.

      (viii)   Any hydrogeologic or geologic data.

        (ix)   Any groundwater  monitoring  data.

-------
                    -3-

         (x)   Any contingency plans,  closure plans,
              or post-closure plans.

        (xi)   Any waste analysis plans.

       (xii)   Any training and/or inspection manuals
              and schedules.

      (xiii)   Any point source discharge or receiving
              water monitoring data.

(b)  The status of information not listed in Section
(a) above shall be determined in accordance with
40 CFR Part 2, which provides for CBI treatment of
information where:

         (i)   Defendant/Respondent has taken reasonable
              measures through the issuance and
              observance of company-wide policies and
              procedures to protect the confidentiality
              of the information, and that it intends
              to continue to take such measures;

        (ii)   The information is not, and has not been,
              reasonably obtainable without Defendant's/
              Respondent's consent by other persons
              (other than governmental bodies which
              are bound by and observing Defendant's/
              Respondent's claims of CBI as to that
              information) by use of legitimate means
              (other than discovery based on a showing
              of special need in a judicial or quasi-
              judicial proceeding);

       (iii)   Disclosure of the information is likely
              to cause substantial harm to Defendant's/
              Respondent's competitive position.

(3)  Corporate Management Report and Plan;  A document
•ubmitted by Defendant/Respondent to EPA, pursuant to
Paragraph 27 of this Decree/Agreement, describing in
full detail what actions Defendant/Respondent has
taken or will take to implement the findings of the
Corporate Management Systems Report.

(4)  Corporate Management Systems Report;  A fully
integrated separate report prepared pursuant to the
Corporate Management Systems Report Protocol set
forth in Appendix 3 of this Decree/Agreement and
submitted by Defendant/Respondent to EPA pursuant
to Paragraph 26 of this Decree/Agreement.

-------
                    -4-

 (5)  Corrective Action;  Any action taken by Defendant/
 Respondent in order to come into compliance with any
 federal, state or local statutory or regulatory
 requirement for the treatment, storage, or disposal
 of any Hazardous Substance.

 (6)  Facility Audit Reports;  Reports to be submitted
by the Audit Firm to EPA, pursuant to Paragraph 19
of this Decree/Agreement, which:

     (a)  describe in detail the procedures followed
          in the facility audit, the facility itself,
          the regulatory history of the facility,
          and the facility's current compliance
          status;

     (b)  describe in detail each violation detected
          during the audit;

     (c)  provide any other information which,  in
          the judgment of the Audit Firm,  merits
          Agency review;

     (d)  for each violation reported,  provide  the
          relevant statutory or regulatory section;
          the particular area of the facility where
          the violation was found (if appropriate);
          the dates during which the violation
          occurred or existed (if it can reasonably
          be determined); and any other relevant or
          appropriate information.

 (7)  Hazardous Substances; Those materials meeting
the definition contained in the Comprehensive
Environmental Response, Compensation,  and Liability
Act ("CERCLA"),  42 U.S.C. §§9601 et seq.,  §9601(14).
(8)  Hazardous Wastes:  Those materials meeting the
definition contained in 42 U.S.C. §6903(5) and the
regulations promulgated at 40 C.F.R. Part 261.

(9)  Independent Audit Firm ("Audit Firm"): A firm
selected by EPA, pursuant to Paragraph 6 of this
Decree/Agreement, for the purpose of performing the
Facility Compliance and Management Systems Audits
described herein.  For the purpose of this Decree/
Agreement, the Independent Audit Firm must exercise
the same independent judgment that a Certified Public
Accounting firm would be expected to exercise in
auditing a publicly held corporation.  In addition,
the Independent Audit Firm must:

-------
                    -5-

     (a)   not own stock in Defendant/Respondent
           or any parent, subsidiary, or affiliated
           corporation;

     (b)   have no history of participation in any
           previous contractual agreement with
           Defendant/Respondent or any parent, subsidiary,
           or affiliated corporation; and

     (c)   have no other direct financial stake in
           the outcome of the Facility Compliance or
           Management Systems Audits outlined in
           this Decree/Agreement.

(10)  Inter-facility Transactions;  Any letters,
contracts, memoranda, or other communications between
two or more offices or facilities owned or operated
by Defendant/Respondent.

(11)  Intra-facility Transactions;  Any letters,
contracts, memoranda, or other communications between
two or more locations or offices at a single Defendant/
Respondent Facility.

(12)  Manifest:  The shipping document EPA form
8700-22 and, if necessary,  EPA form 8700-22A (as
required by 40 C.F.R. Part 262) or equivalent.

(13)  New Violation;  Any statutory or regulatory
violation not reported in the Facility Inspection
Report.

(14)  Plaintiff;  The United States of America, for
the Administrator of the United States Environmental
Protection Agency (collectively, "the Agency" or
"EPA").

(15)  Records;  Any Defendant/Respondent or consultant
report, document, writing,  photograph, tape recording
or other electronic means of data collection and
retention which bears upon Defendant's/Respondent's
compliance with EPA, state and local rules and regulations

(16)  Facility;  Any facility which treats, stores, or
disposes of hazardous waste as those terms are defined
at 42 U.S.C. $§6903(3), 6903(33), and 6903(34).

(17)  Uncorrected Violation;  Any violation reported
in a Facility Inspection Report which remains
uncorrected for 60 days or more after the completion
and submission of the Facility Inspection Report
pursuant to Paragraph 19 of this Decree/Agreement.

-------
                         -6-

               GENERAL AUDIT PROCEDURES

6.   Preliminary Matters

     (1)   Scope of Work

     (a)   Defendant/Respondent shall submit to the Agency
     within thirty (30) days of the effective date of this
     Decree/Agreement the Scope of Work for audits of the
     Defendant/Respondent facilities listed in Appendix
     1  for RCRA and TSCA violations.  EPA shall have
     thirty (30) days from the date of receipt of this
     Scope of Work and proposed Audit Firm to submit to
     Defendant/Respondent in writing any proposed modifi-
     cations in the scope of work.

     (b)   Defendant/Respondent shall have fifteen (15)
     days from the date of receipt of EPA's proposed modifi-
     cations within which to submit in writing its comments
     upon those proposed modifications.

     (b)   Within ten (10) days of receipt of Defendant's/
     Respondent's comments,  the Agency shall issue its
     final decision as to the Scope of Work,  which shall
     be binding upon Defendant/Respondent.

     (2)   Establishment of Trust

     (a)   Within thirty (30) days of the date of this
     Decree/Agreement, Defendant/Respondent shall establish
     an irrevocable trust fund ("Trust"), the form and
     text of which shall be approved by EPA.   If no fund
     is approved by EPA within thirty (30) days of the
     date of this Decree/Agreement, a form supplied by EPA
     shall be used.  The Trustee shall be a bank selected
     by Defendant/Respondent, which must be approved by EPA.

     (b)   The Administrator of EPA shall have special
     power of appointment (and the only power of appoint-
     OMnt) over all income and all assets of the Trust.
     That power may be exercised only to make appointments
     of funds in accordance with this Decree/Agreement.
     If,  at the conclusion of all tasks set forth in this
     Decree/Agreement, there remains trust income or
     assets which have not been appointed by exercise of
     such special power, then all such remaining unappointed
     assets shall be delivered forthwith to Defendant/
     Respondent.  Defendant/Respondent shall fund the
     Trust by placing $	^__^ in the hands of the
     Trustee within forty-five  (45) days after the date of
     this Decree/Agreement.

-------
                              -7-

          (3)   Selection of Audit Firm

          (a)   Within forty-five (45)  days after the date of
          this Decree/Agreement, EPA shall notify Defendant/
          Respondent of its selection of a proposed Audit Firm.
          Defendant/Respondent shall have fifteen (15) days from
          the date of receipt of EPA's proposed Audit Firm to
          accept,  reject,  or comment upon this selection.
          Reasons  for which Defendant/Respondent may reject the
          proposed Audit Firm are limited to lack of sufficient
          national reputation; inexperience in performing
          environmental compliance and management audits;
          inadequate staffing levels;  and failure to qualify as
          an Independent Audit Firm as defined in Paragraph
          5(10) of this Decree/Agreement.

          (b)  In the event EPA and Defendant/Respondent are
          unable to agree on selection of an Audit Firm, the
          parties  shall submit to Dispute Resolution as set
          forth in Paragraph 32 of this Decree/Agreement.

     7.   Audit Seminar.  Before the Audit Firm begins the
audits, and within 60 days of the date EPA and Defendant/
Respondent agree upon the Scope of Work and Audit "  - *s
described above, the Agency shall conduct a semino..
employees of the Audit Firm who are to conduct the auuits.
This seminar shall serve the purpose of assuring that the Audit
Firm employees who will be conducting the audits are familiar
with all protocols required by Agency policies and procedures
to be utilized in conducting compliance audits.  The Agency
may conduct the audit seminar at the National Enforcement
Investigations Center (NEIC) near Denver, Colorado or at the
Audit Firm's office.  The Agency shall not be responsible for
transportation, lodging or other costs associated with attendance
by the audit firm employees at the seminar.

     8.   Observation of EPA Protocols.  The Audit Firm shall
be required by contract with Defendant/Respondent to observe
the protocols presented at the audit seminar.  Such protocols
include but are not limited to:  (1) NEIC's Multi-Media Com-
pliance Aadit Procedures; (2) the EPA Office of Administration's
Environmental Auditing Protocol; (3) the NEIC Policy and Procedure
Manual; and (4) the Corporate Management Systems Report Protocol
provided in Appendix 3 of this Decree/Agreement (See Paragraph
26 below).

     9.   Review of Work Plan.

          (1)  Within 30 days of the Audit Seminar, the Audit
          Firm shall submit to Defendant/Respondent and EPA a
          proposed Work Plan which shall specify the Audit
          Firm's plan for implementing the Scope of Work.  Said

-------
                              -8-

          Work Plan shall include the auditing protocols to be
          used by the Audit Firm; a schedule for conducting
          facility audits and completion of all other tasks
          set forth in the Scope of Work; and the names and
          resumes of those Audit Firm employees who will be
          primarily responsible for performance of the tasks
          set forth in the Scope of Work.  The proposed Work
          Plan shall not specify the order of audits or otherwise
          provide Defendant/Respondent with advance notice of
          specific audits.

          (2)  EPA and Defendant/Respondent shall have 30 days
          from the date of receipt of the proposed Work Plan to
          submit in writing any proposed revisions to the proposed
          Work Plan.

          (3)  The Audit Firm shall have fifteen (15)  days from
          the date of receipt of these revisions within which
          to submit in writing its comments on these proposed
          revisions.

          (4)  Within ten (10) days of receipt of the Audit
          Firm's comments, EPA shall issue its final decision
          as to the work plan, which shall be binding on both
          Defendant/Respondent and the Audit Firm.

          (5)  The provisions of this Paragraph shall also be
          set forth as provisions of the contract between
          Defendant/Respondent and the Audit Firm for the
          performance of the subject audits.

     10. Facilities to be Audited.  The Audit Firm shall,
subject to the provisions set forth herein,  conduct comprehensive
RCRA/TSCA Compliance Audits (see Paragraphs 11 through 25)  and
a Management Systems Audit (see Paragraphs 26 and 27)  of the
facilities listed in Appendix 1 of this Decree/Agreement.
The designation of RCRA/TSCA as the primary areas of audits
shall not prohibit the Audit Firm from auditing and reporting
violations of any other environmental statutes or regulations
should those violations come to the attention of the Audit Firm
audit team during the inspections.  Notice of individual
facility audits shall be provided to NEIC at least thirty (30)
days prior to scheduled visits.  Advance notice of individual
facility inspections shall not be provided to Defendant/Respondent

-------
                              -9-

                   FACILITY COMPLIANCE AUDITS

Review of Records

     11.  Records to be Examined.

         a.   Records Relevant to Compliance with RCRA.

             Facility audits may include a review of any facility
             record of Defendant/Respondent or its predecessors
             from November 1980.  Other records pre-dating
             November 1980 which bear on the facility's compliance
             after November 1980 may also be examined, but
             only to the extent that they are necessary to
             render judgment regarding any event occurring
             after November 1980.

         b.   Records Relevant to Compliance with TSCA.

             Facility audits may include a review of any facility
             record of Defendant/Respondent or its predecessors
             from April 1978 which is relevant to compliance
             with TSCA and its implementing regulations.
             Other records pre-dating April 1978 which bear on
             the facility's compliance after April 1978 may
             also be examined, but only to the extent that they
             are necessary to render judgment regarding any
             event occurring after April 1978.

         c.   Records to be Examined by the Audit Firm.  Records
             to be examined include but are not limited to:

             (1)  all records required by federal, state or
             local law to be maintained by Defendant/Respondent.

             (2)  facility operating records, including but not
             limited to waste profile sheets, containing waste
             pre-acceptance data, receiving logs, analytical
             verification data, waste tracking data for intra-
             facility movement of received wastes or wastes
             generated on-site, waste storage data, waste
             treatment data, and data reflecting the disposition
             of received wastes.

             (3)  corporate and facility guidelines, policies
             and internal operating rules pertaining to facility
             operations, inspections, personnel training, and
             recordkeeping procedures.

             (4)  corporate guidelines, policies and internal
             operating rules pertaining to emergency response,
             site closure, and postclosure activities.

-------
                               -IO-

             CS)   applications,  licenses,  permits and approvals
             (including  state  permits  and  approvals),  RCRA opera-
             tion  plans,  or  other regulatory documents pertaining
             to on-site  activities  at  the  facility.

             (6)    environmental  monitoring  plans for the  facility.

             (7)    waste  treatability  studies.

             (8)    PCB operations plans, letters  of approval,
             pumping logs, and records pertaining to  the processing
             or handling  of  transformers,  capacitors,  and/or
             any other PCB articles, itens and containers.

             (9)    manifests for wastes entering  or leaving any
             Defendant/Respondent facility.

             (10)   records of use,  maintenance and decommissioning
             of vehicles  used on-site and/or off-site  for the
             transportation  of RCRA/TSCA wastes to, from, and
             within any Defendant/Respondent facility.

             (11)   vehicle washing  records.

             (12)   any effluent data, including data on any direct
             discharge to surface water or any discharge to a
             publicly ownevl  treatment facility, which  Defendant/
             Respondent is required to keep pursuant to any
             federal, state,  or local permit or regulation.


     12.  Access to Documents.  The Audit Firm and representatives
of the Agency, including contractors,  shall have full, unfettered
access to all documents bearing upon compliance with  RCRA or TSCA
kept at each facility or at Defendant's/Respondent's  corporate
headquarters, regardless of whether these records are deemed
by Defendant/Respondent to constitute CBI or deemed by the
Audit Firm to indicate or support a violation.  The Defendant/
Respondent shall retain and make available to EPA copies of
any Defendant/Respondent document(s) examined by the  Audit Firm
which indicate or  support any violation detected during the
audit program.  The Audit Firm shall prepare and provide to EPA
a full and complete index of all document? th?.«-  it examines to
ensure that  the Defendant/Respondent retains these records for
subsequent EPA inspection.

     13.  Public Access  to  Records.  Each document submitted
by Defendant/Respondent  to  the Audit Firm or EPA pursuant to
this Decree/Agreement shall be subject to public inspection
unless it is determined  by  EPA (following a claim made by Defendant/
Respondent)  to be  CBI in accordance with  Paragraphs 5(2) and
14 of this Decree/Agreement.

-------
                              -11-

     14.   Assertion of Confidential Business Information Claims.

          a.  Defendant/Respondent recognizes that EPA will
treat as  TSCA CBI only that information claimed confidential
which EPA uses for purposes related to TSCA.

          b.  Claims that information is CBI shall be made on
or before the date on which such information is provided to
the Audit Firm or EPA.

     15.   Tentative Observance of CBI Claims.  Any information
claimed by Defendant/Respondent and asserted to meet the criteria
set forth in Paragraph 5(2) will be treated by EPA as confidential
in accordance with 40 C.F.R. §§2.201 through 2.215 and any
relevant special confidentiality regulations at 40 C.F.R. §§2.301
et seq. pending any final determination that the information is
not CBI.

     16.   Preservation of Records.  Defendant/Respondent shall
preserve all Records examined by the Audit Firm for three years
after submission of its Corporate Management Report and Plan to
EPA (See Paragraph 27 below).  Nothing in this provision shall
authorize destruction of any document required by law or regula-
tion to be preserved for any period of time in excess of three
years.

     17.   Examination of Groundwater Monitoring Information.
The Audit Firm shall be required to examine and submit to EPA
groundwater monitoring plans and data for each Defendant/Respon-
dent facility listed in Appendix 1 of this Decree/Agreement.

     18.   Audit Schedule/Agency Access to Defendant's/
Respondent's Facilities"!All audits by the Audit Firm of the
sites listed in Appendix 1 of this Decree/Agreement shall be
completed within 180 days of EPA approval of the Work Plan as
described in Paragraph -9 above.  Representatives of the Agency,
including contractors, may accompany audit teams from the
Audit Firm on site audits performed by the Audit Firm and
oversee the performance of the audits by the audit teams for
the purpose of ensuring that the audit procedures and protocols
required by the contract are followed.

     19.   Facility Audit Reports.  As each separate facility
audit is  completed, the Audit Firm shall, no later than 30
days thereafter, simultaneously submit to Defendant/Respondent
and the Agency a copy of a Facility Audit Report as defined in
Paragraph 5(7).  The failure of the Facility Audit Report to
include all of the required information for any violation
specified in the report shall not be grounds for avoidance of
any penalty which is payable under the Penalty Schedule set
forth in Appendix 2.  The Agency shall not be bound by any

-------
                               -12-

determination of the Audit Firm indicating that Defendant/
Respondent is in compliance with any applicable statutory or
regulatory requirement.

     20.  Correction of Violations/Submission of Compliance Plans.
In addition to paying the penalties set forth in the"Penalty
Schedule below, Defendant/Respondent shall:

          (1) correct any violation indicated within a Facility
          Audit Report as soon as is physically possible.

          (2) No later than 60 days after it has r-  eived an
          individual Facility Audit Report, submi_ ;o the Agency
          a Compliance Report and Plan.

     The Agency shall not be bound by any Defendant/Respondent
determination that it has achieved compliance, that the compliance
was physically impossible to achieve, or that the times for correc-
tive actions proposed by Defendant/Respondent to achieve compliance
are reasonable.  All corrective actions mandated by this Decree/
Agreement shall be undertaken in accordance with applicable
federal, state and local law.

                PENALTIES AND CORRECTIVE ACTION

     21.  For Missed Audit Deadlines.  Defendant/Respondent shall
pay the following stipulated penalties for any failure by Defendant/
Respondent to comply with any time requirement set forth in this
Decree/Agreement:

         Period of Failure to Comply    Penalty per Day of Delay

         1st day through 14th day             $ 5,000.00
         15th day through 44th day            $10,000.00
         45th day and beyond                  $15,000.00


For Violations of RCRA/TSCA

     22.  Payment of Penalties.  For every violation of RCRA
or TSCA reported in each Facility Audit Report, Defendant/
Respondent shall pay a penalty based on the Penalty Schedule
provided as Appendix 2 of this Decree/Agreement.  The listing
of the violation in a Facility Audit Report shall be conclusive
and binding on Defendant/Respondent, and the amount set forth in
the Penalty Schedule shall be due and payable by certified check
to the  "Treasurer of the United States."  The check shall be
remitted to:
                [appropriate EPA lockbox address]

within  30 days of receipt of the applicable Facility Inspection
Report.  Penalties shall accrue from the date the violation is
determined to have begun to the date such violation is corrected

-------
                             -13-

or abated.  Subject to the rights reserved in Paragraph 25
below, EPA will not take further enforcement action on those
violations for which penalties are paid and corrective action
taken in compliance with this Decree/Agreement.

     23.  Unlisted Violations.  In the event that the audit
firm reports statutory or regulatory violations other than those
listed in Appendix 2, Defendant/Respondent shall correct such
violations as soon as is physically possible.  In addition, the
parties will, for a period of 60 days following receipt of the
Facility Audit Report in which such unlisted violations are
contained, attempt to settle by negotiation the appropriate
remedy and penalties Defendant/Respondent shall pay for such
unlisted violations.  In such negotiations, the parties will
compare each unlisted violation to the most similar listed
violation, if possible.  In the event of failure of the parties
to achieve settlement of unlisted violations within 60 days,
EPA shall be free to take any enforcement measure authorized
by law.

     24.  Uncorrected or New Violations.  Beginning on the date
EPA receives a Facility Audit Report, Defendant/Respondent
shall have sixty (60) days to correct violations cited therein.
For any previously reported violation discovered to be uncorrected
at the end of such sixty (60)-day-period, Defendant/Respondent
shall pay a. civil penalty of $25,000 per day for each day of
continued noncompliance unless, within sixty (60) days,
Defendant/Respondent has notified the Agency in accordance
with Paragraph 20 that compliance is physically impossible and
has obtained a final decision from the Agency verifying such
physical impossibility.  If, during the audit period or during
the first post-audit inspection, the Agency discovers violations
which were not reported to the Agency by the Audit Firm, for
such violations Defendant/Respondent shall pay a civil penalty
as set forth in the Penalty Schedule (Appendix 2).  In addition,
the Agency reserves the right to initiate civil or criminal
action  (or both) with regard to any previously reported and
uncorrected violation and any violation not previously reported.


     25.  Reservation of Rights.

          a.  Reservation of States' and Local Governments'
              Right to Inspect Defendant's/Respondent's Facilities.

              Nothing in this Decree/Agreement shall limit the
              authority of EPA or any state or local government
              to enter and inspect any Defendant/Respondent
              facility.

-------
                              -14-

          b.  Reservation of Agency's Right to Seek Relief.

                   Except as provided in Sections 21 through
              24 above/ nothing in this Decree/Agreement shall
              be construed to limit the ability of the United
              States to take any enforcement action authorized
              by law.


                    MANAGEMENT SYSTEMS AUDIT

     26.  Corporate Management Systems Report.  No later than
60 days after the last Facility Audit Report is submitted to
Defendant/Respondent and EPA, the Audit Firm shall submit to
Defendant/Respondent and EPA a Corporate Management Systems
Report as defined in Paragraph 5(4) of this Decree/Agreement.

     27.  Corporate Management Report and Plan.  No later than
90 days after it has received the Corporate Management Systems
Report, Defendant/Respondent shall submit to the Agency its own
Corporate Management Report and Plan describing in full detail
what actions it has taken or will take to implement the findings
of the Corporate Management Systems Report.


                      MISCELLANEOUS TERMS

     28.  Submission of Reports.   Any reports produced by the
Audit Firm, including Facility Audit Reports and the Corporate
Management Systems Report,  shall be submitted simultaneously
to EPA and Defendant/Respondent.   The Audit Firm shall not
share draft copies of such reports with Defendant/Respondent
unless such drafts are simultaneously submitted to EPA.  The
requirements of this Paragraph shall be set forth as a requirement
in the contract between Defendant/Respondent and the Audit Firm
for the performance of the audits described herein. .

     29.  Effective Date of Decree/Agreement.  This Decree/
Agreement shall be considered binding and in full effect upon
approval toy the Federal district court judge/administrative
law judge to whom this matter has been assigned.

     30.  Notice.  All s"hmissions and notices required by this
Order shall be sent to the following address(es):

 [insert address(es) of EPA office(s) overseeing Decree/Agreement]

     31.  Modification.  This Decree/Agreement may be modified
upon written approval of all parties hereto, and concurrence of
the Federal District Court Judge/administrative law judge
assigned to this matter.

-------
                              -15-

     32.  Dispute Resolution.

          (1)  The parties recognize that a dispute may arise
          between Defendant/Respondent and EPA regarding plans,
          proposals or implementation schedules required to be
          submitted, regarding tasks required to be performed
          by Defendant/Respondent pursuant to the terms and
          provisions of this Decree/Agreement, or regarding
          whether Defendant/Respondent has incurred liability
          to pay stipulated penalties under Paragraphs 19
          through 24.  If such a dispute arises, the parties
          will endeavor to settle it by good faith negotiations
          among themselves.  If the parties cannot resolve the
          issue within a reasonable time, not to exceed thirty
          (30) calendar days, the position of EPA shall prevail
          unless Defendant/Respondent files a petition with the
          court/administrative law judge setting forth the
          matter in dispute.  The filing of a petition asking
          the court/administrative law judge to resolve a
          dispute shall not extend or postpone Defendant's/
          Respondent's obligations under this Decree/Agreement
          with respect to the disputed issue.

          (2)  In presenting any matter in dispute to the court/
          administrative law judge, Defendant/Respondent shall
          have the burden of proving that EPA's interpretation
          of the requirements of this Decree/Agreement are arbi-
          trary, capricious, or otherwise not in accordance with
          the law.

     33.  Continuing Jurisdiction of the District Court/Adminis-
trative Law Judge.The district court/administrative forum in
which this Decree/Agreement is entered shall retain jurisdiction
until all obligations set forth herein are satisfied.

     34.  Relation to RCRA Permitting Process.  Notwithstanding
any other provision of this Decree/Agreement, EPA hereby reserves
all of its rights, powers and authorities pursuant to the
provision* of 42 U.S.C. §§6901 e_t seq. (RCRA) governing permits
for facilities, and the regulations promulgated thereunder.

     35.  Violations Not Covered by RCRA or TSCA.  No stipulated
penalty or other remedy agreed to shall cover or apply to
non-RCRA, non-TSCA violations.  The parties shall be left to
their respective rights, liabilities and defenses with regard
to these matters.

-------
                              -16-

     36.  Continuing Audit Requirement.  For the five-year-period
beginning on the date that Defendant/Respondent submits to the
Agency the Corporate Management Report and Plan required by
Paragraph VII. 27. of this Decree/Agreement, Defendant/Respondent
shall conduct comprehensive audits not less often than annually
of the compliance of its facilities with [applicable statutory
and regulatory requirements).  After the initial audit by a
third party consultant (as required by this Decree/Agreement),
such audits may be conducted by such a consultant or by an
independent audit staff of the company not responsible to
production management.  Reports of the results of such audits
shall be furnished to the [appropriate corporate environmental
official and plant manager).   Within thirty (30) days after
completion of each final annual audit report,  Defendant/Respondent
shall submit to EPA a report of incidents of noncompliance
identified by the audit and steps that will be taken to correct
any continuing noncompliance and prevent future incidents of
noncompliance.

-------
                                                        Appendix 1




                DEFENDANT'S/RESPONDENT'S FACILITIES
 1.




 2.




 3.




 4.



 5.



 6.



 7.



 8.



 9.




10.




11.



12.




13.



14.



15.

-------
                                                      Appendix 2
                         PENALTY SCHEDULE
       RCRA Violation

 I.   Groundwater Monitoring
      40 C.F.R. §§ 264.91 and
      265.91

 II.  Unsaturated Zone Monitoring
      40 C.F.R. §S 264.97 through
      264.100 and 265.92 through
      265.94

 III. Waste Analysis Plans:
      Content and Implementation
      40 C.F.R. $S 264.13U) and (b),
      and 265.13(a)  and (b)

 IV.  Bulk -Liauids in Landfill
      40 C.F.R. §§ 264.314(a)
      and 265.314(a)

 V.   Containerized Liquids
      Disposal in Landfill
      40 C.F.R. SS 264.314(b)
      and 265.314(b)

 VI.  Waste Tracking within
      TSD facility
      40 C.F.R. § 264.222

 VII. Maintenance of Minimum
      Freeboard level for
      Surface Impoundment
      40 C.F.P. S 264.226(c)

VIII. Ignitable/Reactive
      Disposal in Landfill
      40 C.F.R. SS 264.312
      and 265.312

 IX.  Land Disposal (direct
      application to unlined
      surface soils) of non-
      biodegradeable wastes
      40 C.F.R. S§ 264.272(a)
      and 265.272(a)
Penalty

$22,500.00
per missed sampling event
$22,500.00
per missed sampling event
$25,000.00
$22,500
per day of occurrence
$22,500.00
per day of occurrence
$25,500.00
$6,500.00
per freeboard violation
$9,500.00
per cell, per day
$22,500.00
per day

-------
                              -2-
        RCRA Violation

 X.    Trial test of waste
       compatibility prior
       to discharge into
       surface impoundment
       40 C.F.R. S 265.225

XI.    Trial test of waste
       solidification process
       prior to landfill
       40 C.F.R. §265.402

XII.   Failure to control wind
       dispersal of land treatment
       waste disposal zones
       40 C.F.R. §§ 264.272(e)
       and 265.273(f)

XIII.  Incompatible wastes placed
       into surface impoundment
       40 C.F.R. §§ 264.230
       and 265.230

XIV.   Unauthorized expansion of
       TSD facility during
       Interim status
       40 C.F.R. §270.72

XV.    Closure of Units w/o
       demonstration of
       compliance.with facility
       closure plan
       40 C.F.R. §§ 264.113
       and 265.113

XVI.   Inadequate closure/
       port-closure inspec-
       tion/maintenance plans
       40 C.F.R. §§ 264.112
       and 265.112

XVII..  Absence of post-closure
       groundwater monitoring
       program
       40 C.F.R. §§ 264.117(a)(1)
       and §265.117(a)(2)
 Penalty

 522,500.00
 per day of event
$22,500,00
per day
$22,500.00
per unit
$22,500.00
per day
$20,000.00
per day or as
needed to recapture
all profits gained

$25,000.00
per unit
$15,000.00 per unit
$22,500.00 per day

-------
                              -3-
          RCRA Violation

XVIII.  Failure to update closure/
        post closure plan cost
        estimates
        40 C.F.R. §§ 264.144(c)
        and 265.114(c)

XIX.    No schedule included
        for closure activities
        40 C.F.R. §§ 264.112(a)
        and 265.112(a)

XX.     Inadequate Part A
        Applications, absence
        of identified operating
        units
        40 C.F.R. §270.13

XXI.    Inadequate Part B
        Application
        40 C.F.R. $270.14

XXII.   Absence of complete
        facility Inspection
        Plan, units omitted
        40 C.F.R. §§ 264.15(b)
        and 265.15(b)

XXIII.  Failure to record
        on facility inspections
        reports repairs or
        remedial measures taken
        40 C.F.R. SS 264.15(b)
        and 265.15(d)

XXIV.   Failure to inspect
        freeboard levels
        of surface impoundments
        40 C.F.R. SS 264.226(b),
        (c) and 265.226(a)

XXV.    Operating Record
        Omissions failure
        complete grid maps
        of landfilled lifts
        of waste
        40 C.F.R. SS 264.309
        and 265.309
Penalty

$3,000.00 per day
$6,500.00 per plan
milestone omitted
$9,500.00 per unit
not properly identified
$9,500.00 per unit
not properly identified
$2,250.00
per unit emitted,
per day
$2,250.00
per omission
$2,250.00
per occurrence
$2,250.00
per omission

-------
                                -4-
             RCRA Violation

  XXVI.   Failure to record on-site
          generated hazardous wastes
          i.e. truck washing facility
          40 C.F.R. § 262.4Kb)

  XXVII.  No training provided
          to employee assigned to
          do waste analyses
          40 C.F.R. §§ 264.16
          and 265.16

  XXVIII. No analyses performed
          on materials added to
          on-site waste piles
          40 C.F.R. S 265.252

  XXIX.   Records not provided
          to Agency
          within 48 hours of reauest.
          40 C.F.R. §§ 264.74
          and 265.74

  XXX.    Fence not installed
          around all operating
          areas of TSD facility
          40 C.F.R. §§ 264.14
          and 265.14

  XXXI.   Emergency Contingency
          Plan Inadequacies
          40 C.F.R. §§ 264.52
          and 265.52

  XXXII.  Failure to Meet
          Financial Responsibility
          Requirements
          4Q C.F.R. Part 264,  Subpt.  H
          and Part 265,  Subpt.  H
 Penalty

 $9,500.00
 per  unrecorded event
$3,000.00
per untrained
employee
$22,500.00
per event
$6,500.00 per day
of delay
$1,000.00
$2,225.00
per component
deficiency
$25,000.00
per day of delay
            TSCA Violation
Penalty
XXXIII.  Improper Disposal of PCBs
         40 C.F.R. S§ 761.60 (a)-(d).

         —1,100 or more gallons
           or 750 or more cubic
           feet of PCS contaminated
           material.
$25,000.00 per day,
per violation

-------
                                -5-
            TSCA Violation

         —220-1,000 gallons or
           150-750 cubic feet of
           PCB contaminated
           material

         —less than 220 gallons or
            150 cubic feet of PCB
            contaminated material

XXXIV.   Failure to Dispose of PCBs
         by Jan. 1, 1984.
         40 C.F.R. § 761.65(a)

         —1,100 or more gallons
           or 750 or more cubic
           feet of PCB contaminated
           material.

         —220-1,100 gallons or
           150-750 cubic feet of
           PCB contaminated
           material.

         —less than 220 gallons or
           150 cubic feet of PCB
           contaminated material.

XXXV.    Failure to Dispose of PCBs
         within one year of removal
         from service.
         40 C.F.R. § 761.65(a)

         --1,100 or more gallons
           or 750 or more cubic
           feet of PCB contaminated
           material.

         —220-1,100 gallons or
           150-750 cubic feet of
           PCB contaminated
           material.

         —less than 220 gallons or
           150 cubic feet of PCB
           contaminated material.

XXXVI.   Improper Processing of PCBs
         40 C.F.R. § 761.20(a)
Penalty

S17,000.00 per day,
per violation
$5,000.00 per day,
per violation
525,000.00 per day,
per violation
$17,000.00 per day,
per violation
$5,000.00 per day,
per violation
$25,000.00 per day,
per violation
$17,000.00 per day,
per violation
$5,000.00 per day,
per violation
$20,000.00 per day,
per violation

-------
                                  -6-
              TSCA Violation

  XXXVII.  Improper Distribution of
           PCBs  (sale) in commerce.
           40 C.F.R. § 761.20(a)

  XXXVIII. Improper treatment and
           testing of waste oils.
           40 C.F.R. §§ 761.60(g)(2)(i)
           and (ii)

  XXXIX.   Improper Use of PCBs
           40 C.F.R. § 761.20(a)

  XXXX.    Improper use of PCBs
           (road oiling;  dust
           control; sealants)
           40 C.F.R. § 761.20(d)

XXXXI.     Improper use of PCBs

           - Transformers
             40 C.F.R. §  761.30U)
           - Capacitors
             40 C.F.R. §  761.30(1)
           - Heat transfer systems
             40 C.F.R. S  761.30(d)

XXXXII.    PC3 Storage Violations

           - 40 C.F.R. S  761.65(b)
            (facility criteria)
           - 40 C.F.R. S  761.65(c)(7)(ii)
            (spill plan development)
           - 40 C.F.R. §  761.65(c)(8)
            (management of liquids
             in storage)

XXXXIII.  Recordkeeping Violations
          (storage for disposal)
          40 C.F.R. S 761.180(a)

 XXXIV.   Recordkeeping violations
          (disposal facilities)
          Incinerators
          40 C.F.R. S 761.180(c)
          Chemical waste landfills
          40 C.F.R. § 761.180(d)
Penalty

$20,000.00 per day,
per violation
$25,000.00 per day,
per violation
$25,000.00 per day,
per violation

$25,000.00 per day,
per violation
$20,000.00 per day,
per violation
$15,000.00 per day
per violation.
$10,000.00 per day,
per violation
$15,000.00 per day,
per violation

-------
                                  -7-
xxxxv.
             TSCA Violation

          Marking Violations
          40 C.F.R. § 761.40U)
Penalty

$15,000.00 per day,
per violation
XXXXVI.   Failure to Date PCB Items
          placed into storage
          40 C.F.R. § 761.180(a)
                                             $5,000.00 per day,
                                             per violation
XXXXVII.  Violation of any condition
          of a PCB chemical waste
          landfill (40 C.F.r  5 761.75)
          or incinerator     C.F.R.
          § 761.70) apr ._ation approval
                                             $25,000.00 per day,
                                             per violation
XXXXVIII. Failure to decontaminate
          PCB container, tanker
          trucks, etc.
          40 C.F.R. § 761.79
                                             $25,000.00  per  day,
                                             per violation

-------
                                                     Appendix 3

          CORPORATE MANAGEMENT SYSTEMS REPORT PROTOCOL


The Corporate Management Systems Report shall:

(1)  Identify and describe the existing facility waste manage-
ment operations and the Environmental Management Department's
systems, policies and prevailing practices as they affect
Defendant's/Respondent's corporate compliance with RCRA and
TSCA.

(2)  Evaluate such operations, systems, practices, and policies
and identify and describe fully the perceived weaknesses in
such operations, systems, practices, and policies by comparing
them, to the extent practicable, to the existing practices,
programs and policies of other RCRA and TSCA waste management
corporations operating within the continental United States and
to generally accepted corporate management practices.

(3) Based on the evaluation required in paragraphs (1) and (2)
above, the consultant shall identify and describe fully with
supporting rationales the perceived areas, if any, where Defen-
dant's/Respondent's inter- and intra-facility waste management
operations and corporate to operating level environmental
management systems, practices and policies may be improved.
The Corporate Management Systems Report shall list specific
options for improvements in the following areas:

          (a)  Corporate data management practices pertaining
to the following items:

          i.  compliance budgets;

         ii.  staffing;

        iii.  training;

         iv.  auditing;

          v.  incident reporting, including but not limited to
              manifest exception reports and any unpermitted
              disposal, release, or discharge;

         vi.  quality assurance test reporting;

        vii.  quality control reporting;

       viii.  generator waste profile reports, facility pre-
              acceptance reports, and acceptance analysis as
              these items compare to each facility's stated
              basis for accepting or rejecting individual
              waste loads;  and

-------
                              -2-
         ix.  facility mass balance records reflecting the
              internal disposition of all wastes received
              for final disposal.

       (b)   Corporate data evaluation practices, capabilities
and policies pertaining to reports to and from compliance
officers, internal and external environmental audits, regulatory
agency notices of violation and all other compliance data
documents which when evaluated may lead to changes in TSD
operating procedures or directives by corporate management to
modify any individual or multi-facility TSD facility operating
procedures.

-------
                                                   Attachment 3
MODEL EMERGENCY ENVIRONMENTAL MANAGEMENT REORGANIZATION PROVISION
                FOR CONSENT DECREES OR AGREEMENTS

  E.I.  The objective of this provision is to provide a manage-
ment structure at the corporate headquarters level that will
ensure that comprehensive environmental policies and procedures
are developed by top management and fully implemented company-wide
at all facilities.

    2.  Defendant/Respondent shall propose to EPA's  [name of
EPA office overseeing compliance with Decree/Agreement] by
written submittal to [name of Agency contact] within thirty
(30)'days of the effective date of this Decree/Agreement, a
plan for reorganization of the corporate management structure
with respect to environmental affairs.  This reorganization
proposal shall be agreed upon by EPA and Defendant/Respondent
in writing, prior to implementation of the reorganization.

      a.  The management plan shall provide for the creation of
a new position of Director, Environmental Affairs  [or other
appropriate title] to exercise the responsibilities set forth
herein.  The Director, Environmental Affairs shall report
directly to [a corporate Vice President or other appropriate
top management official not directly responsible for manufacturing/
production activities].  The position shall at all times be
filled by an experienced executive with a background in [approp-
riate industrial field] and in environmental management and
compliance.

      b.  It shall be the responsibility of the Director,
Environmental Affairs to develop appropriate corporate environ-
mental policies and procedures and to oversee their implementation
at all company facilities to ensure compliance with applicable
Federal, State and local environmental statutes and regulations.
In the development of such policies and procedures, the recom-
mendations of the environmental audit conducted at the [facility]
by an outside consultant as described herein shall be given
full consideration.

      c.  Defendant/Respondent shall also establish such addi-
tional technical and support positions reporting directly to
the Director, Environmental Affairs as are necessary to meet
the objective of this provision.  Neither the Director nor
staff shall be assigned additional responsibilities not related
to environmental compliance.  Defendant/Respondent shall provide
adequate budgetary support to the environmental staff.

    3.  Within ninety (90) days of EPA's approval  of the environ-
mental management plan, the company shall appoint  the Director,
Environmental Affairs and appropriately qualified  staff.

    4.  Within two hundred seventy (270) days of EPA's approval of
the environmental management plan, the Director,  Environmental

-------
                              -2-

Affrairs shall complete development and begin the  implementation
of appropriate corporate environmental policies and procedures
to meet the objective of this provision.
           f
   5.  Within eighteen (18) months of the effective date of
this Decree/Agreement, Defendant/Respondent shall fully implement
the corporate environmental policies and procedures at all
company facilities.  This shall include any necessary organiza-
tional, or personnel changes at the individual facility level.

   6.  Recognizing the corporate responsibility to maintain
compliance with all applicable environmental statutes and
regulations, Defendant/Respondent agrees to maintain a permanent
corporate environmental management staff.  The organization,
makeup and functions of this staff may be modified from time
to time as dictated by changes in corporate facilities or
operations or the requirements of environmental statutes and
reaulations.

-------